Author Topic: To buy a new car, or to not buy a new car?  (Read 5483 times)

lbmustache

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To buy a new car, or to not buy a new car?
« on: June 24, 2015, 01:28:49 PM »
Hi Mustachians. I am new, but have been reading for a few months! I have been spending these last few months getting my rear into gear and paying off my CC debt. Sold a bunch of things, in the process of downsizing my phone bill, getting rid of my gym membership, etc. It feels good!

I do have a dilemma.

I drive a perfectly nice 2009 Jetta. ~55k miles, 100% paid off. The problem is it is rather expensive to maintain. In the past 18 months, I have had close to $2000 in repairs -- almost $3000 but one $900 item was covered by a CA emissions warranty which will expire this coming March. Some of it was regular stuff (tires, battery), some of it was typical "German maintenance," some of it was "why is this happening at 50k miles?" and almost all of it was expensive. (I do not take my car to the dealership.)

I have no doubt in my mind that more expensive maintenance will be coming up within the next year or two.

I do drive quite a bit for work (working on that...). MPG is mediocre (~22mpg), it's been in two accidents, and every time I drive it I have this fear that it's going to blow up on me. Because of the accidents, it's probably worth around $6-$7k.

Of course, $2000, even divided by 12mos is cheaper than the avg car payment.

Here is my dilemma. I want a new car towards the end of this year, once the CC has been paid off and I've added another thousand or two to my savings. Having been in accidents - and I know this is anti-Mustache - I just don't feel comfortable driving a 10 year old Hyundai Accent or even a newer Nissan Versa. I am thinking of financing a small, safe, fuel efficient, new car around $19k, like a Honda Fit, Toyota Prius C, etc. I could put down ~$10k and finance the rest. I could realistically pay the remaining balance off within 12-18 months.

Financial situation: $10k in savings, no student loans, $2k cc debt. Single. I have the usual expenses (health insurance, rent, groceries, gas, and a small dog). Income is approx $35k-$39k/year after taxes. Credit score should be around 720 or so because I have limited credit history.

What do I do??

backyardfeast

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Re: To buy a new car, or to not buy a new car?
« Reply #1 on: June 24, 2015, 01:45:10 PM »
There's a nice middle ground between new and old.  As you might know already, huge depreciation happens almost as soon as you drive off the lot!  Look for something that's just a year or two old, with less than your 55K miles, and reap the rewards.  For $15K instead of $20K, you shouldn't have any trouble finding something that makes you feel comfortable.

If you're feeling more badass, though, here was my thought process as I look at replacing my 2002 Civic with 300K kms this year.  I'm stuck commuting and put about 30K kms on my car each year.  At first, I thought new was worth considering: nice, super fuel efficient, maybe even electric!  But then I did some basic math.  If the average quality car can go about 300K kms in its reliable life (my civic had very few repairs in it's life so far; tires, brakes, oil, wipers; at 150K did the timing belt, water pump. The AC needed a little work), and I drive 30K a year, then a new car is going to last me 10 yrs. At $20K minimum, that's $2000/year.

I can get another Civic in good shape with 100K kms on it for about $10,000 around here.  Then I can put another 200K kms on it over about 6.5 years, or about $1500/year.  For $5000, I can get a Civic with 150K kms = 5 years or $1000/year.  I finally decided, to my surprise, that it's worth picking up a Civic with around 200K kms on it for about $2500, even though it means replacing my car every 3-4 years, which is undeniably a hassle.  But I figure I'm doing my best to use up available inventory (so it's eco-friendly ish!).  But my goal is to spend as little as possible on my shameful commute, so $500/year amortized purchase price works for me.  In my experience, maintenance costs should be pretty consistent, and the bonus of more than 200K kms means many routine things like the timing belt change should already be done.

The point isn't that you have to go rock bottom like me, but that you can choose your price point and value consciously, factoring in the variables that you choose.

waffle

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Re: To buy a new car, or to not buy a new car?
« Reply #2 on: June 24, 2015, 02:02:09 PM »
So I wouldn't get a brand new car, but you definitely need to look at getting a new car. A Jetta that is only getting 22mpg!? There must be something seriously wrong there.

Also If you have 10k in savings kill that 2k in CC debt. No point in paying that interest still.

neo von retorch

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Re: To buy a new car, or to not buy a new car?
« Reply #3 on: June 24, 2015, 02:18:48 PM »
Your experience seems to be colored by the unusually expensive newer car you're driving now. Just 55k on it and you're paying all those maintenance costs?! Most Honda/Toyota commuter cars need basic maintenance, tires and brakes through 100k, and then a tune-up and occasionally the more expensive water pump (~$500).

I'd look for 2007-2012 vehicles with <= 60k on them and try really hard to pay $0 in interest. You have $2k in cc debt... your hair is on fire! Borrowing more money before paying off that debt is craziness! You know that :)

CmFtns

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Re: To buy a new car, or to not buy a new car?
« Reply #4 on: June 24, 2015, 02:19:52 PM »
A Jetta that is only getting 22mpg!? There must be something seriously wrong there.

Both me and my brother drove Jetta's when we were in high school they got around 21 city 29 highway. Not super mustacian but if that happens to be the car you have it's also not worth paying $$ for a new car to get a 5 more mpg.


I have no doubt in my mind that more expensive maintenance will be coming up within the next year or two.

Both Jettas in my family were 2008 manual transmission and I don't think my parents did any maintenance on them besides oil changes and wear items. One was totaled a few years ago and one is still around and handed down to my younger younger brother it has like 75k miles on it. I would assume you just had a load of bad luck all at once and it is very abnormal for any modern car to have that many problems at 55k. I wouldn't count on thousands in repairs each year in the coming years

lbmustache

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Re: To buy a new car, or to not buy a new car?
« Reply #5 on: June 24, 2015, 03:55:54 PM »
So I wouldn't get a brand new car, but you definitely need to look at getting a new car. A Jetta that is only getting 22mpg!? There must be something seriously wrong there.


The EPA estimate is 19 city and 29 highway, and I mostly sit in traffic so sadly it's the norm for my car :(

Thanks everyone for the tips!

melluvia

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Re: To buy a new car, or to not buy a new car?
« Reply #6 on: June 24, 2015, 06:28:00 PM »
I would save up then look for one like you described but at least a few years old on craigslist. Saves thousands over buying from a dealer. Do not buy a brand new car its a horrible depreciation rate. If you're nervous about the used car you can get the Carfax report or take it to a mechanic before you buy.

chucklesmcgee

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Re: To buy a new car, or to not buy a new car?
« Reply #7 on: June 24, 2015, 08:10:14 PM »
No way does buying a new car make straight money sense. Even though the Jetta has mediocre reliability, it's not that bad cost-wise. The interest from the $10k-$19k+ finance charges you'd otherwise pay for a new car would pretty reasonably cover upcoming and expected maintenance costs on the Jetta. Not to mention insurance savings.

Gas savings often aren't significant enough to justify a new car. How many miles do you drive annually?

less4success

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Re: To buy a new car, or to not buy a new car?
« Reply #8 on: June 24, 2015, 10:44:54 PM »
I too had an older (maybe a few years older than yours) car that was relatively expensive due to maintenance issues for a while--fortunately, those issues cleared up and I haven't had anything beyond replacing spark plugs, oil, and tires for the last 3 years. In my case, the total maintenance cost for 5 years was around $4,000. Depreciation was maybe $1,000 over this period.

Around the start of that 5 year period, we bought an inexpensive new car for somewhere around $15,000. My financing cost was "zero" thanks to low interest rates at the time and the prepaid (and required to maintain the warranty--don't forget about this part!) maintenance was around $2,500 for 5 years (and this did not include new tires at $300 - 400). So total maintenance cost was about $2,800 (only $1,200 less than the older car).

But what really got me was the depreciation. My KBB value is now (5 years later) hovering around $7,500--about half what I originally paid for the car. We'll call the loss $7,000 since I don't recall the exact amounts off-hand.

Totalling everything up:

Old car:
Maintenance: $4,000
Depreciation: $1,000
Total: $5,000

New car:
Maintenance: $2,800
Depreciation: $7,000
Total: $9,800

The new car was way nicer and generally more reliable, for sure. But I don't think it was worth nearly $1,000/year.

My next vehicle will be a 5 year old used car (although my hope is I can eliminate my need for a car entirely).
« Last Edit: November 09, 2019, 11:52:38 AM by less4success »

Dicey

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Re: To buy a new car, or to not buy a new car?
« Reply #9 on: June 24, 2015, 11:53:33 PM »
In my pre-FIRE days, when I was Jonesing for a New Car, I would cure it by calculating the amount sales tax that would be blown on the transaction. Kept me in used cars and happy to be there. Might work for you, too.

bryan995

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Re: To buy a new car, or to not buy a new car?
« Reply #10 on: June 25, 2015, 08:21:52 AM »
Sounds like your car is a dud, I would suggest selling it and then buying another used car for ~$6K-$10K.
(lots of repairs for something with only 50K on it)

Can you do any maintenance yourself?

I recently purchased a 2005 Honda Accord EX V6 with 125K for $6000.

I then purchased about $1500 worth of parts and installed them myself.
Battery, Wipers, Filters, Brake pads, rotors, calipers, all new fluids, sensors, hood lifts, plugs, door actuators, floor mats, gaskets etc. etc.

I documented my experience here:
http://www.driveaccord.net/forums/15-7th-generation/252937-my-geriatric-2005-honda-accord-ex-v6-life-post-130k.html

I still bring the car in for big jobs - timing belt, valve adjustment etc.

But now that everything is done, the car is quite stable. 
Even if I have to spend $2000/year in repairs, I figure I am still coming out ahead compared to a new car.
Though I do take on more risk - it's always a trade off.


lbmustache

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Re: To buy a new car, or to not buy a new car?
« Reply #11 on: June 25, 2015, 11:55:41 AM »

Can you do any maintenance yourself?


Sadly no... I live in an apartment and a not too handy. I can do minor stuff like lights, air filter, etc. but nothing more than that (like brakes, spark plugs, oil, etc.))

In my pre-FIRE days, when I was Jonesing for a New Car, I would cure it by calculating the amount sales tax that would be blown on the transaction. Kept me in used cars and happy to be there. Might work for you, too.

Yes, thinking of all the costs definitely keeps me in check!

No way does buying a new car make straight money sense. Even though the Jetta has mediocre reliability, it's not that bad cost-wise. The interest from the $10k-$19k+ finance charges you'd otherwise pay for a new car would pretty reasonably cover upcoming and expected maintenance costs on the Jetta. Not to mention insurance savings.

Gas savings often aren't significant enough to justify a new car. How many miles do you drive annually?

Approx 15k miles a year! There is a post on MMM outlining the savings from switching to a more fuel-efficient car. I am hoping I would qualify for a very low interest rate, 1.9% or lower (Toyota is very aggressive with their financing right now). Insurance is something I did not think of, thanks!

Thanks everyone for the tips, again. I especially appreciate the breakdown of depreciation. Can be circumvented with a used car. Used car would have to be 5+ years old, as pricing on 1-2yr old used cars is terrible here - a 2 year old Civic with 30k miles goes for $20k when you can get a new one for $22k :o

Lots of things to think about :)

MacGyverIt

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Re: To buy a new car, or to not buy a new car?
« Reply #12 on: June 25, 2015, 02:21:57 PM »
The day I sold my 2006 Toyota Highlander Hybrid, bought a 2003 Toyota Matrix and added 5 digits to my bank account was a happy, MustachianUgrade day.

backyardfeast

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Re: To buy a new car, or to not buy a new car?
« Reply #13 on: June 25, 2015, 02:24:30 PM »
Quote
Used car would have to be 5+ years old, as pricing on 1-2yr old used cars is terrible here - a 2 year old Civic with 30k miles goes for $20k when you can get a new one for $22k :o

That's only sort of true.  The $22K is the sticker price, so that almost new Civic at $20K doesn't seem like much of a deal, you're right.  But remember that the $22K sticker price on a new car is rarely what you end up paying.  Tax, freight (here that adds $1500!), features (even basic options like AC and remote keylocks are sometimes extras on Hondas and Toyotas, grrr) really add up, and Toyota and Honda don't negotiate much on new vehicles.  That's all without the financing costs and the corollating finance costs.  To carry insurance on a financed car here requires luxury full-coverage costs that you might choose not to carry on a paid-off car (or you might raise your deductible, etc). 

The 2-year old car doesn't look like much of a savings up front, but you're often getting the up-scaled features (colour, ac, etc) already paid for too, along with the rest of the savings outlined above.

I still think the 5-year old paid for with your cash is the way to go, but good to do the math on all the options.

lbmustache

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Re: To buy a new car, or to not buy a new car?
« Reply #14 on: June 25, 2015, 02:39:33 PM »


That's only sort of true.  The $22K is the sticker price, so that almost new Civic at $20K doesn't seem like much of a deal, you're right.  But remember that the $22K sticker price on a new car is rarely what you end up paying.  Tax, freight (here that adds $1500!), features (even basic options like AC and remote keylocks are sometimes extras on Hondas and Toyotas, grrr) really add up, and Toyota and Honda don't negotiate much on new vehicles.  That's all without the financing costs and the corollating finance costs.  To carry insurance on a financed car here requires luxury full-coverage costs that you might choose not to carry on a paid-off car (or you might raise your deductible, etc). 

The 2-year old car doesn't look like much of a savings up front, but you're often getting the up-scaled features (colour, ac, etc) already paid for too, along with the rest of the savings outlined above.


Honda does not negotiate much; however for some reason down here Toyota is very aggressive with their financing and pricing. Truecar is showing I can get roughly $2-$4k off the MSRP off a lot of different Toyotas and I don't doubt the prices.

The prices I quoted for the Civic were for the midrange "EX" model, so it has all the features (ac, power everything, cruise, etc.). Honda.com shows a brand new Civic EX for $22,015 incl. destination. Honda is offering aggressive financing on the Civic currently and may be willing to knock down the price a bit more than usual because a new model is coming out soon. I could maybe even get a great deal through Costco.

In contrast, here is a 2 year old Honda Civic EX for $19k: http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?zip=90815&endYear=2013&modelCode1=CIVIC&showcaseOwnerId=55389801&startYear=2013&makeCode1=HONDA&searchRadius=50&showcaseListingId=400292710&trim1=CIVIC%7CEX&mmt=%5BHONDA%5BCIVIC%5BCIVIC%257CEX%5D%5D%5B%5D%5D&listingId=400758769&Log=0

Such is the pricing in my area... :\

Jack

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Re: To buy a new car, or to not buy a new car?
« Reply #15 on: June 25, 2015, 03:16:22 PM »
I drive a perfectly nice 2009 Jetta.

...

I just don't feel comfortable driving a 10 year old Hyundai Accent

As someone who has owned both a Hyundai Accent and a VW (a Beetle instead of a Jetta, but they're mechanically almost identical), I can tell you with complete confidence that a 10-year-old Accent is better than the car you have now.

If my 2003 Accent hadn't been totaled (crushed by a falling tree), I'd still happily be driving it.