Is it ever ok to buy a brand new car?

[cool7hand]

I noticed a couple of threads recently on how to pay for a new-to-you car. Both threads generally assume that one should never, ever buy a brand new car. It got me thinking.

If someone:

(a) has the means to buy a brand new vehicle and it ok with however this might impact their FIRE status; and
(b) has a reason to do so that serves as sufficient justification to them (for example, they enjoy a particular kind of life experience and they can't find the tool/vehicle for that experience used); and
(c) has no personal problem buying new (moral or whatever), then . . . .

What's wrong with buying new?

I think the answer is personal, and I think I know how I would resolve the question, but I'm curious what others think.

[Metalcat]

No one is going to track you down and beat you with a baseball bat that has an MMM logo emblazoned on it, if that's what you mean.

Yeah, of course there are circumstances where it makes sense to buy a new car, and they have been discussed here at length, although I know it's difficult to search threads, so it's good to have these topics come up every few months.

The point is to not *waste* money buying a new car because of stupid reasons that most people fall for.

If you've thought through a purchasing decision and made sound choices based on solid logic, then have at it.

[Mr. Green]

In my opinion there is nothing wrong with a new car if that's what you really want. My wife and I rarely splurge on anything, and we both really enjoy driving so a car is one place we don't mind spending the extra money.

The particular side of me also loves the idea that no surprise maintenance happens out of pocket in the beginning, and I know everything about the car so generally speaking, when something does start to go wrong I know what is coming. I guess there's also part of me that just loves the fact that it's only ever been my car and that I know it has been treated well for it's entire existence.

[Metalcat]

In my opinion there is nothing wrong with a new car if that's what you really want. My wife and I rarely splurge on anything, and we both really enjoy driving so a car is one place we don't mind spending the extra money.

The particular side of me also loves the idea that no surprise maintenance happens out of pocket in the beginning, and I know everything about the car so generally speaking, when something does start to go wrong I know what is coming. I guess there's also part of me that just loves the fact that it's only ever been my car and that I know it has been treated well for it's entire existence.

It also depends on your car market. Where I live, it's very difficult to buy a used Honda or Toyota and not overpay for it, even if it's quite old. I've seen some ridiculous prices when used car shopping, which is why I usually ended up buying American cars, I just couldn't afford Japanese.

There's nothing inherently superior about buying a used car, it's just that in a lot of scenarios a used car is a better deal. That doesn't mean that in all scenarios that it's a better deal.

Also, most consumers don't bother with this analysis. They just figure out what the max monthly payment they can afford is and then purchase what they believe is the most impressive car for that payment. That's where new cars get such a bad reputation.

[chemistk]

I think the crux of the arguments in many of the posts against buying new, apart from the attachment to a frugal FIRE forum, is to really force people to think about all the reasons they might not want to buy new or to at least appropriately weigh the upsides of used.

There are far too many perspectives and justifications for buying new just as there are for buying used.

Generally, if you'd ask here whether to buy new or used and not give any meaningful justification, the default response will always be "buy used or even don't buy a car at all" - that's just simply because it goes against the consumer mainstream of choosing to buy new when the resources are available.

It's absolutely reasonable and appropriate, on a medium such as this forum, for the responders to a post to put the OP through a "gauntlet of justification", because when you peel all the layers back, most of the people who are buying new cars are doing so without asking here because they've already justified it themselves.

But, if you're going to throw chum in the water, you better expect the sharks....

[cool7hand]

It's absolutely reasonable and appropriate, on a medium such as this forum, for the responders to a post to put the OP through a "gauntlet of justification", because when you peel all the layers back, most of the people who are buying new cars are doing so without asking here because they've already justified it themselves.

But, if you're going to throw chum in the water, you better expect the sharks....

If this quote were true, then shouldn't a fair inquisitor point out that it's possible for someone to justify a new car purchase in some situations? Perhaps even explain when a new car might make sense? In my experience, examples of such nuance are rare.

[MaybeBabyMustache]

We really wanted an electric car, and there are incentives that only come with a new purchase (federal & state tax incentives, power provider incentives, etc.) In our case, the model we wanted (Chevy Bolt) was so competitive for a used car, that factoring in the incentives, it was close to a wash. Adding the usual caveats, we paid cash & the car represents .4% of our net worth.

[trollwithamustache]

Strictly speaking buying new is never the cheapest option. If you buy new and hold it for a long time you can average down towards the cost of a used car.  The appeal of a new buy for us was we know the cars were properly maintained and not driven very hard. we will comfortably get 15-20 years out of our cars, unless gasoline goes away, but I think we have until 2035 for that here in California.

With used you will never really know how the vehicle was taken care of.

[lutorm]

We really wanted an electric car, and there are incentives that only come with a new purchase (federal & state tax incentives, power provider incentives, etc.) In our case, the model we wanted (Chevy Bolt) was so competitive for a used car, that factoring in the incentives, it was close to a wash. Adding the usual caveats, we paid cash & the car represents .4% of our net worth.

I think in those cases, while the incentives aren't directly available if you buy a used car, they should also drive down the used car prices since the barrier to choosing a new one is lower. I'm not sure it makes a material difference to the relative merit of buying new vs used.

In our case, we bought a new Pacifica Hybrid simply because you can't find one used so we didn't have to make the choice... ;-)

[Metalcat]

It's absolutely reasonable and appropriate, on a medium such as this forum, for the responders to a post to put the OP through a "gauntlet of justification", because when you peel all the layers back, most of the people who are buying new cars are doing so without asking here because they've already justified it themselves.

But, if you're going to throw chum in the water, you better expect the sharks....

If this quote were true, then shouldn't a fair inquisitor point out that it's possible for someone to justify a new car purchase in some situations? Perhaps even explain when a new car might make sense? In my experience, examples of such nuance are rare.

It is true, and always bears out that way in every single thread here about possibly buying a new car.

The point is that any post about buying a new car *will* be challenged, but there isn't a universal stance here that it's the only option. In fact, the conversation is usually very fair towards new car purchases. At least, in every single thread I've ever seen here, it is, even if a few rare posters err extremely on the side of used cars, the overall conversation never is.

[2sk22]

Over the last twenty years, I have bought 4 new Toyotas for cash. They worked out just fine. If you have the money, by all means go ahead and buy a new car if you want.

My wife and I were driving past a Mercedes dealership recently and I remarked: "We could buy a Mercedes S class for cash and it would barely noticeable dent our net worth".

Her remark: "Good thing you're so rich" :-)

[oldladystache]

I buy a new car about every 10 or 11 years. I can afford it, and I can decide exactly what I want, then go to the dealer and get it. Much simpler than shopping for a used car, and the warrantee is also nice to have.

Back when I didn't have the ability to buy new I bought used cars. Always for cash.

[Frankies Girl]

Honestly, this is another one of those peace of mind/extenuating circumstances that you have to weigh pros and cons for your situation, like the age-old question of whether it's a good/bad idea to pay off your mortgage.

It is okay to buy a new car if you have more pros than cons regarding buying new vs used and that means looking past the cost/money involved. Period, end of story.

Emotions shouldn't be a part of anything like this, but we're human and we have different priorities and as long as you're looking at things clear-headed and know it's a good decision for you, that's all that matters.

[rmorris50]

We all can ask this question about most of our financial decisions. Prob didn’t truly need a majority of the things I bought in life. Was it okay to buy the iPhone, the new CrossFit shoes, adopt two dogs, buy a 2400 SF 4/3 house, etc. or how about the Thai carry out I’m eating?


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[Wolfpack Mustachian]

There are virtually no situations for people who have a reasonable amount of savings where buying a new car is going to be a better purely financial decision than buying a decently reliable used car overall.

That being said, none of us make purely financial decisions. If you want a new car and can afford it, there's certainly worse things you could do with your money.

[max924]

We really wanted an electric car, and there are incentives that only come with a new purchase (federal & state tax incentives, power provider incentives, etc.) In our case, the model we wanted (Chevy Bolt) was so competitive for a used car, that factoring in the incentives, it was close to a wash. Adding the usual caveats, we paid cash & the car represents .4% of our net worth.

I am from way up in Canada, a Bolt goes for North of $40k cdn new here. If that accounts for .4% of your net worth that puts you at over $8 million???? Props to you, you can probably justify buying new.

My opinion on this matter is if you have the principal ($) to buy new and not affect your finances, go for it. If you have not attained your financial goals yet, maybe reconsider buying that new car...

I have achieved 'FIRE' but will probably never buy a new car. It is just not my thing. We recently bought a 1.5 yr old Chevy Volt, which is already more than enough depreciation than I can stomach :)

[norajean]

There have been deals in recent years where leasing was nearly free or well under $100/mo.  I think the Bolt may have been one of them. The stacked deals, rebates and state/fed tax incentives pretty much covered the entire lease period depreciation such that it was nearly free. A no brainer for some!

[FiveSigmas]

Apparently, yes it can be okay.

(I actually don’t have a strong opinion on this — I just came here to snark. Carry on...)

[Paul der Krake]

I get to drive an (almost) new car every time I get a rental. It's nice! Look at all those buttons, let's press them and see what happens. Oh cool, a feature I never ever wished I had.

[chemistk]

It's absolutely reasonable and appropriate, on a medium such as this forum, for the responders to a post to put the OP through a "gauntlet of justification", because when you peel all the layers back, most of the people who are buying new cars are doing so without asking here because they've already justified it themselves.

But, if you're going to throw chum in the water, you better expect the sharks....

If this quote were true, then shouldn't a fair inquisitor point out that it's possible for someone to justify a new car purchase in some situations? Perhaps even explain when a new car might make sense? In my experience, examples of such nuance are rare.

I think that's a foregone conclusion when these threads come up. Nobody ever posts "please confirm that buying a new car is never okay in my circumstance", or "here, back up why I don't want a new car" (except maybe on the wall of shame subforum). To that effect, nobody also ever posts "nanabooboo I'm going to buy a new car even though I shouldn't and nothing you can say will cause me to change my mind".

At least, that's how I approach such threads - someone is asking the forum-at-large to examine their situation and provide input on the feasibility of their desire for a new car, and so the null hypothesis is inherently that the person asking will end up buying a new car. The person is then challenging the forum to prove that the alternate hypothesis (that they should buy a used car or not buy a car at all) is true.

I butcher the statistics terms, but it seems appropriate to present this argument through that lens.

Repeating what Malcat said earlier - ultimately people are going to do what they're going to do. Nobody from the forum is ever (well, I certainly hope not..) going to track down an OP and actually punch them in the face for making a decision that goes against collective wisdom. But nobody here has any obligation to provide advice contrary to that which appears to be the best financial course of action for a given circumstance.

[Fishindude]

Really not much different than choosing steak instead of hamburger.   
If you can afford it comfortably without hurting your finances in any manner, I see no reason to justify purchasing a new car if that's what you want.


 

[MaybeBabyMustache]

We really wanted an electric car, and there are incentives that only come with a new purchase (federal & state tax incentives, power provider incentives, etc.) In our case, the model we wanted (Chevy Bolt) was so competitive for a used car, that factoring in the incentives, it was close to a wash. Adding the usual caveats, we paid cash & the car represents .4% of our net worth.

I am from way up in Canada, a Bolt goes for North of $40k cdn new here. If that accounts for .4% of your net worth that puts you at over $8 million???? Props to you, you can probably justify buying new.

My opinion on this matter is if you have the principal ($) to buy new and not affect your finances, go for it. If you have not attained your financial goals yet, maybe reconsider buying that new car...

I have achieved 'FIRE' but will probably never buy a new car. It is just not my thing. We recently bought a 1.5 yr old Chevy Volt, which is already more than enough depreciation than I can stomach :)

We paid a lot less for a new Bolt (just bought a few weeks ago). But, NW at $5M USD.

[MustacheAndaHalf]

I think it's a different conversation in Post-FIRE.  Someone who has saved for years, has a plan for early retirement, and then has a measured decision to buy a new car... that's within reason.  Someone taking on more debt than their net worth, that's different.  So it still depends on the situation of the person doing the buying - how the new car purchase impacts their FIRE plans.

[crazy jane]

I think it's a different conversation in Post-FIRE.  Someone who has saved for years, has a plan for early retirement, and then has a measured decision to buy a new car... that's within reason.  Someone taking on more debt than their net worth, that's different.  So it still depends on the situation of the person doing the buying - how the new car purchase impacts their FIRE plans.

This is me. I drove inexpensive cars and rode a bicycle for decades. Hit my fire number a few years ago. I am officially retiring June 8. A little over a year ago I bought a new car. Nothing extravagant. It's a Subaru. I'm super happy to finally have a nice reliable vehicle. The heated seats are amazing. So yes it is ok to buy a new car especially one that warms your butt.

[Wolfpack Mustachian]

It's absolutely reasonable and appropriate, on a medium such as this forum, for the responders to a post to put the OP through a "gauntlet of justification", because when you peel all the layers back, most of the people who are buying new cars are doing so without asking here because they've already justified it themselves.

But, if you're going to throw chum in the water, you better expect the sharks....

If this quote were true, then shouldn't a fair inquisitor point out that it's possible for someone to justify a new car purchase in some situations? Perhaps even explain when a new car might make sense? In my experience, examples of such nuance are rare.

I think that's a foregone conclusion when these threads come up. Nobody ever posts "please confirm that buying a new car is never okay in my circumstance", or "here, back up why I don't want a new car" (except maybe on the wall of shame subforum). To that effect, nobody also ever posts "nanabooboo I'm going to buy a new car even though I shouldn't and nothing you can say will cause me to change my mind".

At least, that's how I approach such threads - someone is asking the forum-at-large to examine their situation and provide input on the feasibility of their desire for a new car, and so the null hypothesis is inherently that the person asking will end up buying a new car. The person is then challenging the forum to prove that the alternate hypothesis (that they should buy a used car or not buy a car at all) is true.

I butcher the statistics terms, but it seems appropriate to present this argument through that lens.

Repeating what Malcat said earlier - ultimately people are going to do what they're going to do. Nobody from the forum is ever (well, I certainly hope not..) going to track down an OP and actually punch them in the face for making a decision that goes against collective wisdom. But nobody here has any obligation to provide advice contrary to that which appears to be the best financial course of action for a given circumstance.

That's just because we're going soft. Back when I joined the forum.........

[ericrugiero]

Sure, there are circumstances when it's OK to buy a new car: 
-  Buyer should be on very solid financial footing.  (maybe FIRE or AT LEAST has FU money)
-  Buyer should research the car and look at reliability depreciation of past models.  I can't think of any reason to buy a new Land Rover.  Reliability metrics are poor and depreciation is terrible. Brands such as Toyota, Honda, etc have good reliability and hold their value.  Those are the ones I would look at buying new.  Some cars hold their value surprisingly well (Jeep Wrangler, Porsche, etc).  If you are smart about it, new cars can be a reasonable cost alternative. 
-  Buyer should get a good deal.  Manufacturer rebates, government subsidies, etc can drive the cost of some new cars down close to the used value. 
-  Buyer should be honest with themselves about what they are spending and what they are getting for their money.  Is this really where they want to spend their money? 

Buying a new vehicle is (almost) never the cheapest way to own a vehicle.  You can shop around for a $5K car, drive it for 5 years with minimal maintenance and sell it for $3K.  Many new cars will cost that much just in sales tax.  But, if you are in a situation where you can afford it, I wouldn't criticize buying new. 

[bmjohnson35]

I may have missed them, but here are three more reasons to consider buying new:

1.  You are a car enthusiast who intends to by a "forever car" and you really want to be the original owner.

2.  Although not necessarily a reason, 0% interest loan availability may be attractive enough to spread the cost out and if combined with other dealer incentives, may be enough to push you that direction.

3.  You may be seeking a rare model or one with rare options that are hard to find used.  For example, my dad had to drive 200 miles to buy a new dodge PU with cummins diesel, manual transmission and simple vinyl interior that was easy to maintain.  When he combined the available employee discount (through me) and his inability to find that version of that truck used, it made perfect sense for him.

In the end, it's your life......you and maybe your significant other are the only people you should worry about justifying such a purchase to.

[Ourayaway]

If I could get a reasonably priced used Tacoma or 4runner I'll take it. However, they're often close enough in price to a new one that I might jump on that. Especially if there's 0% financing or cash back incentives. Sometimes if you really what quality and reliability you can't escape the cost. More of buy it for life mentality.

I still would hate paying for a new car. However the memories I'll make building an overland rig to explore the back country with my sons would be priceless.

[JLee]

Sure, there are circumstances when it's OK to buy a new car: 
-  Buyer should be on very solid financial footing.  (maybe FIRE or AT LEAST has FU money)
-  Buyer should research the car and look at reliability depreciation of past models.  I can't think of any reason to buy a new Land Rover.  Reliability metrics are poor and depreciation is terrible. Brands such as Toyota, Honda, etc have good reliability and hold their value.  Those are the ones I would look at buying new.  Some cars hold their value surprisingly well (Jeep Wrangler, Porsche, etc).  If you are smart about it, new cars can be a reasonable cost alternative. 
-  Buyer should get a good deal.  Manufacturer rebates, government subsidies, etc can drive the cost of some new cars down close to the used value. 
-  Buyer should be honest with themselves about what they are spending and what they are getting for their money.  Is this really where they want to spend their money? 

Buying a new vehicle is (almost) never the cheapest way to own a vehicle.  You can shop around for a $5K car, drive it for 5 years with minimal maintenance and sell it for $3K.  Many new cars will cost that much just in sales tax.  But, if you are in a situation where you can afford it, I wouldn't criticize buying new.

Incentives can also come into play - my Model 3 had a $5k state rebate and no sales tax, so was immediately ~$8300 discounted vs an equivalently priced ICE car.  Add the absurdly low depreciation (and lack of traditional maintenance) and it comes out better than one might initially expect.

[Gardencat]

The first time I bought a used car it was a mistake but I was young and didn’t know any better.

But like a poster above, I feel like my 2015 Subaru (heated seats!) was a good deal on a reliable car. My spouse and I and 2 cats had a short window to move cross-country and I didn’t want to make the trip to the PNW/land of snow in my low slung Mazda3. I loved that car, it was so sporty and cute, but in the winter it’s nickname was “the toboggan.”

I think the Sub was the first model car with Eyesight technology which is the total bomb for long freeway type trips. On a more MMM note, it is also very easy to do an oil change - the filter is right there!

[keyvaluepair]

Well, we always buy new cars. However, we buy new cars every 15 years or so. I just don't have the time to excessively over-research buying a used car compared to a new one. Currently our stable consists of:

Honda Civic DX - 1996 vintage, 113K miles - me. Hoping to pass on to my son, who is now 10 years old for his first high-school car. Should take care of the "expensive" girlfriend problem as a side benefit.
Toyota Camry Hybrid, 2019, 40K miles.  - DW
Surly Long Haul Trucker (bicycle) 34K miles - me
Surly Long Haul Trucker (bicyle) 21K miles - DW

[Much Fishing to Do]

I know there are many that throw out numbers like a car loses 20% of its value the moment its driven off the lot or 30% in the first year, etc, etc, and therefore you shouldn't buy a new car.  But I was never able to find the one day old car that cost 20% less or the one year old car that cost 30% less (which I would immediately buy instead if I could find them), instead they were remarkably similar in price, so once I could 'afford' it I bought new. 

Now selling a perfectly good car is where you seem to get crushed (and those depreciation numbers seem to have practical actionable meaning), so I don't sell a perfectly good reliable car, cause its just not worth it to me to take the hit.

[GuitarStv]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

[Telecaster]

In my opinion there is nothing wrong with a new car if that's what you really want. My wife and I rarely splurge on anything, and we both really enjoy driving so a car is one place we don't mind spending the extra money.

The particular side of me also loves the idea that no surprise maintenance happens out of pocket in the beginning, and I know everything about the car so generally speaking, when something does start to go wrong I know what is coming. I guess there's also part of me that just loves the fact that it's only ever been my car and that I know it has been treated well for it's entire existence.

It also depends on your car market. Where I live, it's very difficult to buy a used Honda or Toyota and not overpay for it, even if it's quite old. I've seen some ridiculous prices when used car shopping, which is why I usually ended up buying American cars, I just couldn't afford Japanese.

Exactly.  For some cars, the used discount isn't very big.  If you figure in the loss of some part of the warranty and earlier end of life of the vehicle, the advantage of used over new can be kind of a wash.

Typically, luxury vehicles depreciate like crazy.  A sensible Toyota, not so much. 

[Evgenia]

No, but after not having ANY cars for over 10 years, my husband wanted a new one and (with FIRE in sight) I wasn't going to argue. ;-) The car after that was a sensible used Toyota with lower mileage, ha ha ha.

[Wolfpack Mustachian]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

I dunno, I really find this hard to believe, at least in the way I've bought used cars. We bought a used Toyota Sienna 3 years ago for $4k. A new Sienna base model (this one was equivalent to more than a base model, but leaving that alone), would be 30k. We've had it 3 years with maybe $500 of repairs over those 3 years. If you get a used car that's just a couple years old, you're still sinking a lot of money into the car, so I could see there being similarities. The difference with buying older, higher mileage cars for relatively low cost is that if it fails, you're not on the hook for a $3, 4, 5k repair. You just ditch the car and start over because it's not worth it. Your top-end cost (at least for one time costs) is capped at the cost of buying another very old very high mileage car. I'm sure at some point doing things like this will mean that we'll buy an older used car that will fail within the first year and need repairs more than worth the car costs. However, when a new car is literally 7-8 times as much as an older used car, and you're able to scout out brands and year models that you know are more likely to hold up well because they already have for a decade or more, you're already looking pretty good on the stats of things. I need to have a lot of bad luck in picking used cars to make up for the extra 26k I would have spent buying it new. In fact, I'm kind of putting all of my eggs in one basket with a single new one, that it will not fail (after the warranty of course) for this one car compared to the ability to have my used car spontaneously fail and be able to get another one and another one and another one and another one... still for less money. I'm just "gambling" that my between 7-8 "new" used cars will last longer than the single new car or 7-8 used cars minus one or two of them to factor in the costs of repairs.

None of this takes into consideration, of course, that the money I spend now is more valuable than the same money in the future, the stress of having a new car where you don't want it to get damaged/scuffed/etc. because it's new, possible increases in insurance, etc. etc.

Can you tell I'm not a fan of buying new cars? :-)

[Paul der Krake]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

I dunno, I really find this hard to believe, at least in the way I've bought used cars. We bought a used Toyota Sienna 3 years ago for $4k. A new Sienna base model (this one was equivalent to more than a base model, but leaving that alone), would be 30k. We've had it 3 years with maybe $500 of repairs over those 3 years. If you get a used car that's just a couple years old, you're still sinking a lot of money into the car, so I could see there being similarities. The difference with buying older, higher mileage cars for relatively low cost is that if it fails, you're not on the hook for a $3, 4, 5k repair. You just ditch the car and start over because it's not worth it. Your top-end cost (at least for one time costs) is capped at the cost of buying another very old very high mileage car. I'm sure at some point doing things like this will mean that we'll buy an older used car that will fail within the first year and need repairs more than worth the car costs. However, when a new car is literally 7-8 times as much as an older used car, and you're able to scout out brands and year models that you know are more likely to hold up well because they already have for a decade or more, you're already looking pretty good on the stats of things. I need to have a lot of bad luck in picking used cars to make up for the extra 26k I would have spent buying it new. In fact, I'm kind of putting all of my eggs in one basket with a single new one, that it will not fail (after the warranty of course) for this one car compared to the ability to have my used car spontaneously fail and be able to get another one and another one and another one and another one... still for less money. I'm just "gambling" that my between 7-8 "new" used cars will last longer than the single new car or 7-8 used cars minus one or two of them to factor in the costs of repairs.

None of this takes into consideration, of course, that the money I spend now is more valuable than the same money in the future, the stress of having a new car where you don't want it to get damaged/scuffed/etc. because it's new, possible increases in insurance, etc. etc.

Can you tell I'm not a fan of buying new cars? :-)

Right, the math doesn't add up unless driving into the ground means "driving a shit ton of miles year after year".

Here is my intuitive argument: a car is good for about 200k miles or 20 years, whichever comes first. When I say this someone inevitably interjects well actually it's more like 300k miles or 150k miles or 15 years or 25 years, whatever. The general point is that if you drive too little, your car gets "old age problems" before you hit the 200k miles. If you drive too much, it dies before enjoying its golden years.

So what's a mustachian to do?
1) don't drive so goddamn much that it makes sense to buy new
2) buy at the approximate sweet spot of miles left to years left

[Wolfpack Mustachian]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

I dunno, I really find this hard to believe, at least in the way I've bought used cars. We bought a used Toyota Sienna 3 years ago for $4k. A new Sienna base model (this one was equivalent to more than a base model, but leaving that alone), would be 30k. We've had it 3 years with maybe $500 of repairs over those 3 years. If you get a used car that's just a couple years old, you're still sinking a lot of money into the car, so I could see there being similarities. The difference with buying older, higher mileage cars for relatively low cost is that if it fails, you're not on the hook for a $3, 4, 5k repair. You just ditch the car and start over because it's not worth it. Your top-end cost (at least for one time costs) is capped at the cost of buying another very old very high mileage car. I'm sure at some point doing things like this will mean that we'll buy an older used car that will fail within the first year and need repairs more than worth the car costs. However, when a new car is literally 7-8 times as much as an older used car, and you're able to scout out brands and year models that you know are more likely to hold up well because they already have for a decade or more, you're already looking pretty good on the stats of things. I need to have a lot of bad luck in picking used cars to make up for the extra 26k I would have spent buying it new. In fact, I'm kind of putting all of my eggs in one basket with a single new one, that it will not fail (after the warranty of course) for this one car compared to the ability to have my used car spontaneously fail and be able to get another one and another one and another one and another one... still for less money. I'm just "gambling" that my between 7-8 "new" used cars will last longer than the single new car or 7-8 used cars minus one or two of them to factor in the costs of repairs.

None of this takes into consideration, of course, that the money I spend now is more valuable than the same money in the future, the stress of having a new car where you don't want it to get damaged/scuffed/etc. because it's new, possible increases in insurance, etc. etc.

Can you tell I'm not a fan of buying new cars? :-)

Right, the math doesn't add up unless driving into the ground means "driving a shit ton of miles year after year".

Here is my intuitive argument: a car is good for about 200k miles or 20 years, whichever comes first. When I say this someone inevitably interjects well actually it's more like 300k miles or 150k miles or 15 years or 25 years, whatever. The general point is that if you drive too little, your car gets "old age problems" before you hit the 200k miles. If you drive too much, it dies before enjoying its golden years.

So what's a mustachian to do?
1) don't drive so goddamn much that it makes sense to buy new
2) buy at the approximate sweet spot of miles left to years left

That's a good point about vehicles having a hard stop on years as well as miles. I'll out myself and admit that our family puts a lot of miles on our vehicles. When that's the case, it's just that much more reason to buy used, and a huge amount of Americans who can't really afford new cars fit into my boat, so it makes their new car buying habit that much more of a bad decision. On the other side, even if you drive it a fairly small amount, which would you rather, having a $30,000 asset going to zero over we'll say 30 years at 1k a year or have a 5k asset that's 15 years old going to 0 over the 15 other years (assuming the same 30-year span), knowing that if you get crap luck, you're out 5k instead of having the 30k vehicle gone for only 10 years (but after the warranty expires) where you have a huge repair bill you either have to swallow or lose the 20k that's still left (at 1k a year). I know I'm being extremely back of the napkin with the numbers, but I really just don't see how you can justify it.

I will say, look, if cars are your thing, I'm not going to harass you about getting a new car if you can afford it (as long as you drive it until it truly dies). However, I think one of the biggest points of mustachanism is owning up to the "poor" financial decisions we make as long as it's eyes wide open without trying to justify it. I have yet to personally see a good numbers justification of buying new.

[GuitarStv]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

I dunno, I really find this hard to believe, at least in the way I've bought used cars. We bought a used Toyota Sienna 3 years ago for $4k. A new Sienna base model (this one was equivalent to more than a base model, but leaving that alone), would be 30k. We've had it 3 years with maybe $500 of repairs over those 3 years. If you get a used car that's just a couple years old, you're still sinking a lot of money into the car, so I could see there being similarities. The difference with buying older, higher mileage cars for relatively low cost is that if it fails, you're not on the hook for a $3, 4, 5k repair. You just ditch the car and start over because it's not worth it. Your top-end cost (at least for one time costs) is capped at the cost of buying another very old very high mileage car. I'm sure at some point doing things like this will mean that we'll buy an older used car that will fail within the first year and need repairs more than worth the car costs. However, when a new car is literally 7-8 times as much as an older used car, and you're able to scout out brands and year models that you know are more likely to hold up well because they already have for a decade or more, you're already looking pretty good on the stats of things. I need to have a lot of bad luck in picking used cars to make up for the extra 26k I would have spent buying it new. In fact, I'm kind of putting all of my eggs in one basket with a single new one, that it will not fail (after the warranty of course) for this one car compared to the ability to have my used car spontaneously fail and be able to get another one and another one and another one and another one... still for less money. I'm just "gambling" that my between 7-8 "new" used cars will last longer than the single new car or 7-8 used cars minus one or two of them to factor in the costs of repairs.

None of this takes into consideration, of course, that the money I spend now is more valuable than the same money in the future, the stress of having a new car where you don't want it to get damaged/scuffed/etc. because it's new, possible increases in insurance, etc. etc.

Can you tell I'm not a fan of buying new cars? :-)

Counterpoint (In Canadian funds, using the Canadian market - which is the only one I care about) -

We bought a brand new Toyota Corolla for 13,000$ in 2005.  At the time they had 0% financing for five years which worked out to be cheaper than paying cash, so that's what we did.  A quick check on autotrader tells me that to purchase a used 2005 Corolla today it will cost me 5-6000$ (https://www.autotrader.ca/cars/toyota/corolla/on/scarborough/?rcp=15&rcs=0&srt=3&yRng=2004%2C2006&prx=100&prv=Ontario&loc=M1B%205L7&hprc=True&wcp=True&sts=New-Used&inMarket=advancedSearch).

Over the time that we've had it, we've needed to replace the muffler that rusted out in our salty winters for 1800$.  (We've also needed to replace tires, change the oil, replace the brake pads, and correct steering alignment once after going over a really bad pothole in the winter - but I'd expect that these are just general cost of driving and also likely  so won't include them in calculations.)  So, full cost of vehicle and repairs to us for 16 years of driving has been: 14,800$ . . . which works out to a cost of about 925$ a year.  I expect to get another 4-5 years out of the vehicle.

If I was buying a used 2005 Corolla for the cheapest amount - 5000$ and then driving it for five years I'd end up spending about 1000$ a year.


But then we also have to account for the time and effort spent in regularly looking for/finding a decent used vehicle, the increased risk of missing something (since you don't know how the vehicle has been treated over it's lifetime), and then the costs associated with ensuring that necessary accessories like winter tires are going to fit/work on the new car . . . or adding costs of a new set of winter tires every time you get a new vehicle.

It just doesn't seem like a huge difference.  This calculus may change depending on where you live, or what vehicle you're looking at purchasing.

[We be free if we try]

I feel like I’ve seen both sides of this argument in my own life. Bought a new 1996 Honda Civic DX for the cheapest I could find, if memory serves, $12,500, and drove it for 12 years, selling for $3k. At well under $1k/year spent on the purchase, this worked great. Then a 2 year old 2001 Honda Accord Ex (leather, moon roof) that had a repaired fender bender, and drove it for 16 years, donating it at the end (needed fixing), purchase ended up costing a little more than $1k/year. I’d long promised myself that the next car would be electric, but wanted more range, so early in 2018 bought a new Leaf for $34k out the door, $24k after tax rebate. This was the first year of their 150 mile range, and the accord needed a big repair so couldn’t wait later. I don’t expect to get down near $1k/year spent on the purchase price, but this was a decision where other factors were more important than price.

[Wolfpack Mustachian]

I think that if you're planning on driving a vehicle into the ground, the difference between buying new and buying used is actually pretty minimal.  The new car costs slightly more up front, and the used car costs more in repairs over the period and then the additional time/hassle of having to replace it earlier.

I dunno, I really find this hard to believe, at least in the way I've bought used cars. We bought a used Toyota Sienna 3 years ago for $4k. A new Sienna base model (this one was equivalent to more than a base model, but leaving that alone), would be 30k. We've had it 3 years with maybe $500 of repairs over those 3 years. If you get a used car that's just a couple years old, you're still sinking a lot of money into the car, so I could see there being similarities. The difference with buying older, higher mileage cars for relatively low cost is that if it fails, you're not on the hook for a $3, 4, 5k repair. You just ditch the car and start over because it's not worth it. Your top-end cost (at least for one time costs) is capped at the cost of buying another very old very high mileage car. I'm sure at some point doing things like this will mean that we'll buy an older used car that will fail within the first year and need repairs more than worth the car costs. However, when a new car is literally 7-8 times as much as an older used car, and you're able to scout out brands and year models that you know are more likely to hold up well because they already have for a decade or more, you're already looking pretty good on the stats of things. I need to have a lot of bad luck in picking used cars to make up for the extra 26k I would have spent buying it new. In fact, I'm kind of putting all of my eggs in one basket with a single new one, that it will not fail (after the warranty of course) for this one car compared to the ability to have my used car spontaneously fail and be able to get another one and another one and another one and another one... still for less money. I'm just "gambling" that my between 7-8 "new" used cars will last longer than the single new car or 7-8 used cars minus one or two of them to factor in the costs of repairs.

None of this takes into consideration, of course, that the money I spend now is more valuable than the same money in the future, the stress of having a new car where you don't want it to get damaged/scuffed/etc. because it's new, possible increases in insurance, etc. etc.

Can you tell I'm not a fan of buying new cars? :-)

Counterpoint (In Canadian funds, using the Canadian market - which is the only one I care about) -

We bought a brand new Toyota Corolla for 13,000$ in 2005.  At the time they had 0% financing for five years which worked out to be cheaper than paying cash, so that's what we did.  A quick check on autotrader tells me that to purchase a used 2005 Corolla today it will cost me 5-6000$ (https://www.autotrader.ca/cars/toyota/corolla/on/scarborough/?rcp=15&rcs=0&srt=3&yRng=2004%2C2006&prx=100&prv=Ontario&loc=M1B%205L7&hprc=True&wcp=True&sts=New-Used&inMarket=advancedSearch).

Over the time that we've had it, we've needed to replace the muffler that rusted out in our salty winters for 1800$.  (We've also needed to replace tires, change the oil, replace the brake pads, and correct steering alignment once after going over a really bad pothole in the winter - but I'd expect that these are just general cost of driving and also likely  so won't include them in calculations.)  So, full cost of vehicle and repairs to us for 16 years of driving has been: 14,800$ . . . which works out to a cost of about 925$ a year.  I expect to get another 4-5 years out of the vehicle.

If I was buying a used 2005 Corolla for the cheapest amount - 5000$ and then driving it for five years I'd end up spending about 1000$ a year.


But then we also have to account for the time and effort spent in regularly looking for/finding a decent used vehicle, the increased risk of missing something (since you don't know how the vehicle has been treated over it's lifetime), and then the costs associated with ensuring that necessary accessories like winter tires are going to fit/work on the new car . . . or adding costs of a new set of winter tires every time you get a new vehicle.

It just doesn't seem like a huge difference.  This calculus may change depending on where you live, or what vehicle you're looking at purchasing.

Thanks for the numbers! Especially since I haven't seen a true break down of things like that from an attempt to be frugal standpoint but with realistic numbers.

I would challenge you on a couple of things. First, you're using autotrader. That in my experience is an expensive site/example. I'll be the first to admit that I don't know much about Canadian used car markets or geography, but I did a fairly quick Craigslist of toyota vehicles and found a prius for $2,500 with 170k miles - 270,000 km - right in my wheelhouse for what I would buy, and for actually cheaper than I was even able to get one where I'm at. https://montreal.craigslist.org/ctd/d/montreal-toyota-prius-hybrid-2005/7299498325.html
It might be a drive for you depending on where you live, but there are better deals than your example, but you have to be willing to not get precisely the car you want - but that doesn't mean you have to get a crappy brand - you can keep it in the Honda and Toyota family as I do. Additionally, I couldn't find exactly the 2005 corolla for example, but I did find other ones, like a 2009 Corolla for 6000, gaining 4 years from the 2005 at an increase of only 1k more.
https://montreal.craigslist.org/ctd/d/notre-dame-de-grce-northeast-2009/7298997301.html

Additionally, I've not found locating a car to be that challenging unless you have a broken car, in which case, it's certainly easier to buy new than to buy old because you don't have to spend much time looking. I can't speak for buying winter tires, because that's something I don't have to do, but I see your point there. I apply more of a factor in my mind to the ability to jump ship "easily" and get another one if something crazy happens for a used one versus having a ton of "value" left in a new car and needing a multi-thousand dollar repair after 7 or 10 years or whatever, but that's hard to quantify numerically. Ultimately, I've seen numbers in line with the Prius I mentioned. A new Prius right now is $24,000. I can save 90% of the "depreciation" by getting one now for $2500. I've typically bought cars in line with that - 15 years lost of driving, with around 85% reduction compared to a new car. If it will go another 10 years, which has been my experience with the more reliable cars I buy, I've lost 60% of the years at a savings of 85% of the cost.

I will say that you've made a good argument for it being closer than I would have thought.

[GuitarStv]

Well sure, it's always possible to substitute different vehicles and get different numbers.  :P

I agree though, the prices for used priuses look pretty good.  What's the cost of a new battery?  A prius of that age would need one, wouldn't it?

The main issue I've got with buying a used car from a random person on the street is that I'm not a car guy, and don't know what to look for as far as problems with a vehicle.  This is a whole area of expertise that must be developed and maintained . . . that frankly, I just don't care to worry about.

Another consideration around here is the amount of damage that is done to a vehicle from salt and winter driving.  Look at the underside of any 10 year old vehicle and you will see a shocking amount of corrosion and damage in southern Ontario or Quebec.  I suspect that that also reduces the benefit of buying used.

My argument isn't even that buying new is the best choice . . . just that for my situation (don't know anything about cars, don't want to have to regularly go car shopping or drive all over the country to find a potential deal on a vehicle, etc.), it didn't end up being as horrific from an economic perspective as it's often made out to be.

[tawyer]

The debate over buying new vs used (and cash vs finance, to a lesser extent) misses the more important point: no, it is not OK to buy too much car. By "too much", I mean (a) a vehicle that is larger and more expensive than necessary, and (b) a vehicle that is driven more than necessary. Both are environmentally poor decisions, the avoidance of which are an often overlooked point of the main blog.

[Financial.Velociraptor]

A "real mustachian" buys a CNC turret lathe and builds their own car from raw steel and with plans downloaded from the internet instead.

[Wolfpack Mustachian]

Well sure, it's always possible to substitute different vehicles and get different numbers.  :P

I agree though, the prices for used priuses look pretty good.  What's the cost of a new battery?  A prius of that age would need one, wouldn't it?

The main issue I've got with buying a used car from a random person on the street is that I'm not a car guy, and don't know what to look for as far as problems with a vehicle.  This is a whole area of expertise that must be developed and maintained . . . that frankly, I just don't care to worry about.

Another consideration around here is the amount of damage that is done to a vehicle from salt and winter driving.  Look at the underside of any 10 year old vehicle and you will see a shocking amount of corrosion and damage in southern Ontario or Quebec.  I suspect that that also reduces the benefit of buying used.

My argument isn't even that buying new is the best choice . . . just that for my situation (don't know anything about cars, don't want to have to regularly go car shopping or drive all over the country to find a potential deal on a vehicle, etc.), it didn't end up being as horrific from an economic perspective as it's often made out to be.

Based solely on a quick google, it's between 2 and 4k. I do know that I have a Prius, bought used, that I'm pretty sure didn't have a battery replacement before purchase. I'm at 170k, and haven't replaced it in the 50k I've put on it. This was an experiment for me, and I really don't know what I'll do when the battery needs replaced.

Yeah, I didn't articulate my point about brands very well, lol. What I meant to say was, it looks like you picked out a specific 2005 Corolla because you wanted to get the same year as your car to compare, but what I was meaning was, if you look at other cars or even other years on a Corolla, like the 2009 one I linked to, you could get better deals than the one you presented, which would provide a more realistic value for a used car and tilt the scales towards used cars.

I will also say, I'm not a car guy either. There's a chance that you could miss something that's inherently wrong with the car, but I think that can be dissuaded with a list of maybe 10 or so checks you can easily do with a single test drive without any car experience along with picking a good brand. It won't find everything, of course, but it will find a lot of things. A friend of mine bought a new Subaru years ago that was part of a bad year for that brand of car, as best as I could tell, but you couldn't tell that when it was purchased because it was a new car with no history. I feel that you can have better luck avoiding major missteps of sinking 25k into a new car of an unproven model than spending 4-5 k on a car that you know statistically has a great track record and risking missing something wrong with it.

I will say the corrosion issue is something I have never had to deal with to the degree you do, so that's definitely something I don't have to figure out.

I feel pretty confident that I'm saving a certain amount every year on average for being willing to buy used cars. I'm not sure if it's two hundred fifty a year or five hundred or what, but I'm pretty confident it's consistent savings compared to buying a new one. Overall though, thanks for the comments and for the excellent explanation. It's definitely not as open and shut as I thought it was.

[StashingAway]

In our case, we bought a new Pacifica Hybrid simply because you can't find one used so we didn't have to make the choice... ;-)

Do you like it? I was thinking of getting into that or the Toyota hybrid Sienna. But I've never spent more than 8k on a vehicle so I'm way out of the ballpark. I just can't get myself to even look and revert back to 8K mini-vans, lol

[StashingAway]

I noticed a couple of threads recently on how to pay for a new-to-you car. Both threads generally assume that one should never, ever buy a brand new car. It got me thinking.

If someone:

(a) has the means to buy a brand new vehicle and it ok with however this might impact their FIRE status; and
(b) has a reason to do so that serves as sufficient justification to them (for example, they enjoy a particular kind of life experience and they can't find the tool/vehicle for that experience used); and
(c) has no personal problem buying new (moral or whatever), then . . . .

What's wrong with buying new?

I think the answer is personal, and I think I know how I would resolve the question, but I'm curious what others think.

I think that the answer to your question is that the general population is really bad at evaluating this first part. Combine that with the keeping-up-with-the-Jones' effect and most people are overpaying for new vehicles. So the default answer is that, no, it's not OK to ever buy a new car. But that's just to get into the mindset. Of course there are caveats. There are also some really smart people justifying a bad purchase. The trick is to being able to tell the difference.

Obviously it's OK to buy a new car. But the default answer is that it's not. See what I mean?

[Metalcat]

A "real mustachian" buys a CNC turret lathe and builds their own car from raw steel and with plans downloaded from the internet instead.

A "real mustachian" rides a bike. An e-bike if they're a soft weakling like me.

[ender]

We bought both our last two cars new.

The first (Ford Escape) has cost about $1200/year for depreciation, registration, and taxes (everything but gas) for 45k miles now, based on what Carvana offered us recently.

The second we just bought recently as a new Sienna hybrid.

I don't regret either decision. Would it have been cheaper to buy a used one? For the Sienna, perhaps. Time will tell. For the Escape? Doubtful at this point. I plotted depreciation curves and it would have taken 200k+ miles before the Escape would make any sense to buy used at the time of purchase. So far, it seems that was pessimistic and it might be even higher than 200k miles making the buy-new decision even more financially best.

2021 is weird too because used car prices are all sorts of screwed up.

Personally, I think one of the most overblown personal finance tripes is the "buy 3 years used for cars always!" as while there are certainly vehicle types and brands where this is true, it's not always true. And in fact as cars get increasingly more reliable it becomes even sillier.

Do you like it? I was thinking of getting into that or the Toyota hybrid Sienna. But I've never spent more than 8k on a vehicle so I'm way out of the ballpark. I just can't get myself to even look and revert back to 8K mini-vans, lol

We love ours that we've had a few months now - purchased in December. Is the hybrid powertrain ever going to pay for itself? Almost assuredly not. I just liked the overall feel/car, we were looking at minivans anyways, and we're still going to save almost $100k this year.

It's not the most mustachian purchase. Financially speaking, we'd have been better off buying an older one for much less. :shrug:

[Wolfpack Mustachian]

A "real mustachian" buys a CNC turret lathe and builds their own car from raw steel and with plans downloaded from the internet instead.

A "real mustachian" rides a bike. An e-bike if they're a soft weakling like me.

Alas, it's the biggest reason why I'll never be a true mustachian.