We typically talk to those closest to us before we enter a long term relationship.  Reviewing pro’s and con’s help us reaffirm a good decision, or run from a potentially bad decision.  But what if you look at your next vehicle in terms of a relationship - after all, it is a long term commitment, it can bring you joy and add to your life or it can bring you nothing but heartache and cost you more than you bargained for to get rid of it.

 The 5 things to know before making that vehicle commitment are:

 1. Determining how you will dispose of your current vehicle. Whether it is a lease or a purchase, getting out of your current vehicle is the first (and often ignored) first step. After all, if you are currently driving an SUV and you find that the value of your vehicle has fallen, how are you going to pay off the outstanding loan? Therefore, look up the value of your vehicle online at www.kbb.com (use the “average trade-in” value) and compare that to your payoff (which you can get from your finance company if you simply call and ask). Once you know whether you can get out of your current vehicle, that will free up your mind to consider your next step.

 2. Understanding that your payment is less than ½ of your vehicle expense. The cost of a vehicle is the sum of the payment, the cost of gas, insurance, maintenance, and depreciation. Just because you can afford a $400 does not mean that the vehicle will cost you $400. Add fuel, insurance, and maintenance and you will be close to $1,000 per month before we even add the loss you will have due to depreciation. So set your budget wisely and consider your “total cost of ownership.”

 3. Deciding how long you plan on owning your vehicle. Decide - do you are plan on keeping the vehicle long term (5 years or more) or just for a couple of years? If you are a long term player - consider either paying cash or financing the vehicle. If you are a “one night stand” kind of guy - leasing is for you. It’s the less expensive way to finance a vehicle short term and it will insulate you from the ups and downs of the used car market.

 4. What the crystal ball says about your future? Typically, you will have a vehicle for 4-5 years - so how will your life change over the next half a decade? Planning on having children? Moving to a colder or warmer climate? How about changing jobs - with a longer commute? Your vehicle should fit your lifestyle not only today, but your anticipated lifestyle over the next 5 years. There are no annulments with car purchases - only nasty divorces - where you end up paying a hefty sum to trade out if you make a bad decision.

 5. Finally, find out how much your car should be worth in the future. Most people look for the discount and make their purchase decision based on how much savings they get today. But if you have 2 vehicles, both costing $40,000 - and you receive a $4,000 discount on one and you pay the list price on the other - you would assume that the vehicle with the discount costs less. Not necessarily so. What if the vehicle with the large discount was worth $10,000 less in 3 years than the other vehicle; and the reason the second vehicle was not discounted was because it was in higher demand. To get a glimpse of future value and demand - ask your dealer for the “residual value” of any vehicle you are buying. The residual value is the projected future value as a percentage of the original list price. So if you receive a residual value of 40 that means the vehicle is projected to be worth 40% of its original list price after 3 years (residuals should always be quoted in 36 month values for greatest accuracy). The higher the residual, the more it is projected to be worth in the future. Residuals closer to 50% (for 36 months) are considered to be excellent buys.