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Scott Neal

Scott Neal, CPA, CFP, is the president of D. Scott Neal, Inc., a fee-only financial planning and investment advisory firm with offices in Lexington and Louisville. Reach him at or by calling 1.800.344.9098.

Financial Planning and Cars

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Cars are ubiquitous and expensive and they are many things to different people. For some they are merely transportation. For others they are a hobby, work of art, or cultural icon.

Admittedly, I am a “car guy.” My first car was a red ’63 Chevy Impala SS with a bellowing four barrel carb, four on the floor, and a 4:11 ratio rear end that would get us to the car’s top speed in about 1/8 mile from a standing start. Since living in Germany 35 years ago, I have driven mostly BMWs for their outstanding handling. Once clients know this about me, it is easy for them to talk with me about a planned automobile purchase. I am happy to oblige. And since cars usually represent a major purchase and because our firm is all about helping people make better financial decisions, we are glad to help our clients where we can. I have even visited dealerships with or for some clients.

It is entirely helpful to know the rules of the sales game before sitting down at the desk to discuss “the deal” with the salesperson. Recently, a sales manager at a new car dealership explained how he must have an average profit of $x on all the cars they sell. He drew a bell curve and said that customers fall into three camps: there are some few (the upper tail on the bell curve) that will simply pay, without negotiation, whatever the dealer asks. Another few (the lower tail) will negotiate hard to get the car for as little as possible— often for approximately “dealer cost.” The remainder (the vast middle of the bell curve) will negotiate some, but not extensively, allowing the dealership to make an average profit. Part of the salesperson’s job is to determine where you, the buyer, fall on that curve and then to exploit that maximize profit. I assured him that our client wanted to be on the lower tail of his bell curve. It might take a few hours, but it could save thousands in the process.

I recently received a Saturday morning text message from one of our clients asking if I knew the fair price for “paperwork” when buying a new car. He had negotiated the price of the car on a previous visit to the dealership. We had quantified the effect that his purchase would have on the family’s living standard. As he was taking delivery, the salesperson presented him with a larger than expected cost including $599 for “paperwork prep.” Thus, his question. My response was that it was simply an add-on to try to re-negotiate the price of the car. He referred the salesperson back to the agreed-upon price, resolved that he wouldn’t pay more, and the paperwork fee was eliminated.

New car buying services can do much of the work for you. USAA claims that they save members $4,606 off the manufacturer’s suggested retail price. AAA has “partnered” with dealers who are willing to offer its members a great price up front. purports to be the largest new car buying service with pre-negotiated discount dealer pricing for all new vehicles. Even if you want to buy locally from your favorite dealership or salesperson, these services may simply level the playing field for you to know that you have a fair price.

The danger of buying a used car is not what it used to be. We all know that the new car depreciates quickly after you drive it off the lot and that buying a “nearly new” car can be a terrific way to save some money. I have bought 5 cars from distant sellers on either eBay or via the classified ads in a car club magazine. It became an adventure to pick up a BMW on Long Island and another in New Hampshire and drive them home. That process is obviously not without its pitfalls, but if you know what you want to own it’s a great place to find out where it can be found and what the price is likely to be. Shipping a car is always an option when you buy from afar, but where’s the fun in that?

Leasing a car often makes sense for many people, but it is highly situational. There are many factors to consider when choosing leasing vs. purchasing and that will be the subject of a future article. Did you know that you can lease a used car by stepping into somebody else’s lease? Check out for how to do it. This is somewhat like an eBay purchase and some of the same caveats apply. You take certain avoidable risks if you follow the company’s process and sign the paperwork before you take delivery. Sometimes people will actually pay you to take over their lease. It’s worth considering.

Houses and cars are both personal assets that are too often ignored in financial plans. The cost of cars purchased during one’s lifetime is usually only second to houses. However, there is a significant difference: depreciation on one and appreciation on the other. Before plunking down tens of thousands of dollars on a depreciating asset, make sure that you have done your homework.

Houses and cars are both personal assets that are too often ignored in financial plans. The cost of cars purchased during one’s lifetime is usually only second to houses.

Scott Neal, is the President of D. Scott Neal, Inc. a fee-only financial advisory firm. Contact him via email at or 800-344-9098. Visit the firm’s website at