Buying Our First Car

[MMMnewbie]

Hello Mustachians,

I got very helpful advice about investing from this forum so I thought I would turn to you with our latest challenge: buying our first car. Hubby and I have been living in NYC since college so neither of us has ever owned a car. (Read: we know nothing about cars). Now, we are moving to Texas and, while we are going to try to use public transportation and bike as much as possible, we will need a car for grocery shopping, weekend trips, going out at night, etc. We are going to pay cash for the car, of course.

We want to buy something that will last for many many years and will fit 2-3 kids or 2 kids and a dog (we don't have any kids or pets, but don't want to be in a situation where we grow out of our car within a few years).

My hubby's family has always bought Subarus and has found them reliable (and online research seems to back this up) so he wants to get a Subaru Impreza. We are planning to move back to the Northeast after a couple of years so the all-wheel drive really appeals to him as well for driving in snow and such.


These are my questions:

1) I have been advocating for a used car after reading MMM, but a 2011 Subaru Impreza with bumper to bumper 100K mile warranty costs over 17K used. And that's not including tax! At that rate, isn't it just worth paying a few extra thousand for a new car? The savings from buying used seem minimal.

2) If the trick is to buy an even older car, what about if it breaks down? What if it was abused by the previous owner and will only last a couple more years? The warranty runs out after 100K miles. We don't know how to fix cars ourselves, don't know any mechanics, etc. My husband works literally morning to night (he's in finance) and doesn't have time to learn to DIY this stuff. Wouldn't we just spend all the $$ we saved up front on repairs and maintenance?

[neo von retorch]

Lately I've been reading and thinking that you should buy for what you need now rather than what you might need down the line, especially years from now. Sure - selling/buying cars can cost you money, particularly if you buy from and sell to a dealer rather than go with a private party.

I think it's also a trap to think "well it's only a few thousand more for a new one." But you don't need a new one, so save yourself several thousand dollars.

Have you seen MMM's list of suggested cars to purchase?
http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/

Personally I think most people will be doing good for themselves with a 4-8 year old hatchback. So practical. The only thing a hatchback doesn't seem to have is "status." People seem embarrassed to drive them (in the U.S. anyway.) They are generally inexpensive, practical (roomy, versatile), efficient and you will have no trouble surviving a Texas winter in one of them. (Again, buy for what you need now, not for when you move to the Northeast.)

Of course, if you're dead set on an Impreza, have you compared prices between where you live now and what they sell for in Texas? They might be cheaper down there since the AWD isn't really as big of a sell.

Also, the warranty is nice, but if a car has lasted 50k, in most cases, it'll last the next 150k as well (particularly if it's a reliable, late model brand - verify reliability for specific years and models, though, using Consumer Reports! Just $6.95 for a month subscription to the web site.) A car that has been driven very hard would probably shown general signs of neglect throughout. (Depending on the Impreza, you just might be getting it from a young, spirited driver. But still, the Impreza engines are pretty rock solid... but not terribly efficient. There are cars that get much better gas mileage that will meet all your current needs quite nicely.)

[JoyBlogette]

It might be cheaper to take a taxi when needed and rent a car for weekend trips (also more luxurious than buying a car).  If I didn't need my car for commuting, this is what we would be doing.

[bogart]

Lately I've been reading and thinking that you should buy for what you need now rather than what you might need down the line, especially years from now. Sure - selling/buying cars can cost you money, particularly if you buy from and sell to a dealer rather than go with a private party.

I think it's also a trap to think "well it's only a few thousand more for a new one." But you don't need a new one, so save yourself several thousand dollars.

I'm a buy 'em, drive-'em-'til-they-drop car owner, and find my needs don't change that much over the years -- the one time I bought a different vehicle it was because I had a kid (and I replaced my then-15-year-old Toyota that I'd bought new with a used station wagon); I've always owned 2 large dogs; I've never needed a reliable snow vehicle.  But your circumstances may be different (i.e. more likely to change more frequently).

That said, personally I'm happy to spend a few extra thousand to get the first 50K miles on a vehicle and be able to maintain it myself, plus pick all the features I want (e.g. it's harder to find manual than auto transmissions in  the used market).  Over my lifetime I've bought 5 used and 2 new vehicles, depending on what I wanted/needed at the time and how the used/new pricing compared.  So it's not like I'm committed to this (buying new), but I do think there can be times when it makes sense.

[Rebecca Stapler]

I'll echo the previous posters' sentiments about buying what you need now, not what you think you might need in the future -- particularly when it comes to buying enough space for 3 kids and buying AWD on the assumption that you'll move to the northeast sometime. Here's why:

• It usually takes years to get to the point where you have 3 kids, and in the intervening time you will learn what works for your family car-wise and what doesn't. I would get a car that is fine for 1-2 kids now, and address the 3rd kid issue when it arises.
• I live in the northeast and I don't find AWD necessary.
• Apparently the Prius will have an AWD option in 2016 (if you feel it's necessary)
• I wouldn't sacrifice the gas mileage required for an AWD vehicle now with the speculation that it might come in handy later -- not just because it may not be necessary in the northeast, but because you may never make it to the northeast on the time table you're anticipating. We moved to a "temporary" city in the hopes of moving to where we are now, and we were kind of stuck there -- for 2+ years longer than I thought we would be.

I've never bought a car with a warranty and never needed one. Maybe it's that I shell out the extra money for Toyotas, because they're reliable, but I don't think we've spent more than $5,000 on repairs on our Toyotas in the 8 years we've owned them. So, I wouldn't spend extra on a car because it has a warranty.

And ... if you couldn't tell from my Prius shoutout earlier, I freakin love our Prius. The hatchback is perfect for us, it's cost us under $2,000 in repairs (and it was due to my own terrible driving), gets 42 MPG (even with my terrible driving!), and it can even accommodate 3 carseats in back if it were ever necessary. We plan to get a Prius station wagon when our 99 Corolla bits the bullet. We bought it 3 years used, which I think is the sweet spot for used cars, with 70k miles on it.

[Louisville]

OP, I'm not saying this"some people" is you, but it seems implied in your post:

I don't quite understand why some people think they need a different car to transport kids/dogs than to transport adults. I raised both my kids just fine driving a series of small, 4 door Japanese cars. Mazda Protoge, Honda Civic 4 door, etc. The car seats fit just fine. Anything that didn't fit on the floor board went in the trunk. Our (mid-sized) dog could just fit between the car seats, although we very rarely had to transport her by car.
Also, and I know this is a hot button issue so consider it a non-judgemental request from me , please stop at two kids or less. The earth and the rest of humanity will thank you.

[RWD]

These are my questions:

1) I have been advocating for a used car after reading MMM, but a 2011 Subaru Impreza with bumper to bumper 100K mile warranty costs over 17K used. And that's not including tax! At that rate, isn't it just worth paying a few extra thousand for a new car? The savings from buying used seem minimal.

2) If the trick is to buy an even older car, what about if it breaks down? What if it was abused by the previous owner and will only last a couple more years? The warranty runs out after 100K miles. We don't know how to fix cars ourselves, don't know any mechanics, etc. My husband works literally morning to night (he's in finance) and doesn't have time to learn to DIY this stuff. Wouldn't we just spend all the $$ we saved up front on repairs and maintenance?

1) The Subaru Imprezas have been holding their value particularly well. I was also comparing new vs used Imprezas when I bought my last car. One thing to keep in mind is the extra overhead costs in purchasing new. Even if a used one is going for exactly base MSRP you could still come out ahead buying private party used. When you buy a new car at the dealership you will also have to pay for destination ($500-1000), documentation fees ($75+), sales tax (~7%), and possibly any options that are on the car that you don't want. You bypass most of that by purchasing used, and if it's a new enough car it will likely still be under warranty too. I'm not sure how it works in New York (or Texas), but where I live you don't pay sales tax if you purchase a used car via private party. There is still a use tax (VLT) here, but if you purchase a used car through a dealer you pay both sales tax and the use tax... If you go the used car route just make sure to take it to a shop before your purchase and have them do an independent pre-purchase inspection (PPI). There is usually a small fee for this, but if they find anything wrong that wasn't disclosed by the seller then it's another negotiating point that can save you money. Also, don't be afraid to walk away from the deal if you don't feel comfortable with the car or the price.

2) Modern cars are typically quite reliable, even used ones. TrueDelta is a decent site to check the reliability of prospective purchases. Also, if you do a PPI as I mentioned above, you will get extra peace of mind that the vehicle you purchased is mechanically sound. If you keep up on regular maintenance (see owner's manual) then unexpected breakdowns will be very rare, even for a 10-year old vehicle. If you at least learn how to do some simple basic maintenance like changing the air filter and stuff you should be able to save a good amount of time and money. Eventually when you do need to bring it into a shop a lot of them will be able to give you a ride to your destination or loaner/rental cars.

As far as what car you should purchase, I agree with neogodless. Buy what you need now and if you need more space or all wheel drive later then you always upgrade in the future. And the second time you buy a car you will know even better what to look for (based on your own tastes and experiences with the first one). Growing out of your car in a year or two should not be a big concern. For your situation you'll probably be best served by a simple small Japanese car like a Honda Civic. You should be able to pick up a relatively recent and reliable example for under $10k, which immediately saves you $7k compared to the recent Impreza. That's worth $30/month right there if invested at a modest 5%! Insurance will possibly be cheaper too, but that varies so much by person, location, provider, and car that I don't count on it.

[MMMnewbie]

OP, I'm not saying this"some people" is you, but it seems implied in your post:

I don't quite understand why some people think they need a different car to transport kids/dogs than to transport adults. I raised both my kids just fine driving a series of small, 4 door Japanese cars. Mazda Protoge, Honda Civic 4 door, etc. The car seats fit just fine. Anything that didn't fit on the floor board went in the trunk. Our (mid-sized) dog could just fit between the car seats, although we very rarely had to transport her by car.
Also, and I know this is a hot button issue so consider it a non-judgemental request from me , please stop at two kids or less. The earth and the rest of humanity will thank you.

Interesting that you assume having kids = giving birth to kids. I would actually like to adopt kiddos, so you can breathe easy in that respect.

As for cars, I think the idea is that with 2 people, you are rarely using the back seat - if anything, you'll throw stuff there or maybe give friends a ride. But with kids, they're regularly riding back there, so that space is not available for transporting things, plus you want to make sure it's big enough for them to be comfortable inside. As for kids + dogs, my sister-in-law has 2 collies and she says when she puts them into a small 4-door, there is no more room for people back there. Anyway, it's helpful to hear that you didn't find small cars an obstacle to transporting your family. I was wondering if we need to look for something bigger than an Impreza and it sounds like we don't need to worry about that.

[RWD]

Forgot to mention: assuming you are buying used, I highly recommend buying in Texas instead of New York. New York puts salt on their roads during the winter so most used cars from that area will be much more likely to have significant rust. Used cars that have stayed in Texas or other states in the Southwest will have little to no issues with rust, even when looking at 10+ year old cars.

[frugaliknowit]

I echo Rebecca Stapler.

The cost versus benefit of what you have in mind is just not worth it.  I't less than optimally efficient.  Choose a mustachian car that is on the roomy side.  Try to deal private party.  Test drive it with pedal to the metal going through all gears.  Since you are both inexperienced with cars, shop with a trusted friend.  Have a mechanic check it.  In general, extended warranties are marketing tools and benefit auto makers and or insurance companies, period.

When your needs change, sell private party, then buy another used car (preferably private party).

[CanuckExpat]

I'm going to echo a lot of what other people have already said: First, buy what you need now, not what you think you might need. Life throws a lot of surprises at you, and do you really want to carry around an over sized, overpowered, over outfitted expensive car for several years on the chance you might need it in the future? If you want an Impreza, that's another thing, but it might not be good to convince yourself you need one based on what could happen down the road.

With only two people, and the need for occasional grocery getting, a Toyota Echo, Yaris or something similar would probably solve your needs just as well. As someone else mentioned, depending on how in-frequently you use the car, and depending on availability in your area, car share (Zipcar, etc), might be a better idea financially.

Second, you mentioned wanting space for dogs. One thing you didn't specify was what kind of dogs we are talking about. If you happened to have a Great Dane and an English mastiff, I might concede that you need a larger car.. if you had two Chihuahua's on the other hand, maybe not so much.  But again, you don't have any dogs right now.

Third, while it might be nice to have, I don't think AWD is at all the necessity people make it out to be for winter driving (this is from someone who grew up in Ontario). A good set of modern winter tires really does give you good grip, especially if you are spending your time on well maintained normally plowed roads. If you were planning on going off roading and think the situation might come up where one drive wheel is stuck in muck, then it comes in handy. But the former happens a lot more than the latter, which is really marketing material.

For context, we have a late model Honda Fit (bought used, but I'll concede that was difficult and I considered buying new given the price differences), two small/medium sized dogs (15 lb each), and for regular use we have an abundance of space. We can also easily go camping and usually have enough space for us, the dogs, and provisions.  Not knowing much about kids, I say with a grain of salt I could easily see one carseat, and maybe two fitting in and still leaving room for the dogs and us. For two kids, two dogs, two adults, and gear for camping, that is what the roof rack and hitch storage are for :).

This might also be helpful: Turning a Little Car Into a Big One

For what it's worth, I've never owned a Subuaru (rented once and liked it, but a bit of a gas guzzler for my taste), but the people I know who own them do quite like them and have had good experiences. We have bought two used Honda Fits, both from Subaru dealers coincidentally, and have found the dealerships a pretty good experience.. and I think it is tough to find a car dealership a good experience :)