New Car...Walk me off the ledge!

[LearningMustachian72]

Hey!

We are a two car family and have to be based on where we live/work.

After 10+ years of driving really old cars (always 10-20 years old), I am considering buying a new car.  Looking at Subaru Outbacks a new one is only a few more thousand than a 2017 with 25k miles.

I know, I know, I could be buying a 2014 or something older for much cheaper but after years of several trips to the mechanic dealership, I am thinking it may be nice to have one reliable car we shouldn’t have to worry about for 10+ years and keep buying cheap cars for our second vehicle.

I’ve been reading a lot on this and am still enticed by the new vehicle as we would still be saving 50% of our income. 

Is this unreasonable, will I regret it?

[ender]

We bought a new car a few years ago because for the model we wanted, if you treated the "zero value" point it took 250k miles before the break even happened on new vs used (most used were on the curve of purchase price at 0 miles to $0 @ 250k miles).

I was a bit surprised.

A decent number of new cars have similar curves. Basically figure out the trendline of price vs miles/years and see what that suggests for a brand new car and then check if that expected price is higher than what they sell for (or be aware of what the premium is).

[Dicey]

I am an outlier in that I don't mind the idea of brand new BIFL vehicles*, as long as they're practical choices. However, here is my well proven tactic for use when the new-car blues hit. Calculate the sales tax and new car registration fees. Ooh, that's lotsa money! You could probably do some really cool stuff with that wad of dough. Not cured yet? Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

*Honestly, it really does work. While I've had new vehicles as company cars, I just realized I never have purchased a brand-new car with my own money. I sure have salivated over a few over the years, but this technique really works.

[researcher1]

After 10+ years of driving really old cars (always 10-20 years old), I am considering buying a new car.  Looking at Subaru Outbacks a new one is only a few more thousand than a 2017 with 25k miles.

I’ve been reading a lot on this and am still enticed by the new vehicle as we would still be saving 50% of our income. 

Is this unreasonable, will I regret it?

I always buy new, drive it for 11-14 years, sell private party, then repeat the process.
This is the most cost effective and efficient method if you are purchasing popular mainstream vehicles (Honda, Toyota, Subaru, ect).

However, I would consider something other than Subaru if you don't live in a snowy region.
Get a FWD instead and enjoy lower upfront cost, lower maintenance costs, better gas mileage, ect.

As you have seen, the price of 1-5 year old models is simply too high compared to the negotiated price of a new car with 0 miles.

[ender]

I am an outlier in that I don't mind the idea of brand new BIFL vehicles*, as long as they're practical choices. However, here is my well proven tactic for use when the new-car blues hit. Calculate the sales tax and new car registration fees. Ooh, that's lotsa money! You could probably do some really cool stuff with that wad of dough. Not cured yet? Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

*Honestly, it really does work. While I've had new vehicles as company cars, I just realized I never have purchased a brand-new car with my own money. I sure have salivated over a few over the years, but this technique really works.

This is considerably less effective if you do the same for comparing a brand new vs a 3 year old version of the same car ;-)

[researcher1]

Calculate the sales tax and new car registration fees.
Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

In my state, annual vehicle registration costs are identical, regardless of the vehicle age.
So there is zero cost penalty when buying new.

When you buy a new car, you pay sales tax once, then drive the car for 10-15 years.
When buying used, you will need to replace vehicles more often, which means you will pay sales tax more often.

Auto insurance on my brand new vehicle was within $20/year of my 2006 model vehicle.
Insurance of new cars is often comparable to used cars, because they have so many more safety/security features, which reduce claims.

[ender]

Calculate the sales tax and new car registration fees.
Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

In my state, annual vehicle registration costs are identical, regardless of the vehicle age.
So there is zero cost penalty when buying new.

When you buy a new car, you pay sales tax once, then drive the car for 10-15 years.
When buying used, you will need to replace vehicles more often, which means you will pay sales tax more often.

Auto insurance on my brand new vehicle was within $20/year of my 2006 model vehicle.
Insurance of new cars is often comparable to used cars, because they have so many more safety/security features, which reduce claims.

+1

The mantra of "buy used or you are throwing money away!" is oftentimes not the case. Particularly with the many cars which more or less depreciate linearly.

[Dicey]

I am an outlier in that I don't mind the idea of brand new BIFL vehicles*, as long as they're practical choices. However, here is my well proven tactic for use when the new-car blues hit. Calculate the sales tax and new car registration fees. Ooh, that's lotsa money! You could probably do some really cool stuff with that wad of dough. Not cured yet? Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

*Honestly, it really does work. While I've had new vehicles as company cars, I just realized I never have purchased a brand-new car with my own money. I sure have salivated over a few over the years, but this technique really works.

This is considerably less effective if you do the same for comparing a brand new vs a 3 year old version of the same car ;-)

Actually, it's not. The sales tax alone is enough to make a fiscally responsible person reconsider, whether they're looking at a new car or a newer used car. You might be right if we're talking about beaters, but luckily, I've no experience in that arena.

[ender]

Actually, it's not. The sales tax alone is enough to make a fiscally responsible person reconsider, whether they're looking at a new car or a newer used car. You might be right if we're talking about beaters, but luckily, I've no experience in that arena.

Sales tax is a percentage of the purchase price (or value of car) in most states I've lived.

This means if you buy a $20k new car or a $15k used car, the sales tax difference is a 4:3 ratio. So if you'd pay $1k for the new car you'd pay $750 for the used car.

Does it work differently in other states?

[Dicey]

Calculate the sales tax and new car registration fees.
Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

In my state, annual vehicle registration costs are identical, regardless of the vehicle age.
So there is zero cost penalty when buying new.

When you buy a new car, you pay sales tax once, then drive the car for 10-15 years.
When buying used, you will need to replace vehicles more often, which means you will pay sales tax more often.

Auto insurance on my brand new vehicle was within $20/year of my 2006 model vehicle.
Insurance of new cars is often comparable to used cars, because they have so many more safety/security features, which reduce claims.

Clearly, your state is atypical ;-). Not one bit of your experience is applicable in mine. I shared a trick that's worked for me, based on what things cost in the place where I live. I passed it on in hopes of helping someone. Being shredded by you isn't helpful. It worked for me and helped me get to FIRE.

[researcher1]

Clearly, your state is atypical ;-). Not one bit of your experience is applicable in mine. I shared a trick that's worked for me, based on what things cost in the place where I live. I passed it on in hopes of helping someone. Being shredded by you isn't helpful. It worked for me and helped me get to FIRE.

This is wrong.

Three times as many states use Flat Rate registration fees than use Value Based.
https://www.ncsl.org/research/transportation/registration-and-title-fees-by-state.aspx

None of this is meant to "shred you", it is simply providing real-world counter-point to your experiences.
- As noted above, far more states use a flat rate registration fees
- Buying used cars will absolutely results in more car transactions over times, meaning more sales tax payments.  This will minimize the sales tax benefit.
- Insurance costs can absolutely be very similar between new & used, resulting in little/no insurance savings benefit to buying used.

[ender]

- Insurance costs can absolutely be very similar between new & used, resulting in little/no insurance savings benefit to buying used.

One minor comment here - this is slightly less true if you get collision/comprehensive on newer vehicles vs older ones (since that scales moreso based on the value of the vehicle).

Otherwise, great post - I should add too that even some of the "value based" registration states have effectively flat registration rates for the initial X years, which unless you buy a car older than X is going to result in the same registration costs.

When I lived in Iowa (which is value-based on the linked chart), unless the car was older than 7 years old, the registration was calculated the same as if it was brand new.

[researcher1]

Actually, it's not. The sales tax alone is enough to make a fiscally responsible person reconsider, whether they're looking at a new car or a newer used car.

Sales tax is a percentage of the purchase price (or value of car) in most states I've lived.
This means if you buy a $20k new car or a $15k used car, the sales tax difference is a 4:3 ratio. So if you'd pay $1k for the new car you'd pay $750 for the used car.

Agree with this.

In my area, the sales tax difference between a $25K car and a $20K car is only $325.

And that $20K used car is going to be several years old with many more miles than new, which means you will have to replace that vehicle sooner, resulting in paying sales tax again.

[FIRE 20/20]

Clearly, your state is atypical ;-). Not one bit of your experience is applicable in mine. I shared a trick that's worked for me, based on what things cost in the place where I live. I passed it on in hopes of helping someone. Being shredded by you isn't helpful. It worked for me and helped me get to FIRE.

This is wrong.

Three times as many states use Flat Rate registration fees than use Value Based.
https://www.ncsl.org/research/transportation/registration-and-title-fees-by-state.aspx

None of this is meant to "shred you", it is simply providing real-world counter-point to your experiences.
- As noted above, far more states use a flat rate registration fees
- Buying used cars will absolutely results in more car transactions over times, meaning more sales tax payments.  This will minimize the sales tax benefit.
- Insurance costs can absolutely be very similar between new & used, resulting in little/no insurance savings benefit to buying used.

Thanks for posting!  My experience matches Dicey's, so I was surprised to see that this isn't as common as I expected.  I've saved thousands alone on Registrations fees, plus a significant amount in sales tax and insurance cost by following the same approach as Dicey uses.  In addition, the depreciation during the first few years is another significant savings.  But those savings apparently aren't universal.  It's always good to run the numbers.

[ToTheMoon]

Hey!

We are a two car family and have to be based on where we live/work.

After 10+ years of driving really old cars (always 10-20 years old), I am considering buying a new car.  Looking at Subaru Outbacks a new one is only a few more thousand than a 2017 with 25k miles.

I know, I know, I could be buying a 2014 or something older for much cheaper but after years of several trips to the mechanic dealership, I am thinking it may be nice to have one reliable car we shouldn’t have to worry about for 10+ years and keep buying cheap cars for our second vehicle.

I’ve been reading a lot on this and am still enticed by the new vehicle as we would still be saving 50% of our income. 

Is this unreasonable, will I regret it?

What is your use case for wanting the Outback over something else?

We had recently been pondering purchasing an Outback as a replacement for our 2006 Mazda 3 GT hatchback (purchased new) that we love dearly. In our location, the average price of a (used) Outback was approximately $10,000 more CAD dollars than the equivalent Mazda 3 (and yes, I am fully aware that they are different vehicle classes and cannot be directly compared, but bear with me.)  The advantages we saw to getting the Outback: larger cargo capacity, a bit more clearance, and AWD. The disadvantages: higher cost, a larger vehicle, CVT transmission.

For reference, we are a family of 4 with 8 & 10-year-old boys, and we almost always have at least one 50+ lb dog. We live in the Rockies and are always on dirt roads hiking, biking and tent camping. With the purchase of a roof rack and a couple of accessories, the Mazda 3 was our go-to for everything - there were always bikes, kayaks or the Thule box on top of it. Beauty is that because it is relatively low, the roof is easy to access so getting things on/off has never been an issue. They are also rather large inside for a compact car - our "big & tall" friends are always shocked when they actually get in. All of that, and its actually a really fun car to drive!

We really wanted an Outback for a lot of reasons, including that they are basically marketed directly to use-cases like ours, but in the end we decided that the little bit of extra clearance and AWD was not worth the added cost. Our Mazda 3 had taken us plenty of places where most would say a small car had no business being, and being FWD with good snow tires it was a beast during snowstorms. About two weeks ago we found a fully-loaded Skyactive 2014 Mazda 3 with only 59,000KM on it, listed privately for a few thousand below blue-book value (we ended up paying $14,000 CAD cash.) We snapped it up, threw some new roof racks on it and are very pleased with our purchase.

It really took all of that to say: figure out what your main uses will be for your new car and let us know - a new Outback might be just right for you, but there may be plenty of other options out there that are worth considering that will save you lots of $$ and still give you everything you are looking for.

[researcher1]

Thanks for posting!  My experience matches Dicey's, so I was surprised to see that this isn't as common as I expected.  I've saved thousands alone on Registrations fees, plus a significant amount in sales tax and insurance cost by following the same approach as Dicey uses.  In addition, the depreciation during the first few years is another significant savings.  But those savings apparently aren't universal.  It's always good to run the numbers.

If you are unlucky enough to live in one of the few value-based registration states, then you absolutely need to account for these costs.
But for the majority of states in the US, this is not a factor at all in the new vs. used equation.

When you say you've saved a "significant amount" in sales tax, what is the tax rate in your location?
For me, the difference between new vs. used is just a few hundred dollars, which is offset by the fact that I won't have to pay sales tax as often when buying new.
It doesn't seem like any state sales tax would result is significant savings, assuming you are comparing new vs. slightly used (not a 15 yo beater).
https://taxfoundation.org/2020-sales-taxes/

Also, how much are you savings on insurance between new vs. used?
I personally have seen very little savings between my brand new cars and my 10+ year old cars.

You also mention that "depreciation during the first few years is another significant savings", but this definitely not true of popular brands like Honda/Toyota/ect.
They don't depreciate in the old-school way people are used to from crappy American cars from decades ago.
And as I've pointed out here before, the price of a well negotiated brand new car is often very similar to what 1-3 year old used vehicles sell for.

Here is one real-world data point from just this weekend.
I went on Carvana to see what they would give me for a vehicle I purchased last year.  Their price was just $300 less than what I paid for it!

[FIRE 20/20]

Thanks for posting!  My experience matches Dicey's, so I was surprised to see that this isn't as common as I expected.  I've saved thousands alone on Registrations fees, plus a significant amount in sales tax and insurance cost by following the same approach as Dicey uses.  In addition, the depreciation during the first few years is another significant savings.  But those savings apparently aren't universal.  It's always good to run the numbers.

If you are unlucky enough to live in one of the few value-based registration states, then you absolutely need to account for these costs.
But for the majority of states in the US, this is not a factor at all in the new vs. used equation.

When you say you've saved a "significant amount" in sales tax, what is the tax rate in your location?
For me, the difference between new vs. used is just a few hundred dollars, which is offset by the fact that I won't have to pay sales tax as often when buying new.
It doesn't seem like any state sales tax would result is significant savings, assuming you are comparing new vs. slightly used (not a 15 yo beater).
https://taxfoundation.org/2020-sales-taxes/

Also, how much are you savings on insurance between new vs. used?
I personally have seen very little savings between my brand new cars and my 10+ year old cars.

You also mention that "depreciation during the first few years is another significant savings", but this definitely not true of popular brands like Honda/Toyota/ect.
They don't depreciate in the old-school way people are used to from crappy American cars from decades ago.
And as I've pointed out here before, the price of a well negotiated brand new car is often very similar to what 1-3 year old used vehicles sell for.

Here is one real-world data point from just this weekend.
I went on Carvana to see what they would give me for a vehicle I purchased last year.  Their price was just $300 less than what I paid for it!

Rough order of magnitude - I saved about $500 in sales tax with my most recent car purchase.  The car I purchased was about 2 years old, but due to how it was optioned (I suspect it was the manual transmission) it was on the lot for 88 days and 90 days is when they typically go to auction so the dealer was highly motivated to get rid of it.  They cut the price at the 30 and 60 day marks and I offered about $3k less than that knowing if they didn't take it they'd likely have to take the auction price.  I typically keep my cars about 10-15 years or so, and generally buy a 2-4 year old car, so I'll be well over 100 years old before I need to pay an extra round of sales tax.  If I'm still buying cars when I'm a centenarian I'm ok with taking that extra hit.  Insurance costs was not very significant, but was probably in the neighborhood of $80 a year.  Not a lot, but it all adds up. 

[SailingOnASmallSailboat]

Calculate the sales tax and new car registration fees.
Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

In my state, annual vehicle registration costs are identical, regardless of the vehicle age.
So there is zero cost penalty when buying new.

When you buy a new car, you pay sales tax once, then drive the car for 10-15 years.
When buying used, you will need to replace vehicles more often, which means you will pay sales tax more often.

Auto insurance on my brand new vehicle was within $20/year of my 2006 model vehicle.
Insurance of new cars is often comparable to used cars, because they have so many more safety/security features, which reduce claims.

We bought a new car in 1998. Just sold it a couple of months ago. Bought a used car in 1999. Just sold it a couple of months ago. We didn't replace the used vehicle any more frequently than we replaced the new one. My point is, the number of times you pay sales tax is more related to how you view car ownership than the new vs used thing.

[researcher1]

We bought a new car in 1998. Just sold it a couple of months ago. Bought a used car in 1999. Just sold it a couple of months ago.

Say you have two car options:
- 3 year old used vehicle with 40K miles
- Brand new vehicle with 0 miles.

Which has more life left in it? 
I don't understand the logic of replacing the new car at the same frequency as the used car, given that the used car already has a bunch of miles on it.
For example, if you're willing to go 10 years and 200K miles on the used car (for a total 13 years and 240K miles), then why wouldn't you be willing to drive the new car for 13 years and 240K miles?

If this is your approach, then buying new definitely isn't for you.
I keep my cars until they reach 11-15 years old and 150K-190K miles.
So I can buy ONE brand new car or TWO 6-year-old used cars.

[researcher1]

Rough order of magnitude - I saved about $500 in sales tax with my most recent car purchase.  The car I purchased was about 2 years old,

I typically keep my cars about 10-15 years or so, and generally buy a 2-4 year old car, so I'll be well over 100 years old before I need to pay an extra round of sales tax.  If I'm still buying cars when I'm a centenarian I'm ok with taking that extra hit. 

How are you calculating the $500 sales tax savings?  In other words, what sales price did you use to calculate sales tax for the brand new model?
My last 2 new cars were purchased at a $4K and $7.5K discount from MSRP.
Unless you thoroughly researched the new car pricing to determine what actual real-world sale prices are, your $500 savings is artificially inflated.

Also, you say you buy 2 year old cars and keep it for ~10 years.
So if buying a brand new car, you would keep it for ~12 years (the new & used cars would be the same age when getting rid of them).
Therefore, the new car will last you 20% longer than the used car.

For example...
- You spend $2000 in sales tax for a new vehicle and drive it for 12 years ($166/yr)
- You spend $1500 in sales tax ($500 savings) for a used vehicle and drive it for 10 years ($150/yr)
- So across a 12 year ownership time period, the ACTUAL sales tax savings is only $200

This is just one example of how people trick themselves into thinking used cars are so much cheaper, but fail to consider all of the actual long-term costs.

[Paper Chaser]

How many miles do you drive per year? Subarus are notorious for things like head gasket issues, ringlands, etc and they've not had a stellar run with their CVT. If this is to be a 10 year vehicle with reliability being the most important factor, I'm not sure I'd be looking at an Outback.

[bluebelle]

I can't talk you off the ledge, I buy new and keep them.   My current Subbie is 17 years old (2003 Forrester).   I didn't plan to keep her this long, the original plan was 10 years.   But at that point I'd started working from, it make no sense to replace a perfectly good vehicle with a new one to just sit in the driveway.   If my next forrester is half as good I'll be thrilled....Probably should have replaced her 2 years ago, she's really showing her age now, wheel bearing, burning coolant slowly (easy fix, add a cup every 500km or so), AC gets flaky when stuck in traffic (you know, when you really need it).   We're moving in the fall, vehicles will be replaced when we get out of Toronto.

You didn't ask, but I like the forrester better than the outback, but that's personal preference.

and for others, I paid up front for quality, DH's mazda was cheaper up front but has had more costly repairs.

[bluebelle]

How many miles do you drive per year? Subarus are notorious for things like head gasket issues, ringlands, etc and they've not had a stellar run with their CVT. If this is to be a 10 year vehicle with reliability being the most important factor, I'm not sure I'd be looking at an Outback.

I have not heard that about Subarus, maybe I got lucky, I currently have what I assume is a very slow head gasket leak that didn't happen until year 17, 262,000KM (163,000 miles).   Wheel bearing just before that.   

[Dicey]

Dear researcher1,
The OP asked to be talked off a ledge. I offered a strategy that has worked for me. You proceeded to pick my answer apart. You cannot disprove something that worked for me.

I don't understand your need to "correct" my answer. The OP asked for I help, I gave it to them. Your replies are all about proving me wrong, and rather insistently at that.

If you have a solution for the OP, then offer it. Picking apart my answers does nothing to help the OP, which is why we're here, isn't it? This isn't the first time you've done this, and it's very much not in the spirit of helping others. If you need to be 100% right about 100% of everything, maybe you need stick to your own replies and stop correcting other people. Please stop. The goal is to help each other, not to incessantly prove how smart you are.
Kind regards,
Dicey

[K_in_the_kitchen]

When we bought new in 2019, we test drove Subarus, along with other makes, including Hondas.  In the end, we bought a Mazda3 GT hatchback in a screaming deal (new model design was coming out -- right now the same year/make/model used, with more miles than I have, sells for more than I paid new).  I don't think we'd ever considered a Mazda, but the reviews were great and we weren't married to any specific make.  It's an awesome car and does everything we need other than haul huge things.  But how often do we need to do that?

I'm team buy new if one has the cash available and doing so doesn't derail any other financial goals, which is the less common opinion in frugal circles.  I like new cars -- I like knowing no one else has abused the car, I like knowing all of the necessary maintenance has been done on schedule, I like knowing it's unlikely to break down, I like the up-to-date safety features (I love blind spot lane changing assist).  In 15 or so years we may buy another new car and sell or gift this one.

As for the ledge, I think it's always harder to make this kind of decision when you're looking at cars that hold their value well.  the sales tax, registration, and insurance won't be that different.  I would ask myself if I love the car enough to want to drive it for a really long time -- if yes, I'd probably buy new.

[FIRE 20/20]

Rough order of magnitude - I saved about $500 in sales tax with my most recent car purchase.  The car I purchased was about 2 years old,

I typically keep my cars about 10-15 years or so, and generally buy a 2-4 year old car, so I'll be well over 100 years old before I need to pay an extra round of sales tax.  If I'm still buying cars when I'm a centenarian I'm ok with taking that extra hit. 

How are you calculating the $500 sales tax savings?  In other words, what sales price did you use to calculate sales tax for the brand new model?
My last 2 new cars were purchased at a $4K and $7.5K discount from MSRP.
Unless you thoroughly researched the new car pricing to determine what actual real-world sale prices are, your $500 savings is artificially inflated.

sigh

It seems as though you're just being argumentative to be argumentative.  For about 5 years I was a moderator for a car enthusiast online forum.  One of the areas I moderated was the marketplace section, including people posting new and used car prices for the models of interest to the forum.  I was extremely familiar with the prices for this model at the time, although my current knowledge is pretty stale. 

Also, you say you buy 2 year old cars and keep it for ~10 years.
So if buying a brand new car, you would keep it for ~12 years (the new & used cars would be the same age when getting rid of them).
Therefore, the new car will last you 20% longer than the used car.

For example...
- You spend $2000 in sales tax for a new vehicle and drive it for 12 years ($166/yr)
- You spend $1500 in sales tax ($500 savings) for a used vehicle and drive it for 10 years ($150/yr)
- So across a 12 year ownership time period, the ACTUAL sales tax savings is only $200

This is just one example of how people trick themselves into thinking used cars are so much cheaper, but fail to consider all of the actual long-term costs.

You're missing a LOT with that analysis.  Invest the $500 savings for 10 years and it should roughly double in real terms (assuming 7.2% real growth and the rule of 72).  That $1000 can be applied to the next car's sales tax, making the difference $1,000 at that point.  If that doubles again over 10 years, then the savings from sales tax alone pays for all future cars' sales tax and more. 

[joe189man]

We have a 2010 mazda 3 hatch back we bought new and a 2019 honda odyessy we also bought new

regardless of how much you may spend or save on taxes or insurance, there really isnt a price to be put on piece of mind of knowing how each mile was and will be put on the car by you vs buying used from an individual or dealer

a new car will last for 10+years easily if not 15-20 years

researching them where i live i found a similar situation, a few year old car is nearly the cost of new, new often have financing deals near 0% helping saving some cash

its not mustachian but i recommend you jump of the cliff and buy new

[MilesTeg]

As long as you buy something (1) popular (2) reliable and (3) no more than you actually need and you keep that vehicle for at a bare minimum 10 years, the overall cost of buying new vs gently used is not huge. Popular, reliable cars have a fairly linear depreciation curve these days (see: camry, corolla, etc.).

That said, there is a significant difference in price as others have pointed out. You have to decide if that difference is worth it.

Personally, I buy and keep cars 15-20 years, so I have no problem buying new. With a bit of patience you can "negotiate" a price that cuts out the first couple years of depreciation. You just have to be patient and wait for deals and dealers wanting to off load inventory and not be too particular about exact model/options/etc.

[researcher1]

It seems as though you're just being argumentative to be argumentative.  For about 5 years I was a moderator for a car enthusiast online forum.  One of the areas I moderated was the marketplace section, including people posting new and used car prices for the models of interest to the forum.  I was extremely familiar with the prices for this model at the time, although my current knowledge is pretty stale. 

Not being argumentative at all.
It sounds like you used the negotiated new car price when calculating sales tax savings, which is the accurate comparison.

No financially adept person would ever pay MSRP for a new vehicle.
However, many people here consistently make the same mistake in their new vs. used analysis...using the new car MSRP as their comparison point.
This artificially high price is used to calculate the sale price, sales tax, and depreciation of a new car...which causes their new vs used analysis to be incorrect.

You're missing a LOT with that analysis.  Invest the $500 savings for 10 years and it should roughly double in real terms (assuming 7.2% real growth and the rule of 72).  That $1000 can be applied to the next car's sales tax, making the difference $1,000 at that point.  If that doubles again over 10 years, then the savings from sales tax alone pays for all future cars' sales tax and more.

I see this argument come up a lot...but it assumes that consumers invest EVERY available dollar they have sitting around in the stock market.
But this is simply not how the overwhelming majority of people operate.
Most people keep money in liquid accounts for emergency funds, car/house purchases, car/house maintenance, vacations, ect.

You don't cash out stocks to pay sales tax on a car you buy a few years from now.
Conversely, I wouldn't immediately buy stocks/mutual funds with the few hundred in sales ta savings.  Instead, it would stay in the pool of liquid funds I keep available.

[researcher1]

You proceeded to pick my answer apart. You cannot disprove something that worked for me.
I don't understand your need to "correct" my answer. The OP asked for I help, I gave it to them. Your replies are all about proving me wrong, and rather insistently at that.
If you have a solution for the OP, then offer it. Picking apart my answers does nothing to help the OP, which is why we're here, isn't it?

I'm not sure why you take my posts so personally.
I'm not "picking apart" your answers, but simply offering a counterpoint so the OP and others have the most accurate information possible.

Your post cited 3 reasons to avoid buying a new car...sales tax, registration fees, insurance.
I simply pointed out that these items have a minuscule impact on the new vs. used analysis for the vast majority of consumers.
I very politely pointed this out in post #5.  I'm not sure how you could take offense, or incorrectly dispute, what I said.

[Dicey]

You proceeded to pick my answer apart. You cannot disprove something that worked for me.
I don't understand your need to "correct" my answer. The OP asked for I help, I gave it to them. Your replies are all about proving me wrong, and rather insistently at that.
If you have a solution for the OP, then offer it. Picking apart my answers does nothing to help the OP, which is why we're here, isn't it?

I'm not sure why you take my posts so personally.
I'm not "picking apart" your answers, but simply offering a counterpoint so the OP and others have the most accurate information possible.

Your post cited 3 reasons to avoid buying a new car...sales tax, registration fees, insurance.
I simply pointed out that these items have a minuscule impact on the new vs. used analysis for the vast majority of consumers.
I very politely pointed this out in post #5.  I'm not sure how you could take offense, or incorrectly dispute, what I said.

I simply pointed out something that worked for me, and you took it upon yourself to pick it apart, based on a completely different data set. Please stop.

[ender]

Dear researcher1,
The OP asked to be talked off a ledge. I offered a strategy that has worked for me. You proceeded to pick my answer apart. You cannot disprove something that worked for me.

I don't understand your need to "correct" my answer. The OP asked for I help, I gave it to them. Your replies are all about proving me wrong, and rather insistently at that.

If you have a solution for the OP, then offer it. Picking apart my answers does nothing to help the OP, which is why we're here, isn't it? This isn't the first time you've done this, and it's very much not in the spirit of helping others. If you need to be 100% right about 100% of everything, maybe you need stick to your own replies and stop correcting other people. Please stop. The goal is to help each other, not to incessantly prove how smart you are.
Kind regards,
Dicey

Um, this is what the question was:

Is this unreasonable, will I regret it?

You can certainly give any answer which works for you. For example, here are some possibilities which might have worked to convince someone to buy a used car:

• New cars cause cancer
• Car dealerships make the most money on new cars
• It is more expensive to buy new

Just because a reason is your personal experience doesn't mean it is either:

• True for you
• True universally for everyone

[Dicey]

Just because a reason is your personal experience doesn't mean it is either:

• True for you

Well, I'll be damned.


Edited to Add - ender, you quoted the question accurately, but you completely ignored the subject line of the thread. "Walk me off the ledge!" is exactly what I responded to. Tough crowd here.

To OP: I'm glad you've come to a decision you're happy with. May it be a great car for you for many years to come.

[alsoknownasDean]

Obviously the opportunity cost of the money spent is to be taken into consideration when calculating used vs new. That can tip the equation towards used in many circumstances.

However of course it's horses for courses, and sometimes the financially sub-optimal choice is the right one for someone at a particular life stage or a particular set of circumstances.

Do you need something the size of an Outback, or would a Civic or similar be sufficient? Cash or finance? If finance, do you have the value of the car in liquid savings/investments? Or at least, is your emergency fund large enough to cover car payments for x months?

Do you intend to get rid of it in a few years, or do you plan on driving it until the wheels fall off?

[Paper Chaser]

I have not heard that about Subarus, maybe I got lucky, I currently have what I assume is a very slow head gasket leak that didn't happen until year 17, 262,000KM (163,000 miles).   Wheel bearing just before that.

So perhaps for most MMMers, who may drive very little, their experience would mirror yours (although your 17 year old Subie doesn't have a CVT). But 163k miles in 17 years is about 9500 miles per year which is about 20% lower than what the median American drives. Also, reliability is relative. They really don't make too many junk cars anymore if we're comparing them to what's been made historically. Remember when a 10 year old car with 100k miles was pretty much scrap? That being said, a comparable Toyota, Honda, etc is less likely to have a head gasket issue at 163k like you're experiencing than a Subaru. It may not be a deal breaker, but it will likely have higher repair costs over time.

[Laura33]

OK, I'm going to offer a slightly different way to think about this.  First question:  what is the bare minimum that you could spend that would meet your transportation needs?  It's probably on the order of a couple thousand dollars for another reasonably reliable old vehicle (or zero if your current vehicle is still functioning well enough and not draining the bank with repairs).  Second question:  how much does the vehicle you want cost?  I'm guessing about $20-25K more.  Third question:  do you have an extra $20K or so to spend on luxuries (i.e., do you have all of your other financial ducks in a row, such as maxed-out 401(k), no CC debt, etc.)?  Final question:  are all of the luxuries that that additional $20K or so buys you -- the additional convenience, peace of mind, safety features, bright/shiny/pretty -- the highest and best use of that amount of money in your own personal circumstances, or do you have other priorities that are more important if you step back and look at the big picture?

We can argue all day about what is the best financial decision over the next 15 years.  But all of that is based on projections and assumptions; now, there are better or worse assumptions, and of course you should do that analysis, but in the end, no one can guarantee that any particular choice will turn out to be the optimal one 15 years from now.*  What you do know -- the thing you have actual control over -- is how much is coming out of your pocket right now, today.  And you also have the ability to assess how spending that money on a car will affect your other financial priorities.  So I like to approach these kinds of purchasing decisions with a baseline of "lowest-price that meets my needs," and look at everything beyond that as a luxury to which I am treating myself.**

Note:  luxury gets a bad name here.  I am a huge fan of luxury; my life is filled with it.  The problem is that most people are very, very good at convincing themselves that luxuries are actually needs, which then of course makes spending giant wads of cash on something seem entirely rational and appropriate.  I think recalibrating your brain to redefine "need" as the minimum possible thing that will work for you helps you evaluate more accurately whether the added luxuries you get from spending the extra money are really worth it to you, as compared to everything else you could be doing with that money.  And the answer may well be yes for you!  But don't put your thumb on the scale by comparing a new car against a car that's a year or two old; really look at things from the ground up, and think about what you're giving up if you use that money here.

*Examples:  I have always viewed myself as a "buy lightly-used, drive until they're dead" person."  And yet I haven't managed to do that once in my car-owning life (well, except for my first hand-me-down beater -- but that one died within 2 years).  The first one I was stupid and let myself get entranced with the bright-shiny of a new car after about 8 years.  The second one, well, I was stupid and bought a cute, sporty 2-door, and then a few years later we moved to the top of a hill and had a kid and the sporty car couldn't make it up our hill in the winter.  The next one was an absolutely horrible BMW that blew up at 8 years old.  The next one I was determined to drive forever and hand down to my DD -- but by the time she was driving 8 years later, the carmakers had developed active crash avoidance features and put them in affordable vehicles, so after a year we ended up trading it in on an almost-new car.  Now, YMMV, of course; you are probably a far more rational person than I am with much better self-control.  The point is that the best of intentions cannot guarantee that you won't get a lemon, or that your life and priorities won't change a few years from now.

**Before everyone gets bent out of whack on the poor man/rich man boot analogy:  I am not actually advocating buying the cheapest possible thing that's going to fall apart and cost you tons in repairs.  By all means, consider the longer-term cost projections when you are in a position to do so.  All I am advocating is a mental exercise that begins with acknowledging that anything above the level of "beater" -- really, any vehicle at all -- is a luxury, and that the value of that luxury should be assessed against the other possible uses of that money.  For me, not being stranded by the side of the road/being on a first-name basis with my mechanic is a very, very high-value luxury that outweighs most everything else.  But it is a luxury (and one that I can afford and happily pay for).

[Fishindude]

We have owned a few Outbacks and several of our family members have also.  There is not much savings in purchasing a low miles, lightly used Outback vs a new one, so we always opted for new.
Nothing wrong with buying a new car for someone who is still saving 50% of their income.  I would recommend you pay cash for it, rather than borrow even if a low interest rate.   If it bothers you to pay cash for it, you should probably re-think this decision and go with something a bit cheaper.

[Car Jack]

Maybe being an engineer, I have to do the math before I reach a conclusion.  Should you buy new or used?  It depends.  What costs are there in your state?  What depreciation exists with the exact model car you're looking at?  Don't look at what internet weenies tell you, do the research yourself.

Depreciation:  https://caredge.com/bmw/m5/depreciation

We have a number of cars with DW and 2 sons driving. We have cars we bought new and we have cars we bought used.  When looking for my Wrangler, I looked for 6 months.  I found nothing.....absolutely nothing cheaper than buying new that was less than 3 years old.  So getting a 2 year old vehicle with 30k miles would have cost me exactly what I paid, ordering exactly what I wanted.  Other cars (most mid sized sedans) drop like a rock.  Camry, Accord, Fusion, Legacy.  Our Legacy Limited was purchased a year old with 19k miles on it for $10k less than new (nearly 30% off).  We have 2 Crosstreks.  A 13 Limited and a 19 Premium manual.  These cars are like Wranglers, but depreciate a bit more.  I could not see buying a 2 year old one for $800 less than new.  So do your homework.

What are your other costs?  For me:
Registration $60 every other year.
Title $75 one time.
Sales tax 6.25% once.
Exise tax 2.5% of depreciated value every year. (the depreciation curve applied is very steep, so costs are much cheaper quickly)
Inspection $35 a year.

I don't know how Outbacks depreciate (even though we've owned 3 of them).  I'll mention that the comments that an outback has a "little more ground clearance" than a Mazda 3 is pretty funny.  The Mazda is 5.5" and Outback (same as Forester and Crosstrek) is 8.7".  That's 50% more, not a little.  If you're not blasting down unplowed roads or driveways, you might not care.  If you are, you'll care a lot.  Same comment for AWD and snow tires.  I have been stuck at the bottom of my driveway in FWD cars with snows too many times.  There's no runup (an oak tree in the way) and a steep hill and we get actual wet, heavy snow (not the fluffy, light stuff you see in the west).  I'm too old to hoof it up the driveway in 8 inches of new snow anymore.  I'm much more happy just gunning the gas and driving to my garage where I get into my Jeep, mount the snow plow and clear the driveway.

[LearningMustachian72]

Thanks everyone for the responses, it has been really helpful reading through them!

We have decided to go with a new outback as the out the door cost of a 2017 with 26,000 miles was 30,333 compared to 34,510 for new.  The enhanced features along with the peace of mind of being the original owners was worth the added cost for us.

Also, we wanted the outback because we live in a very snowy state, have a steep driveway, have 2 dogs and enjoy canoeing, boating, camping/hiking.

We plan to keep the vehicle at least 10 years which was another factor in our decision (would we be tempted to upgrade the 2017 in less than 10?)

We will still keep our 2004 Camry with 184,000 as a secondary vehicle and drive that to the ground but wanted to have one very safe/reliable vehicle.

Thanks again for all of your input!

[researcher1]

What depreciation exists with the exact model car you're looking at?  Don't look at what internet weenies tell you, do the research yourself.

Depreciation:  https://caredge.com/bmw/m5/depreciation

This is a perfect example of why the depreciation argument against new cars is often complete garbage.
The link you posted is calculating depreciation based on absurdly high New Car pricing.

I looked up a make/model I purchased last year and have followed closely.
The New 2020 pricing used on this site is over $5000 more than what buyers are currently paying for the top trim level.

This is why is it so important to do your own research, as this site's depreciation is pure fiction.
The actual depreciation curves for a well-negotiated new car will likely be far different.

[ender]

What depreciation exists with the exact model car you're looking at?  Don't look at what internet weenies tell you, do the research yourself.

Depreciation:  https://caredge.com/bmw/m5/depreciation

This is a perfect example of why the depreciation argument against new cars is often complete garbage.
The link you posted is calculating depreciation based on absurdly high New Car pricing.

I looked up a make/model I purchased last year and have followed closely.
The New 2020 pricing used on this site is over $5000 more than what buyers are currently paying for the top trim level.

This is why is it so important to do your own research, as this site's depreciation is pure fiction.
The actual depreciation curves for a well-negotiated new car will likely be far different.

This is one of my biggest pet peeves for talking about depreciation. MSRP is a meaningless number, particularly for American manufacturers who regularly sell cars significantly below MSRP.

We bought a brand new base model Ford Escape in 2017 at just under 66% of MSRP in 2016. From looking at cars.com, similar vehicles now are selling for around $3k less than what we paid, so our real depreciation was closer to $750/1000 a year.

If you look at MSRP as the baseline, our car has depreciated 50% in just 4 years. With most of that in the second I purchased it as it "lost" so much value off MSRP given our sale price.

It's still worth noting it is likely we could have purchased a $5k used car four years ago and had lower total costs, in spite of getting a phenomenal deal on a new car (hit the stacked dealer/Ford incentive lottery).

[ToTheMoon]

I'll mention that the comments that an outback has a "little more ground clearance" than a Mazda 3 is pretty funny.  The Mazda is 5.5" and Outback (same as Forester and Crosstrek) is 8.7".  That's 50% more, not a little.  If you're not blasting down unplowed roads or driveways, you might not care.  If you are, you'll care a lot.  Same comment for AWD and snow tires.  I have been stuck at the bottom of my driveway in FWD cars with snows too many times.  There's no runup (an oak tree in the way) and a steep hill and we get actual wet, heavy snow (not the fluffy, light stuff you see in the west).  I'm too old to hoof it up the driveway in 8 inches of new snow anymore.  I'm much more happy just gunning the gas and driving to my garage where I get into my Jeep, mount the snow plow and clear the driveway.

@Car Jack

That was me, and I will own it! I admit that I am guilty of only looking at things through my own lens - we get a lot of snow, but we are in the West where the ski hills refer to it as "champagne powder." We live in a town that does a decent job of snow clearing, I do not have a gigantic or steep driveway to contend with, and the road to the ski hill is generally plowed.

This is a demonstration of why considering the use-case is important rather than just the vehicle in question. Also, if someone is a one-car family or not. Our other vehicle is a 1994 lifted Jeep Grand Cherokee (affectionately known around these parts as "Truck Norris") and that is the one we take out on the back roads to find the Christmas tree.



Consider my wrist slapped (but my enthusiasm for the Mazda 3's remains.) :)

[FIRE 20/20]

You're missing a LOT with that analysis.  Invest the $500 savings for 10 years and it should roughly double in real terms (assuming 7.2% real growth and the rule of 72).  That $1000 can be applied to the next car's sales tax, making the difference $1,000 at that point.  If that doubles again over 10 years, then the savings from sales tax alone pays for all future cars' sales tax and more.

I see this argument come up a lot...but it assumes that consumers invest EVERY available dollar they have sitting around in the stock market.
But this is simply not how the overwhelming majority of people operate.
Most people keep money in liquid accounts for emergency funds, car/house purchases, car/house maintenance, vacations, ect.

You don't cash out stocks to pay sales tax on a car you buy a few years from now.
Conversely, I wouldn't immediately buy stocks/mutual funds with the few hundred in sales ta savings.  Instead, it would stay in the pool of liquid funds I keep available.
[/quote]

Your comments are absolutely valid for people who are not on this forum.  But we're not talking about "the overwhelming majority of people", we're talking about MMMers.  Anyone on this forum who is even considering a new vehicle purchase would be investing at LEAST 30% of their income if not over 50%.  And I think it can safely be assumed they're following the investment order, so yes - EVERY available dollar is going into the market in accordance with their IPS.  If they aren't doing that then they're waaaaay overspending on a car.  I recall an old MMM post where IIRC he suggested a rule of thumb of never spending more than $15k on a car unless one had over $1M (not sure if he meant NW or invested).  I think that's a good rule of thumb - if anyone knows where he wrote that I'd appreciate a link.  If I were writing it I'd suggest never spending more than $10k on a personal car until FIRE because it's so trivially easy to find an outstanding vehicle for well under that amount.  And I'm a former car enthusiast with lots of track days and competition in my past.

And of course it's obvious no one should cash out stocks to pay sales tax on a car.  Money is fungible. 

[researcher1]

Anyone on this forum who is even considering a new vehicle purchase would be investing at LEAST 30% of their income if not over 50%.  And I think it can safely be assumed they're following the investment order, so yes - EVERY available dollar is going into the market in accordance with their IPS. 

Are you saying MMMers don't keep a pool of funds liquid (for emergencies, car replacements, major purchases, vacations, ect)?
That literally "EVERY available dollar" gets put in the stock market?
I guarantee the vast majority of people on this forum do not do this.  Most have a pool of money in savings/CDs/MM accounts to use for short & long term expenses and emergencies.  A few hundred dollars worth of sales tax would be coming out of or going into this pool of funds (not the stock market).

I recall an old MMM post where IIRC he suggested a rule of thumb of never spending more than $15k on a car unless one had over $1M.  I think that's a good rule of thumb.  If I were writing it I'd suggest never spending more than $10k on a personal car until FIRE because it's so trivially easy to find an outstanding vehicle for well under that amount.

This is a completely worthless rule of thumb without an ownership period attached to it.
So it is OK to spend $15K each on 2 separate used cars in a given time period, but not OK to spend $30K on 1 new car for the same ownership period?
Do you see how this guideline makes no sense?

It makes more sense to buy 1 new car for $20K and keep it for 15 years...than to ultimately spend the same amount on multiple used cars in those 15 years.

[LearningMustachian72]

Hi all,

Wanted to circle back as I did purchase a 2020 Outback Limited.  Wanted leather seats for the dogs but didn’t care about any frills beyond that.

$34,000 out the door (taxes in MN are expensive!)

Will drive it roughly 12,000 miles a year and plan to keep at least 10 years and hopefully 15.

Keeping our Toyota Avalon with 186k miles as car #2 but wanted one that was newer and we didn’t have to worry about (not that we have to worry about the Avalon, things a beast).

Thanks all for the suggestions, simply wanted to close the loop.

[Dicey]

It's always nice when the OP closes the loop. BTW - you're quite the looker!

[MilesTeg]

Hi all,

Wanted to circle back as I did purchase a 2020 Outback Limited.  Wanted leather seats for the dogs but didn’t care about any frills beyond that.

$34,000 out the door (taxes in MN are expensive!)

Will drive it roughly 12,000 miles a year and plan to keep at least 10 years and hopefully 15.

Keeping our Toyota Avalon with 186k miles as car #2 but wanted one that was newer and we didn’t have to worry about (not that we have to worry about the Avalon, things a beast).

Thanks all for the suggestions, simply wanted to close the loop.

Did the nazgul come as a standard option or did you pay extra?

[LearningMustachian72]

@MilesTeg

Haha had to look that one up.  Looks bad ass, unfortunately wasn’t part of the package.

[Pigeon]

Congrats on your new Subaru!

I bought a new Forester last year, after a lifetime of driving cheap econobox cars into the ground. I love this car so, so much.

[Just Joe]

I am an outlier in that I don't mind the idea of brand new BIFL vehicles*, as long as they're practical choices. However, here is my well proven tactic for use when the new-car blues hit. Calculate the sales tax and new car registration fees. Ooh, that's lotsa money! You could probably do some really cool stuff with that wad of dough. Not cured yet? Call your insurance agent and get a quote on that brand-new vehicle. Add that amount, less your current insurance premium, to the first number. Boom, you're cured. Works like magic. You're welcome.

*Honestly, it really does work. While I've had new vehicles as company cars, I just realized I never have purchased a brand-new car with my own money. I sure have salivated over a few over the years, but this technique really works.

Another idea too: have your existing vehicle properly detailed. You can take that as far as you want.

Get the wash/wax/carpet shampoo or the Lamborghini detail job applied to your Toyota. Maybe that will satiate your itch for something nicer.