The argument for a new car.

[oldjeep]

Re: The argument for a new car.

one thing I hate about buying used, especially 2 or 3 years old, those people who sell a ride a couple years after buying it, knew they were going to do that. their idea of maint is put gas in and run it. I know a few of those guys. rode with one down to the dealer to trade in his mustang, I didn't think a car could do that many burn outs in a short trip.

Lease returns and rental cars fall into that category too.

 

[Bigprairie1]

Re: The argument for a new car.

Anyone know of a site that compares cars and the real cost of ownership?

What does it cost to buy a new car and put 100K miles on it including fuel, repairs, insurance, etc. over say 5 years? (He'll drive 25 to 30 K a year.)

I know of at least (3) companies that have done reports on this (J.D Power, C.D Howe Institute and I think the 3rd is the Fraser institute) and it is a really interesting report.
In Canada things are a little more expensive on this than in the U.S but the yearly average cost of buying and maintaining a Chevrolet Malibu (I think that was the model...or something similar) was around $6500 a year, EVERY year for a 3-5 year period. Now, that number takes into account depreciation, maintainence, fuel, insurance, etc. Now, figure in the states that number to be in the low $5's or thereabouts. (interesting note: that number used to be higher!!! but it has gone down to the mid $6k's due to the improving quality in the cars).
Interestingly no car owner, particularly men, ever believes the full financial math on a new car purchase.....and it isn't good. It is one of, if not the worse financial investment you can make.
The depreciation numbers Aspeck mentions are very accurate and should be taken into consideration.
The best bet is to find a 2-3 year old car with low miles and go with that. The great news for used car buyers is that with the immense quality and reliability improvements in cars over the last 10+ years...it is increasingly hard to find a 'lemon'. So a used car with 30-40K miles on it....is hardly broken in at all and is a substantially better bet than it was 20-30 years ago. So much so, that I wouldn't think twice about buying even a 5-8 year old car (or truck) that has a clear, well maintained history with the intention of getting 3 to 5 years out of it with minimal costs.
Most buyers, and again particularly guys.....justify the purchase from a variety of standpoints including, gas mileage, reliability, utility, etc. However, when the investigation is really complete and all the numbers are in....its mostly about just getting something nice and new and different.
I'm a real car and industry buff on this and love this stuff and follow these trends very closely....interesting feedback so far!!
BP

 

[oldjeep]

Re: The argument for a new car.

Interestingly no car owner, particularly men, ever believes the full financial math on a new car purchase.....and it isn't good. It is one of, if not the worse financial investment you can make.

The problem is viewing buying a car as an investment. If you really looked at it in those terms, you would take the bus.

 

[Tim Frank]

Re: The argument for a new car.

One of the wisest people I've ever met maintains that the optimal vehicle investment strategy is to "drive the cheapest car that your ego will allow".
It's always worked for me.

 

[Bigprairie1]

Re: The argument for a new car.

The problem is viewing buying a car as an investment. If you really looked at it in those terms, you would take the bus.

....why would you not view a vehicle as an investment?....given of all things that can cost a sizeable amount of money. Your vehicle is usually your next biggest cost for your household....why not be smart, or at the very least...responsible about it.

BP

 

[oldjeep]

Re: The argument for a new car.

....why would you not view a vehicle as an investment?....given of all things that can cost a sizeable amount of money. Your vehicle is usually your next biggest cost for your household....why not be smart, or at the very least...responsible about it.

BP

I think you had better look up the definition of investment. A car is an expense unless we are talking about a classic Ford Cobra or a Duisenberg.

 

[rbh]

Re: The argument for a new car.

We could always walk.
A vehicle is a tool. Just like a shovel VS an excavator.
Time is money.

As for used vehicles, I luv'em there is no way that I could justify a 20% +- drop as soon as I drove the new vehicle off the lot.

 

[roscoe]

Re: The argument for a new car.

....why would you not view a vehicle as an investment?....given of all things that can cost a sizeable amount of money. Your vehicle is usually your next biggest cost for your household....why not be smart, or at the very least...responsible about it.

BP

Unless you're buying a classic, a car is a double or triple negative.
It's a depreciating liability for sure, and possibly incurs a debt as well.

 

[roscoe]

Re: The argument for a new car.

... so a $20K vehicle would loose $6K the first year, $4K the second year, and $2K every year after that. With the price of vehicles escalating as they have, that formula has changed some, but not a whole lot.

So where can I find one of those 7 year old cars that have depreciated down to being free?

 

[aspeck]

Re: The argument for a new car.

one thing I hate about buying used, especially 2 or 3 years old, those people who sell a ride a couple years after buying it, knew they were going to do that. their idea of maint is put gas in and run it. I know a few of those guys. rode with one down to the dealer to trade in his mustang, I didn't think a car could do that many burn outs in a short trip.

from experience, MOST of the customers we had that traded ever 1-3 years were people that took amazing care of their vehicles. One guy in particular changed his oil every 2-3 months, said it was cheap maintenance. There would be 800-1000 miles on the oil. Our mechanics would save his oil for their cars! He wasn't really the exception. Most of these guys and gals were car enthusiasts and took amazing care of their vehicles. We had one customer that traded his wife's car every year and his car every 6 months ... A more sporty sedan in the spring and a 4wd SUV in the fall. Garage kept, babied, religious maintenance. I could go on.

I have personally owed and sold many more off lease and rental vehicles. Only one did I have any problems with, and it was covered under warranty and was taken care of. So my opinion of those types of cars, great VALUE because others are afraid of them.

 

[Bob_VT]

Re: The argument for a new car.

I'm going to pretend you never even said that...

Worry more if the son-in law can see my suggestion!! I wish my FIL had one to give me Yes, I know it's your toy. I remember the good cars

 

[canoemang]

Re: The argument for a new car.

One of the wisest people I've ever met maintains that the optimal vehicle investment strategy is to "drive the cheapest car that your ego will allow".
It's always worked for me.

Agreed..

If the kid can turn a wrench and doesn't mind it. I see no reason for a newer car but If he cant turn a wrench and pays a shop then i get it. I have 2 vehicles, 1996 Tahoe @ 280K Miles and a 98 Jetta @ 180K miles, id rather turn a wrench on either (which i do) than take a loan payment + full coverage payments...

 

[dingbat]

Re: The argument for a new car.

So where can I find one of those 7 year old cars that have depreciated down to being free?

I was going to say.......car shopping 2 years ago the difference between a new Honda Accord and a 2 year old Accord was no where close to the figures people quote.
When all was said and done, I was left with a choice.....a 2 year old car with 30K miles and a one year warranty with 2.9% financing or a new car with a 3 year warranty and 0.9% financing for a 10% (~$2,100) premium. Throw in the tax incentives being offered on new cars at the time and buying used would have actually cost me money.

I'm going car shopping again the end of this year. We have a new driver in the household and Dad (I) could use a new commuter. I'll look at used but the trade in values being "floated" don't give me any better hope of finding a used car deal than last time.

 

[WIMUSKY]

Re: The argument for a new car.

I'm on the same lines as dingbat, per say. I trade in for new every 3 years, my last one being 4yrs. With each truck I have more and more equity in my trade-in. My payment now actually went down $100 a month from my previous truck due to the equity. My only out of pocket down payment is just enough to pay for the taxes and license. The only downside, I always have a payment. But they are getting smaller.... I always wait until RAM is giving a ton of rebates plus dealer incentives.....

 

[bruceb58]

Re: The argument for a new car.

I have older cars. No car payments=very happy!

My next car for my daily driver when I get one will be a Toyota Highlander. My friend bought her's used 2 years old for around $20K. The new price on the car was over $30K. Her car was immaculate.

 

[12vMan]

Re: The argument for a new car.

You think like me. I had a 2003 Dodge Ram 1500 quad with 160K and avg 14mpg. Started needing a little regular care and replacement. Considered alot of options before getting a new 2012 Mazda3 hatch. Zero maintenance for years, 40 mpg, under $20K, saving $300 month in fuel, six speed manual fun ride with lotsa cool gadgets. After trading in the truck, the payment is less than the $300 a month fuel savings. Virtually a free new car with no headaches.

I like this scenario. The fuel savings for payment tradeoff makes total sense.

 

[agallant80]

Re: The argument for a new car.

I love to use Excel. Let me whip up a quick formula.

Assuming 1,000 miles a month and 200 in repairs and $3.25/gal
$162/month fuel
$200 repairs
TCO for current = 362

New
$325 payment
$92 fuel
TCO new = $417/month

Delta: $55


Formula used =1000/35*3.25 (miles driven/MPG*cost of fuel) change the MPG between assumed new and current.

 

[greenbush future]

Re: The argument for a new car.

Unless you're buying a classic, a car is a double or triple negative.
It's a depreciating liability for sure, and possibly incurs a debt as well.

Car is the absolute worst "spend" you will have during your short stay here on earth. New cars are the worst thing one could do with hard earned cash, anything one can do to minimize the spend will be well ahead of the saving game. If you need a corvette to feel better that's your choice, but anyone who says they make $$ with cars is either a dealer, or lying, or both. I bought my truck new in 2008, and paid it off in under 3 years. No car payments is the best thing one could want in today's world. She has 100K now and will need to run for another 100k for me even feel slightly good about spending that money when it was new. Have fun spending your $$

 

[bruceb58]

Re: The argument for a new car.

I love to use Excel. Let me whip up a quick formula.

Assuming 1,000 miles a month and 200 in repairs and $3.25/gal
$162/month fuel
$200 repairs
TCO for current = 362

New
$325 payment
$92 fuel
TCO new = $417/month

Delta: $55


Formula used =1000/35*3.25 (miles driven/MPG*cost of fuel) change the MPG between assumed new and current.

$200/month on repairs? LOL

Of course you leave out higher insurance costs, sales tax and higher registration fees.

 

[avenger79]

Re: The argument for a new car.

depending on the vehicle 200/month is very realistic. dropped just over 2000 in parts on the F150 last year.(yes I realizethat's not quite 200/month, but if a person wasn't able to do the work themselves and had to pay labor as well that number would have tripled) Lots of big number hard parts. this year not so much but we're not done yet.

as far as registration costs, it depends on where you live. we pay the same reg fee for any year vehicle here. granted where Bruce lives I'd still be driving my 1971 Ford just because of reg fees.