A Wild Ride

Dear Dr. Per Cap,

 I am turning 18 next week and will be getting my Minor’s Trust payment. I am psyched! I am thinking of getting a Cadillac Escalade or maybe just a Land Rover. I was wondering, what color do you think I should get it in – black or gunmetal grey?

Built for Speed

Dear Built for Speed,

Whoa there!  Let’s take a step back here and take a deep breath.  You have a lot more to think about than the color of your car. You’re about to receive a large amount of cash, and you want to make sure that money lasts longer than the new car smell. Otherwise it is just “easy come, easy go.”

This is a once in a lifetime opportunity, and you should make a plan for what you are going to do with your money before spending one dime.  The plan doesn’t have to be complicated either.   Maybe write a paragraph describing how you intend to spend your money over the next few years; or draw a pie chart with wedges that represent expenses and savings.  A good rule of thumb for a young person is to save at least 50%, but don’t be afraid to sock away more.  Then put your plan somewhere where you’ll see it every day; like your refrigerator door, bathroom mirror, or even the inside of your locker at school.

Now let’s talk about car buying. But I’m gonna have to apply the brakes here, too. Getting a new car can be fun, and a car is also a necessity for many people. But keep a few things in mind. First: a car is not an investment because it actually loses value, or depreciates, over time.  In fact some brand new cars can depreciate by as much as $2,000 the moment you drive them off the dealer’s lot!  So don’t assume your car will hold its value if you ever need to sell it.

Next, remember the words a wise man once told me: “You start paying for a car after you buy it.” (Would you believe the wise man was actually my high school wrestling coach? Yep!)  And my coach was right because as soon as the ink dries on your sales contract, and you’ll be spending more money on stuff like insurance, gas and maintenance.

The third thing to think about is that those car dealers are smart, and know how to separate people from their money – they are good at their job. So be a savvy shopper and maybe take an experienced friend or family member with you when you are looking around for the perfect car, to make sure the car salesman doesn’t take you for a ride.

Ok, so now that you have the road map in front of you, and you have your plan, think about what car best suits your needs – do you need good gas mileage, a big truck bed, or is reliability the most important thing? Next, if your budget can afford it, you can think about your wants too – a kickin’ stereo, rims, sunroof, tint, etc. Then shop around, and take your time. And before you know it, you’ll be zooming around town in your dream car – and still have money in the bank for later. So sit back, relax, and enjoy the ride!

PS: Oh, yeah, and I vote for the color red.

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. This content does not constitute professional and/or financial advice, and Dr. Per Cap is not a licensed investment advisor. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.