Understand the psychology behind buyer’s remorse and these five steps to overcome it
The year was 2003 and I had just bought a $110,000 home. I had bought several rental properties before, always putting in the time to find a fair value for the investment and negotiating a good price.
This time was different. The house had a jacuzzi in the finished basement…how could I say no?
It wasn’t long after signing the closing documents that I felt an overwhelming sense of regret. I was pretty sure I overpaid and now I would have to live with the decision for a couple of decades.
I wasn’t alone in my regret. A survey by Trulia finds that 44% of homeowners feel buyer’s remorse after purchasing their home. One of every three home buyers say they wish they had bought a bigger house while 15% wish they had more information before making the decision.
Why do people feel that way after a big purchase? Is it just our minds playing tricks on us? Is there a way you can avoid buyer’s remorse the next time you make an important decision?
What is Buyer’s Remorse?
Buyer’s remorse is that sense of regret you get after making a big decision. You don’t even have to buy something but it’s most common after expensive purchases like a house or car.
You know what I’m talking about, right? You went out to the dealership just to look around but then you heard about the special holiday sale. The dealer threw in a couple of extras and you were so excited to drive off the lot with your new car.
Talking to your friends later though, you aren’t quite so excited. The payments and increase in insurance are going to mean skimping for a while. You look online at used car prices and regret splurging on the new model.
You might even wonder if you can take the car back and just pretend it never happened.
Is it guilt? Is it that you think the salesperson influenced you or that you made the wrong choice?
Buyer’s Remorse Psychology
Most of the time, when someone says, “It’s all in your head,” they aren’t speaking literally. In the case of buyer’s remorse, it just might be true. Despite feeling really awful about your purchase, there’s some really interesting things going on in the grey matter right now.
I’m going to be digging deep into my psych classes here so feel free to propose your own ideas. There are a couple of different thoughts on the psychology behind buyer’s remorse.
The first is the idea of cognitive dissonance. We all have a perception of ourselves, the beliefs and values we hold dear. When you do something that contradicts that perception of yourself, it causes you stress on a subconscious level. You feel regret and even sadness because your action doesn’t align with your deeper beliefs.
You disappointed yourself. That’s cognitive dissonance.
That’s why bigger purchases cause more buyer’s remorse, because the higher level of commitment contradicts more with the perception. You can buy a cup of coffee and still think of yourself as a frugal spender. It gets harder to think of yourself as responsible with money when you just bought that expensive new sports car.
Another theory behind the psychology of buyer’s remorse comes from Art Markman, Ph.D. at the University of Texas. Markman says that regret is the function of two motivational systems that guide us.
The avoidance system helps deal with negative things like debt, things you want to avoid. Emotions like regret and guilt are survival instincts, keeping us from doing activities that might cause emotional or even physical harm.
The other motivational system, the approach system, deals with things you want and base desires. Much of the time, that approach system is in control. You see all the things you want and you’ve got a pocket full of plastic cash.
After you’ve satisfied that desire, the approach motivation stops driving you. The avoidance system is now in control and you have to think about all the consequences of your purchase.
The lamest part of about buyer’s remorse is that it can strike even after good decisions. While buyer’s remorse can help to avoid some bad financial decisions in the future, that regret can be overwhelming even when you got a good deal.
Overcoming Car Buyer’s Remorse
Buyer’s remorse after buying a car is so common that it deserves it’s own section. I don’t think I’ve met a single person that did not feel at least a little regret after buying a new car…and sometimes even after buying a very reasonable used car.
Why does buyer’s remorse hit us so often with car purchases and how can you use this to make better decisions?
There are two reasons we regret our cars more than any other purchase. First is because these are some of the most expensive financial decisions we make. Even if that $6 mocha-coca-grande latte was a bad decision, it’s hard to get worked up over something that costs so little.
Signing your name to a $20,000+ contract for a new car is something else entirely. In fact, a study by Harvard Business found a direct relationship between size of a purchase and strength of buyer’s remorse…even when it was seen as a ‘good deal’.
The other reason we get buyer’s remorse with cars is the drastic and opposing forces we face in car buying.
On the one hand, we hear so often about being responsible with our money when it comes to car buying and how much car you can afford. We prize fuel efficiency and the ‘good deal’ on car that gets us to work every day.
Then there’s the other set of forces; the marketing that drives us to prize speed, power and status in a car purchase. For some guys (yep, fell for this one when I was younger), their car is an extension of their manhood. Our cars are the most noticeable way to show off success.
Dealers are all too happy to help that second force win out while we’re buying a car. Unfortunately, that second force is quick to reassert itself after the purchase.
Smart Spending and Investing Means No Regrets
One of the best ways to buy what you want and still not suffer buyer's remorse is by knowing that you're also taking care of your financial future.
This means shifting some of your spending to saving and investing before you buy that new Louis Vuitton handbag. As you watch your nest egg grow, you'll worry less about the frivolous spending because you know you're also doing the right thing with your money.
How to Overcome Buyer’s Remorse
Buyer’s remorse is hard-wired into our brains so you might never be able to fully avoid it. You can do things to make better financial decisions and lessen the regret you feel after big purchases.
These five steps will help you avoid buyer’s remorse or limit it after a purchase. One of the best things you can do though is just understand what things bring the biggest regret. These are the biggest scams and wastes of money and I’ve created a video of the top 10 worst.
1) Use cash instead of credit. This keeps you on a budget and helps avoid running up the credit card bill. Don’t think that spending all the cash in your wallet won’t cause a little buyer’s remorse but it will help avoid the really big purchases.
2) Take a day to think about your big purchases. Taking a cooling-off day to think about big purchases is my favorite. Coming really close to making the decision, your brain will react similarly to if you had actually made the purchase. That avoidance system is going to take over and present you with all the ideas why you don’t necessarily need a diamond-encrusted, heated ice cream scoop.
3) Use cooling-off rule to get more information and compare options. If you didn’t put much thought into comparison shopping before, that cooling-off day is a great second chance to compare your other options.
4) Use a list when you’re shopping. Ever wonder why grocery stores put all that candy right next to the checkout? Nobody goes grocery shopping for Snickers and gum, but somehow they end up coming home with both. Write out a list of what you need and stick to it.
For big decisions like buying a house or a car, make a list of the must-have features you want before you go looking. Agree on a budget and don’t get drawn in to paying thousands more for features you didn’t even know you wanted.
5) Follow a budget when you go shopping. Even if you’re using credit cards to do your shopping, you can still stick to a budget to control your spending.
Buyers Remorse Happens in all Expensive Purchases
We all feel buyer’s remorse. It’s natural and you’re probably not going to fully overcome it. Understanding what it is and why we regret those big decisions will help to keep your mind from playing tricks on you. Planning out your purchases and using a cooling-off day will help you make better financial decisions.
You can minimize the regret you feel by checking your spending habits. Sometimes buyers remorse is a good way of rethinking those impulse purchases and expensive little toys that you can't afford. If you're having second thoughts about an impulse purchase, use the cooling off rule and think about why you're feeling that anxiety. Don't worry about missing out on the purchase, it will be there after you've thought about it.
Once you've given yourself time to analyze those second thoughts about spending the money, you'll be ready to make a better decision. You might still feel some anxiety but you'll know you did the right thing.
Check Out the Entire Car Buyers and Spending Habits Series!
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