Credit & Debt
My Most Expensive Mistake: By Farnoosh Torabi
Just because your parents sell you something, doesn't mean it's a good deal. A few years ago I purchased my dad's 2006 German luxury car for roughly $20,000. It felt like a win-win for both dad and me. He priced it at just enough so he could pay off the car loan and at a level I found to be pretty competitive in the marketplace.
Full disclosure: I knew nothing about cars. But I eagerly took the vehicle off my dad's hands because it felt like a fair deal. (Also, it was a sweet ride!) I even paid for the car to be shipped from my parents' home in California to New York where I live.
Within the first few days after the car arrived, it started giving me trouble.
From there began a three-year money drain to keep the car in drivable condition. Each service visit resulted in anywhere from $600 to $3,000 in repairs. In the end, I probably poured another $10,000 into the car for maintenance and upkeep. This of course, hadn't been a problem for my dad: The car was newer when he owned it and still under warranty, so the cost of servicing and repairs was a non-issue to him financially.
We happily traded it in recently for a reliable (read: boring) car that I researched (and successfully bargained down). And it hasn't failed us yet! (Though you can be sure I purchased the extended warranty!)
What did I learn after all this? I recommend taking time to analyze the costs associated with big-ticket purchases like a car or home. While the sticker price might fit your bill, you need to find out: Can you comfortably afford all other related costs? With my vehicle purchase, I should have done more research and learned the average out-of-pocket maintenance costs associated with that 4 year-old German car. There are online resources that could have helped me with that. Instead, I learned the hard way that maintenance costs quickly outweighed the benefits of the car's moderate sticker price.
Lastly, I should have asked the previous owner (my dad) more questions. While he didn't intentionally sell me a problem car, I should have asked him more about his experience with the car. Turns out the car had been in an accident and repaired at one point. I didn't think to ask but learned years later. I should have also negotiated. It's never inappropriate to ask for a discount—even when the seller is your own father.
For more tips and resources on mastering your finances, visit chase.com/financialfitness.
Farnoosh Torabi is an award-winning journalist, author, television personality and personal finance expert who works with Chase Slate to provide financial education.