Buying a car

Consider these factors before you acquire a new vehicle in retirement

Fall is one of the best times to buy a car, as auto dealers drop prices on last year’s models to make room for the new vehicles.

You may even want to put a vehicle on your Black Friday shopping list, according to Consumer Reports.

Since the crowds are at the malls, you may find an empty sales lot and a staff willing to make a deal.

Whenever you choose to go car shopping, you’ll be faced with a number of decisions — color, make and model, and don’t forget financing.

Auto loan increases

Americans owe more in auto loans than ever before.

Car buyers are in debt to the tune of $1 trillion, according to The Office of the Comptroller of the Currency.

A top banking regulator has warned the growth is “unprecedented,” and we could see a rise in delinquencies that could cause financial stress on some banks. 

Auto loans, however, don’t pose a threat to the financial system at large.

Unlike the loans behind the housing crisis of 2008, auto loans make up a much smaller chunk of lending when compared to mortgages. 

There are two reasons auto loans are skyrocketing: 

1. Were buying more cars.

2. Cars are becoming more expensive.

The price of a new car is rising because of all the advanced technology, like driver-assistance systems and highend entertainment connectivity options.

Many car buyers are attracted to extra-long loans as a way to pay for their fancier rides.

The average loan used to be five years, but now it’s common for buyers to stretch out a loan to seven or eight years. 

It’s important to remember that those longer loans will keep your monthly payment lower, but you’ll end up paying more in interest and finance charges.

I recommend sticking to a five-year loan — even shorter is better if you can afford it.

How do you know how much you can afford? It goes back to your budget.

Calculate the payments, interest included, and be sure to have a plan for how youll pay for repairs and maintenance costs.

Then, after you’ve paid off your car, continue to put the money in savings so you can start saving for your next car. 

There are additional considerations when it comes to choosing a car if you’ve already retired:


No one likes to hear it, but as we get older, our vision and reflexes tend to deteriorate.

New technology can help older drivers with slower response times stay safe on the road.

A camera and rear proximity sensors may be worth the investment.

Other good safety features include automatic brakes and warning sensors.


Car depreciation begins the moment you drive it off the lot.

On average, a car loses about 25 to 30 percent of its value in the first year and 50 to 60 percent in the first three years.

Retirees on a fixed income will want to minimize depreciation as much as they can; consider buying a latemodel used car or research makes and models that do a better job of maintaining their values.


Interestingly, a recent study surprised a lot of people about what color cars have the least depreciation.

Orange, yellow and green cars were found to hold their value the best, because these odd colors are hard to find, according to the research company iSeeCars.

At the other end of the spectrum, which color car depreciated the most?

One of the most popular colors on the road: Gold. 

Skip Johnson is an advisor and partner at Great Waters Financial in New Hope, a financial planning firm and Minnesota insurance agency. Skip also offers investment advisory services through AdvisorNet Wealth Management, a registered investment advisor. Learn more at