Alright, personal finance blogosphere. Enough with the haterade for new cars. Are they depreciating assets? Yes. Is interest bad? Yes. Is financing a car the worst thing someone could do financially? Not necessarily. In fact, as someone who financed a $27,000 car several years back, I wouldn’t change a thing. Except maybe I would have spoken up sooner.
Car shopping was hands down the most stressful money exchange I had ever participated in. Mostly because I hadn’t yet bought a house. Thankfully, I had a secret weapon: my dad. A man of few words with an incredible poker face, he’s also owned an auto repair for essentially my whole life and tinkered with cars for all of his. To say he knew more about cars than most people in the showrooms was an understatement.
Once I had landed on my sensible Camry, I spent hours pouring over the research online. Yes, I knew it was going to lose a hunk of its value when I drove it off the lot. But I also knew how absolutely uninterested I was in driving a car that someone else owned. Every ding, every dent, every french fry crumb hurt my heart. Plus, I was swapping out a 1996 Chevy Camaro with a rebuilt engine (thanks, Dad!) and over 200,000 miles on it. It was my dream car, but it started to get old. Like, headliner-sags-onto-your-head and dashboard-cracks-from-temperature-changes old. This was 2011, after all. And if you’ve never had the privilege of driving a Camaro in a Chicago winter, it’s a lot like ice skating uphill.
So, I researched my new car, landed on a price, and walked back into the dealership. In the middle of the negotiation, my dad picked up a piece of paper, scribbled down the number I settled on, turned the paper face down, and pushed it in front of the salesman. He didn’t say a word. The salesman hemmed and hawed. He called his boss. We even walked out the door. Sure enough, my phone rang. The car was mine, but they couldn’t–no, they wouldn’t–go any lower. But they would offer me 0% financing.
I had enough money in my savings account to pay cash for the car. Instead, I crunched some numbers, settled on $400 a month, and agreed to finance my car for five years. Five years of payments meant a lot of things. I didn’t technically own my car. I definitely wouldn’t walk away with the title. A chunk of each paycheck was already earmarked for an obligation.
And yet, I was also free to pay off the loan at any point. And while I made my monthly payments, I got free car washes. While free car washes are remarkably exciting, so was the interest that I was actually earning on the money that was free to sit in my bank account. Imagine how much cooler this story would be if it were an investment account. You win some, you lose some.
And that’s the part that no one talks about. I could have bought my car. I did buy my car. I just bought it differently. But I still bought it in a way that fit into my financial plan at the time. It wasn’t the general sabotage that the blanket condemnations make it out to be.
Perhaps you disagree with me for buying a new car. You find me materialistic or impractical or just plain irrational.* Maybe that’s true. But you should also know this. I bought that car six years ago. It has 32,000 miles on it. I will, in effect, drive that car until it dies or my blue-haired, wrinkled self no longer passes her driving test. And at 5,000 miles a year, if Toyota really stands by their pledge of 200,000 miles, it will be close.
If you want to write posts about the benefits of used cars, please do. Share your numbers. Tweet about the value of thinking hard about these kinds of decisions. Explain what it actually means to agree to pay the same bill every month for 60 months, how painfully tedious that can become.
But don’t say everyone is wrong. Don’t say everyone is stupid. And don’t you dare tweet that I’m not adulting. You know what really isn’t adulting? Putting other people down because they have different financial plans, dreams, or goals than you. Last I checked, signing on for a responsibility and carrying it out actually is a sign of maturity. It might actually be the defining tenet of it.
You drive your car, I’ll drive mine.
So Tell Me…Has someone ever misunderstood one of your money decisions?
*If you still think I’m foolish for buying a new car, relax. You’re in good company. The family mechanic (hi, Dad!) agrees.
Des @ Half Banked
Awwwww Penny you are like the most responsible new car owner ever! And also, I SHOULD HAVE FINANCED MY USED CAR TOO. Yes, I paid for it outright, and no, at the time I wasn’t investing so I didn’t technically miss out on sweet, sweet investment returns, so it was the right choice (I guess) for me at the time. But knowing what I know now? Bring on the car loans, and my money will stay invested, thankyouverymuch.
I never even thought about that, Des! That’s a really interesting point about financing used.
Emily @ JohnJaneDoe
I’ve had 6 cars in the almost 33 (gulp) years I’ve had a driver’s license. Four of them were new. The two used ones both had some serious problems that we didn’t learn about until after they were bought (a transmission that went 4 months after purchase and an improperly rebuilt engine).
Just saying, in my experience, a good new car can be cheaper than a bad used car. A bad used car can keep you from being able to get to work or run essential errands, strand you in a dangerous place, and run up big repair bills. Even if those things cost less over time than a new car, they may be harder for your budget to absorb.
If you know nothing about cars (hand up!), plan to keep your car for a long time (hand up!), really need something dependable (less the case), and/or can afford it (hand up!), then a new car can be a good decision for you.
I now have a husband who knows a lot about cars, and my next car purchase will probably not be new. Mostly, that’s because I trust him to do a good job vetting the purchase, maintaining the car and handling emergency repairs. But on my own, that might not be the best decision.
Cars are frustrating both new and old, I suppose! Maintaining cars is definitely something worth considering. Looking into warranties whether you buy new or used is essential. Part of why my dad shook his head at a new car is because we know a really good mechanic 😉
Claudia @ Two Cup House
I’ve had at least six used cars in the last 15 years and two new. Cheap was my favorite price but then there would be major repairs like the transmission or the engine that cost more than the whole car. I might add to this new vs used debate. ?
I would love for you to add to this! And if my Camaro taught me anything, it’s the fact that what’s under the hood is WAY more expensive than the other plastic and metal bits. Oof. Having this Camry has been wonderful in terms of minimal maintenance and repairs. I’m sure we’ll head down that road eventually, but I know I’m much happier…and so is my dad. He has better paying customers to contend with now 😉
I also bought my car (a Corolla) new, and I also financed it at 0%. I think the wisdom or folly of buying a new car depends a lot on what kind of new car you buy and how long you keep it. I plan to keep my once-new Corolla until it starts falling apart around me (or costing me way too much to maintain), allowing that initial rapid depreciation to be spread out over a long time of owning the car. To me that’s vastly different from someone leasing a new luxury car every four years (as many of my colleagues do)!
So different! I part next to BMWs and Jaguars I definitely think there are all sorts of gradations in terms of buying cars. Sweeping everything up into a generalization overlooks a lot of what makes it a complicated situation. I’m so glad you shared your Corolla experience.
I never understand why people are SO anti-car loan. It’s one of the cheapest forms of financing you will ever find (in your case, FREE! Well done!).
I understand spreading the message of not over-consuming in general, but hey, if you spend a lot of time in your car and it adds value to your life, and you understand the costs vs. less spendy options, splurge away….
“You know what really isn’t adulting? Putting other people down because they have different financial plans, dreams, or goals than you. ” <— Yup. Basically this.
Thanks, TJ. I think I’ve been dabbling in the blogging world long enough to recognize the easy shots. And this is one of them. I didn’t want to call attention to that particular tweet, but I wanted to speak up. So I did.
FF @ Femme Frugality
So with you on this! Bought my first new car this year, and I wouldn’t do it differently. In our area, used and new prices have crept up to ridiculously close, and having my kids in a car I know is safe is worth the small difference in premium. The used models that would have been legitimately cheaper might as well have scored as “death machine” with the IIHS. There are so many ways to be good at personal finance. Less judgement is needed for sure.
Yes! Less judgement indeed. Since I started blogging, I try to always call myself out of being judgemental. And I ask my husband (and parents — to some extent, though they don’t know that I blog) to do the same. It is so easy to scoff at decisions that are different than our own. But do I know someone’s entire situation? Not usually!
Matt @ Optimize Your Life
“But I still bought it in a way that fit into my financial plan at the time.” I think this is really the key. Most people seem to buy their car while ignoring the rest of their finances. If they can afford the monthly payment, then they can afford to buy the car. Other goals will just have to be figured out later. In pushing back against this trend, a lot of finance writers seem to have gone too far and designated a right and wrong decision, where really they should be arguing more that there is a right and wrong approach to decision-making.
If you’ve thought through your options and your financial position, then you should be able to buy whatever you think is best for you.
Focus on the process, not necessarily the product, right? I might not want the same outcome as another blogger or neighbor or relative, but I bet we all want to make smarter decisions to get us there. Right on, Matt!
The Green Swan
I’m in the same boat as you. My wife and I bought a new Pathfinder last year, got a fabulous deal (basically the same price as buying a used one with 20K miles on it), and was able to finance it for less than 2%. I can’t say that is a bad deal, I had the cash ready to pay for it all at once but not with that financing offer, I too plan on owning it forever, I set the payments on auto-debit and haven’t worried about it since. I couldn’t be happier with the decision and that’s because I took the time to research and plan it out and determine what’s best for my family’s needs.
I really start to view it as a potshot. It’s easy to make the statement that all new cars are bad. It’s much more difficult to explain how situational car buying, like all of finances, can be. Cheers to your new Pathfinder!
Steve @ Think Save Retire
The longer that you keep the car, the more value you’ll get from it. If you plan to drive that car straight into the ground, then buying the car new will probably work out to be a wise decision in the end. You aren’t letting someone else benefit from the depreciation that *YOU* paid for. See, this is how you buy new cars.
The problem is so many of us buy new cars, then sell them before realizing a lot of their value, which ends up costing us a TON of money in the end. I do remain steadfast in my belief that most of us shouldn’t buy new cars, period. We don’t know how to maximize their value. And, with few exceptions, we wind up letting depreciation get the better of us.
But, that is also not to say buying a new car is *always* a bad decision. Just like homeownership (which I also rail against pretty heavily), there are ways to get maximum value out of our money spent. The more we do those things, the better our financial investments will be.
I’m so glad you shared this, Steve. You’re absolutely right that constantly trading in or upgrading probably isn’t great. But blanket statements really frustrate me. So when I saw a tweet saying that people weren’t adulting if they had car loans, I had to say something! 🙂
Love this post and your perspective on this subject. I don’t necessarily agree on the whole “if you buy a new car you suck with money” philosophy. In 2012, I purchased a certified pre-owned 2009 Ford Escape for $19K. (I know it wasn’t brand new, but it was new(er) (had only one owner and a full warranty) and that is a lot of money for a then 22 year old.) I financed it for 5 years and got a great finance rate. (End up paying it off 1 1/2 years early). I had a very similar experience shopping for it like you did. Thank goodness for Dads. Next car, years and years down the road, I’ll probably buy a new or new(er) car again. My car is 7 years old and hasn’t had one thing wrong with it. The piece of mind of having a reliable car is what matters to me. I’m not good in stressful car breakdown situations. I think as long as you are smart with how you purchase it, live within your means and have a plan there isn’t anything wrong with buying a new car.
Yes to all of this! Peace of mind and living with your means are two things that I value so deeply. And I only appreciate them more the older I get. And you’re so right. Dads are the best!
Good for you, Penny. I actually sold cars for several years (several years ago) and I’ve seen situations where it made sense to do it all. Sometimes buying used made sense, other times a lease is actually the smarter choice. It all depends on your own situation.
PS – I bought a new 2016 car this summer. Shhhhh 🙂
Wow! Do you have any posts written about that? I used to sell makeup in a department store. It was a REALLY interesting look at economics and value systems. I can only imagine what that would be like on the level of cars!
Just one post…but it brings in a lot of organic traffic. People obviously like this topic! http://www.getrichquickish.net/2016/05/how-to-buy-a-car-and-not-get-screwed-5-tips-from-a-former-car-salesmen.html
Because I have to be difficult:
I rail against new cars (for me) because I don’t have the cash to pay off a loan if I needed to. Well, we do in theory but on the things I want to use that for vs a car. That being said, I also have access to awesome mechanic work for a cheap price too, so that swayed me a lot.
With the economy the way it is where we live, we have seen people lose their jobs left and right and be overextended with 3 truck loans and be caught owing more than they paid for the stupid thing because they can’t sell it. Now I realize that is a really extreme situation of people not being money aware. And the cries of “this is what I was taught growing up! You get car loans” is growing tired to me. Also the “not actually using money to invest or save” is another thing that bugs the crap out of me. If you’re taking advantage of the 0% loan, sweet, but otherwise what’s the point?
I realize that’s not a good cross-section of the PF community.
Not to mention people’s obsession with switching vehicles as often as they change their phones (Calgary is a weird place), which actually makes this a great used car City.
Also my boyfriend got in a nasty accident a year or so ago (he’s ok) and it makes me SO ANGRY that that one event cost him so much value in the car because some idiot was distracted. (again, the anger came after my boyfriend was cleared of any issues). He will have that car for a long time, it’s his baby, but still. If we needed to sell because of job stuff, I would hate that to be a point of contention or resentment. (my car is much more family and dog friendly. His is not. At all. It would be a very easy choice for me.)
That being said, we have a mortgage which may be just as stupid 😉 (or even more so)
But yes, you do you and this is 100% correct adulting and you should def twitter slap anyone for telling you otherwise.
I reread this and apparently I am very passionate about this.
I love it, Katelynne! I would 0% my life if I could, but only on the condition that I had the savings, not just the projected income, to cover it. I did the same thing for our wedding and my first Master’s degree. I would never ever risk taking on that kind of debt if I didn’t have a backup for a backup plan in place! That being said, it felt right for me and the situation I was in at the time. But car buying is absolutely the worst, so I will either drive this until the bitter end or become so wealthy and careless with my money that I hire a driver 😉
I’ll admit I’m not a fan of car loans most of the time. The exception would be when a person has actually saved up that amount of money, either in a savings account or even in their retirement accounts. But what often happens to people under 30 is they take out a car loan when they haven’t ever been able to save up that amount of money. I think it’s easier to overspend when you buy with payments (true for everything we buy with payments including homes.) Sometimes people think it will magically become easier to find $400 plus full coverage in the future. But that isn’t often the case. Then instead of driving it 10+ years they swap it out for something new in 4.
For financially responsible people, it can be a great deal. For people who really need a car and this is the only option (like most things we take payments on i.e. college and houses), then it’s nice to have the option. But for most people in the end it was a lack of planning that will cost them other financial goals. House swapping and car swapping with payments is an easy way for broke people to stay broke. And keeps a lot of people living paycheck to paycheck. PF bloggers often come across as overzealous because having so much of your paycheck committed to housing, cars or cell phones can steal people’s options away. They hate out of love?? =)
In full disclosure, I have had my own little rant about payments. http://www.montanamoneyadventures.com/the-danger-of-purchasing-with-payments/
I did use cars as the example, but it could apply to any of the things we take out loans for. I don’t think it’s necessarily the wrong choice, but there are a few dangers that paying with cash avoids. 99% of people will have to take out a loan for a house, and that is often a good choice. But there are pitfalls that it is good to think through.
All of your points are great (as always), Ms. Montana. Maybe it can be overzealousness, but I worry that it is also because generalizations are easy to make. And this tweeter (Twitter-er?!) was clearly just shouting into the echo chamber anyway. “You’re not an adult if you have car loans.” “Yeah, what an idiot!” Rinse and repeat.
“You’re not an adult if you have car loans.” “Yeah, what an idiot!”
Well, that’s just silly. I think we run a great risk labeling any one decision stupid or un-adult for everyone. Life is just more nuanced than that. It might not be a great call for one person but the perfect choice for another. It would be easier if life was that black and white. But the variations and tough calls are what makes it interesting. I feel like my fb feed is living proof of this right now. No matter if you are voting R, D or 3rd party, someone thinks your an idiot helping ruin the USA. We all just gotta figure it out for ourselves, and let the haters, hate. I think you made a lovely call on the interest free loan. =)
Yup! That one tweet two nights ago sparked this entire post. And you’re absolutely right that social media can oversimplify things. And I’ll be much happier with my personal FB page in November. I hope 😉
This is so interesting! Thanks for the candid sharing, Penny. I think a lot of the trouble is that most people who have car loans are nowhere near your situation (0% interest, could pay off the loan at any time, did a lot of research). Instead, they are financing because they’re buying more car than they can afford, don’t have money to put down, pay high interest, and walked onto the lot with “sucker!” stamped on their forehead.
Sooo, while I would say that I think car loans aren’t typically something I agree with, I am so glad you’ve reminded me that nothing in personal finance can be 100% right or wrong, because everyone’s situation is different!
Also…long time reader, first time commenter. Hi! 🙂
You made my day for leaving a comment, Britt! Thank you so much. I absolutely agree with you. I was in a really unique, fortunate, and privileged situation that allowed me to do that. It definitely isn’t for everyone, but I always try to consider the possibilities and different perspectives, you know?
Colin @ rebelwithaplan
There’s something notable to point out about a lot of the people that are anti-new car: many of them are married/in a committed relationship, Also, many of them were gifted gently used cars by their parents when they were in high school or college.
The reason I bring is up is important. Everyone knows cars can break down at the most inconvenient of times. When you’re driving around a used car that’s several years and miles old, it’s even more likely. What happens when your car breaks down every few months and you’re constantly scrambling to find a temporary way to make it to work, run errands, etc? I’m betting a lot of these anti-new car people have spouses who they can rely on for transportation in the situation of their car being in the shop for a day or a few days.
I’ve never bought a new car in my life. I bought a used Ford Focus with 132k miles in my senior year of high school with all of my own money because my parents weren’t able to help pay. I drove that car all throughout college and for several months after college. It had nearly 200k miles on it when I was finished with it.
Getting repairs on the car was ALWAYS a headache. Sometimes I could coordinate with friends but usually I was stuck without a car for a few days and had to get a rental. It was frustrating.
After getting rid of my Focus, I got another, much better used car. The car was a lot more reliable. I don’t think I will ever buy a new car but I shake my head a little whenever someone is so anti-car but you can tell they probably have a strong system in place being able to get around in the scenario their car is in the shop for a few days.
So, I lived with a mechanic my entire life and owe him approximately all the dollars for all the free labor (thanks, Dad!). Even in my incredibly privileged situation, it was still an absolute pain when my Camaro broke down. Which was often. My mom always jokes that it’s like the story of the shoemaker whose kids have no shoes. Our used cars were always needing work. Thanks for sharing that perspective, Colin. I hadn’t even thought about the underlying support system people assume has to be there.
Revanche @ A Gai Shan Life
I bought my first car with a loan in a pretty stupid way: I went alone, I negotiated by myself, I accepted financing that wasn’t awesome and probably overpaid by a thousand or so. It was an expensive lesson in knowing that I could have done better, but that was the best thing I could do at that time, so I made up for it by paying off the loan in 3 years instead of five. I’ve never bought new since but that’s because we’re currently in a location that *generally* makes it easy to find gently used/well maintained used cars. If that wasn’t the case, I’d gripe and grumble and gnash my teeth, and figure out how to make buying new feel not sucktastic. It was definitely not the case when I lived in LA, thus, the new car.
All that to say, new can be good. New can suck. Used can be good, used can totally suck. I think what matters most is whatever you choose isn’t getting you in over your head and that you’re actually thinking through the consequences of your choices: are you costing yourself opportunities? Are you making the best choice of car and therefore price bracket for your life? Did you know that if you total your new car that’s fully financed, you still have to pay it in full ASK ME HOW I KNOW.
OH NO. All the oh noooooos. Cars can be the worst, can’t they? Finding the price bracket for your life. That’s gold, Revanche.
Great article, and I’m glad it worked out for you! I have to ask, though: what about the risk factor? I hear this argument more often with mortgages, where if you can get a loan for $100,000 at 4% and put it in an investment account earning 7-8%, that’s like free money. But if you change the numbers a little and take out $1,000,000, most people start to sweat a little, and understandably so because they realize that they’re on the hook for that money if things don’t go as they planned. I get that you had the cash to pay for it, and for that, you are light-years ahead of most people walking into a dealership, but what if something else catastrophic claimed that money and/or your ability to repay it? To me, it just seems like a dangerous gamble that happened to work in your favor this time. I promise, I’m not trying to tell you how to spend your money that you earned, but I’m curious about your thought process and how you decided to pull the trigger on this one.
Thanks for commenting, Kyle. As someone who is so vocal (probably obnoxiously so) about how much I hate my mortgage and how I do want to pay it down as soon as possible, I can see why this would see especially contradictory. I suppose more background would be helpful. At the time, I was in my third year of teaching. I had been RIFed twice in a district and then had just been hired by a much more financially stable district. When I bought the car, I had just signed a one-year contract, so I basically knew I would be paid for at least a year. On top of having considerable savings (I believe I had about $40k at that time), I also lived with my parents. One day, I’ll post on that! So I had the cash flow to make the payments. If I lost that cash flow, I had the savings. If the savings were claimed by something else, I had insurance, disability, and life insurance through my work. And a piddly pension payout in the event of my death. So in the case of my car, because it was a 0% loan AND I had the funds (at least as much as anyone has anything, I suppose), I felt comfortable taking that risk. It fit in my financial plan and where my life was at that time. Could it have a gone south? Possibily. But I suppose we can’t ever account for everything. Thanks for helping me think on this more!
Gotcha, it seems like you were MUCH better prepared than most who use this line of reasoning. Enjoy the car, and have fun filling it up with your own french fry crumbs 🙂 !!
I was. And I’m really fortunate that I was. But I do think if we talked about it more, people could actually have it as a viable option.
It’s only been about two years since I started eating in my car. Before that, the only person who was allowed to eat in it was my grandma. Anything for grandmas! 🙂 I’m so pumped you commented, Kyle. Thanks!
Gary @ Super Saving Tips
Agreed! There are lots of great reasons to buy a used car and there are lots of great reasons to buy a new car. We ended up buying new-but-reasonably-priced a couple years ago in part to satisfy my wife’s desire for some of the now-included safety and technology features that we actually use. It is our only car, it sees barely 7k miles per year, and we plan to drive it for a very long time. Oh, and it also has a loan on it (1.9% isn’t quite as good as zero, but free oil changes are a step up from free car washes), because that’s what made sense for our financial plan at the time, not because it was more car than we could afford. Maybe we’ll pay it off early, maybe we won’t. It’s not a decision I regret.
Oh, yes! The oil changes. I think I only made it to two or three before the warranty ended — because I drove even less back then. Sounds like you made a decision that works for you, Gary!
Okay, first, this is the best thing I’ve ever heard: “In the middle of the negotiation, my dad picked up a piece of paper, scribbled down the number I settled on, turned the paper face down, and pushed it in front of the salesman. He didn’t say a word.”
I would like to please hire your Dad to do all of my negotiating, ever, from now on. That’s AMAZING.
I love new cars. Your french fry crumb comment resonated in my *soul* because it’s so true to me haha. I know that my next car purchase (which will probably be in like.. 10+ years) will more than likely be a new car. My first car was used and I drove it until they literally didn’t make the parts for it anymore, I cried when I said goodbye to it. My second (current) car was new and financed for 5 years, but I put 40% down in cash and had payments of only $320 a month. I confess that longer term financing (like the 7 year options these days) does boggle my mind, because I feel like no one can really plan 7 years out. But if you go into a financing deal with a good interest rate (and you can’t get better than 0%!) and your own savings plan, then I absolutely agree that new cars can be regret-free decisions and not deserving of all the hate. Awesome, awesome, awesome post Penny!
It was like a scene out of a movie. He has no patience for small talk (or most things for that matter), and it really got the job done. I love 0% financing with a safety net. Even if I could cash flow it currently, I wouldn’t finance if I didn’t also have it in savings (or something equally accessible) because you never know. And thanks for getting me. I was kneeling the pavement inspecting a ding that the Carmax sales guy tried to tell me wasn’t there, and I finally said, “I want to make my own dings.” That was the moment when my dad realized it was new car or nothing.
I financed a $16k car after many years of buying cheap cars in cash (like $ 2-5k) and getting burned every time. They would die and we wouldn’t have had the time to save enough to replace it for a better one, because of the constant repairs/breakdowns. Not to mention the stress and hassle, because we are a one car household.
Would do it all over again if I had to, would do in the future again if I had to. Best car decision I ever made! NO regrets. (Story here: http://nzmuse.com/2015/11/car-loan-2/)
Thanks for commenting and for the link! There are drawbacks to cars, new and used. And that Camaro I drove? I can’t even imagine how much money I actually owe my dad in labor. I’m continually reminded of it by my mother when they’re fighting and she jokes that he’s coming to live with me 😉
Sarah @ Smile & Conquer
I’m so on your side on this one! I bought new six years ago and have had no regrets. I was able to get 0% financing for five years which gave me affordable payments that fit my budget. Plus it’s reliable and hasn’t cost me anything in big repairs, because you know what busts budgets? Old, crappy, broken down cars 😉
I would have sold that Camaro the next day if it weren’t for my dad. I secretly think he was breathing a sigh of relief that I bought new just because it kept my car out of his shop for a while.
Could I have been more reasonable and tried to scoop up a 2010 or 2009 model? Sure. But it suited me just fine, and I think my Camry and I are in it for the long haul.
Really enjoyed this post, thanks for sharing your thoughts and for going against the grain with your opinion. New cars are very easy targets to point out as “bad financial mistakes.” The problem, think you mentioned, is that blanket statements in personal finance are almost never a good thing. Everyone has different goals, values, situations, etc. Most of the time there’s no black or white on any particular decision. Is financing a $40K brand new car and then trading it in every 3 years a bad idea? Of course. But is buying a new car ALWAYS a bad idea? No, not at all. It’s an easy target and tons of people will jump in and agree, but if you dig in to the specifics there are certain situations where it makes sense.
My favorite part of this post was how many people chimed in and explained why buying new worked for them. It’s so silly to silence good ideas by taking cheap shots. And in terms of financial missteps in my life, there are many. This just isn’t one of them!
Completely agree. I financed a new car as well for various reasons, which I’ve thought of writing a post about but felt like I’d get crucified by the rest of the PF community haha. Really great to see people chime in about their specific situations and why it was the right decision for them too.
Dennis @ NestEggRx
Fun article to read and congratulations on getting 0% financing. Personally, I think the best argument for buying a new car is that you don’t know anything about cars or how to fix them. With your dad being an expert on cars that argument seems to go out the window for you. Nevertheless, the longer you own it the better it is for you financially.
Yeah, he wasn’t really convinced I should buy new until he watched me examine a used car for dents for approximately an entire afternoon. There are so many ways that people sell used cars to uninformed people. My dad always offered to take a look for friends and family. I distinctly remember a distant ex-boyfriend really smugly telling my dad that he bought the best used car on his own. Why was it so great? Not only was the car spotless, but so was everything under the hood. My dad’s response: That means something probably leaks that they didn’t want you to see. Guess who was right? 😉
Mustard Seed Money
My mom gets a new car when she runs her car in the ground. My dad buys used cars and I use to ask him why my mom got new cars while he got used. He said that it wasn’t worth it to deal with a small issue with my mom’s car while he was happy to deal with any small issues on his. If a new car makes you happy and gives you piece of mind. As long as you realize the tradeoff, which you clearly do, then go for it.
That’s so interesting! I’m starting to learn that there are tradeoffs to most everything in life. Now, I try to anticipate them all in advance.
Aww, glad you had a good experience.
We used USAA’s deal to get a great price from Toyota too. In fact, it seemed like they really wished we’d go away so they could sell it to someone else for more 🙂
I’m not sure if I’ll buy another new car when the time comes, but this one’s 5 years in and I hope to have at least 5-10 more before I hit 200K miles.
It sounds silly and is totally against the rules of frugality, but I really, really, really wanted a blue car this time around and I got one. Maybe I could have gotten a used gold one for a little less, but blue makes me happy.
If you spend a lot of time in your car, it makes sense to try to find a way for it to make you happy (within reason, of course!). I had my car driven in from DC because I wanted the champagne color 😉
5000 miles a year? You will have that car forever.
I have had a leased car until I bought mine out in 2014. There is a huge peace of mind knowing who has driven the car, what they did to it and how that scratch got there. (IT WAS ME!) And at 1% interest, it makes sense.
I feel like there should be a financial pass for Hondas and Toyotas. Even if we pay a bit more buying it new, it’ll last for-ev-er! No harm, no foul.
Knowing that I am responsible for everything with my car is a fantastic motivator to take really good care of it. Six years later, I still park in the back of the lot. New cars and health benefits. That’s the next post 😉
When we got Mrs. SSC’s car, we bought it new and were going to finance it at 2% and pay it off within a year. We had the funds to buy it outright, we just didn’t want to pull them all out and say goodbye to them at once. When we mentioned we were going to finance it through the credit union the dealer offered to beat their rate and he did, because we got it for 0%. At which point, we just waited until the loan was down to ~$3500 before we finally paid it off. That was close to 4 years where the chunk of money we would have used for it just sat and grew bigger.
I’m with you in the camp of “why wouldn’t you take a 0% loan” – especially when you have the $$ to pay it off anyway. Even MMM just posted a few weeks ago about his new car and his 0% interest loan and all of his financial justifications for it.
I totally get it – from a financial standpoint and a “I want to make the dings” standpoint.
Thanks for not saying, “Vacuum the fry crumbs, Penny.” 🙂
Secret Retirees 2018
Awesome story. Your dad sounds like that guy on the beer commercial – “he’s the most interesting man in the world.” And you’re right who cares what people think. It’s your life so do what’s best for you. Best of luck with it. Virtual pennies in the back seat (my mother in law always does that when someone in our family buys a car) – but hey don’t pick them up?
You have no idea how excited I am to see this comment, Secret Retirees! I’m more than a little biased, but I do think my dad is just about the greatest. I’ve learned so much from him about cars and life.
As for my Camry, it’s treating me quite well. We’re in year six of our relationship, and things seem to only get better with time. Except for that one time I backed it into my dad’s truck. ALL THE TEARS. Thankfully, my car’s bumper and my heart have since recovered.
At your current mileage, it looks like you’ll do fine with your Camry. I bought a “new” 2002 Mitsubishi Galant in 2004 from a rental car company. That beauty had 49,000 miles on it and now has almost 298,000 miles. I view the car as a “millionaire maker” because we’ve had reliable wheels for 12 years now with modest transportation costs. We’ve also had a 1998 Volvo as a secondary car; it also served us well even though we put few miles on it. We paid $18K total for both of our cars.
We’ll be moving to Mexico at the end of the month, so we’re getting rid of our old cars. We do so with a little sadness because we’ve been cruising around in these babies for 12 years! They have helped us achieve our financial goals. Your car will help you do the same, especially if you keep your prudent driving habits up. Only 5k miles a year…that’s awesome. Enjoy you sweet, new ride!
I wanted to correct you and say that I bought the car six years ago. But it is SO NEW to me. And if you want to know a secret, I left the plastic on the interior by the floor. My husband jokes that if the dealer didn’t peel off the plastic protectors on all the interior parts, I’d ride around in a plastic bag. He’s not wrong.
Six years…nice! A buddy of mine bought a new Nissan in 2006, and he’s still driving it. A little maintenance and a long-term vision will save you a bunch of money. Ride that millionaire-maker until she drops!
100% agree with everything you say here! Thanks for posting this. I had always blindly been a proponent of the “buying used is the only financially responsible choice” and then happened to marry someone who prefers to buy new cars (and – gasp! – doesn’t always drive them for 200k miles). Once I did some research, I realized that with smart choices (ie, buying a car from a reliable brand) buying new is definitely not the only financially responsible choice. I am glad I was forced to do some research and see the error of my views!
And the most persuasive reason for buying a new(er!) car today? Federal regulations and technological advancements from as recent as 2012 have reduced US traffic deaths dramatically:
That’s such a valid point, Casey Ray! I was floored when we learned that my Toyota came with 8 airbags compared to the one in my Camaro. Safety features are definitely things that no one wants to have to use, but they make a huge difference. Even things like backup cameras are game changers!
Mystery Money Man
I love this post!!
Here’s an example of getting great value buying a new car:
I purchased a new Toyota Corolla in 2002, for $16,000. Base model, standard transmission. I drove it almost 300,000 miles, and only spent $1300 in repairs in 11 years. In 2013, it was written off in a minor collision, and the insurer gave me $4000 for it, because it was a Toyota (in their words). At the time, I couldn’t have sold it for more than $1000, due the miles. Also, it gave me about 50 miles/gallon (highway driving), which was about the best fuel efficiency available for a non hybrid vehicle.
The problem with trying to get great value buying new, is that the scenario above can’t be accomplished with the vast majority of vehicles.
How I was able to achieve great value:
1) Very reasonable price ($16,000)
2) Near flawless reliability (the Corolla is probably the most reliable car ever made)
3) Drove it into the ground, owned it for 11 years.
4) had a very good value to the insurer, increasing MY value when it was written off (this was good fortune, in a sense)
5)Very low operating costs, great fuel efficiency.
This combination of factors cannot be accomplished with most vehicles. Thats why getting great value buying new is really limited to small, reliable sub compacts (Honda Fit), or compact cars (Corolla, Mazda 3), or perhaps a base model midsize sedan, such as a Camry or an Accord.
For almost all other vehicles, buying used is the best option. Pick up trucks, SUV’s have a premium price tag, are far more costly to operate, and simply depreciate way too much, best purchased used.
Mystery Money Man
I should add, that I had another new car buying experience that didn’t turn out nearly as well. A much more expensive vehicle, ended up selling it 4 years after buying new, and took a big hit on the depreciation, so I speak from experience! : )
The type of car you buy makes a huge difference, that’s for sure. I’m happy to be in the Toyota club!
Amanda @ centsiblyrich
Great post, Penny! We’ve bought both new and used. Two vehicles we have now were purchased new and my son’s car was purchased very used. I think the problem with buying new comes when you buy, trade up regularly and have a perpetual car payment. I learned this the hard way. We did this for years and lost thousands upon thousands of dollars, not because we purchased and financed new vehicles, but because we didn’t keep them and drive them for any length of time. I’ve written a post on the benefits of buying used because I think many people fall into the trap we did. Our “new” cars are now 4 years old, have been paid off for 3 1/2 years, and we plan to keep them until they die or we don’t pass our driver’s tests. 🙂
Your example is a great one for buying a new car the right way! Thanks for sharing.
Here’s to the “drive them forever” club! We could be founding members, Amanda. And you’re absolutely right. There are huge pitfalls when it comes to buying new. But educating people on all the options makes a lot of sense to me!
I had a somewhat similar experience a few years ago. I had a ’98 Mustang that was needing some TLC so I purchased a new 2012 Mustang that somebody had owned for maybe six months (just long enough to drive off the lot & take the hit for the initial depreciation). Also at that time, the used car market was still fairly high because of the ‘Cash for Clunkers’ program & we had a hailstorm right before that damaged a lot of cars locally.
I had looked at used cars that were three or four years old but the price wasn’t much different than mine at the time. So I decided to buy new. I don’t have too many regrets, it was my dream car & it’s as new as a used car can be. The dealer said it was the first used vehicle they sold that was the same as the most current model year.
Your 0% financing is a good deal & hard to compete with. My biggest gripes with buying more expensive vehicles is the hidden costs like sales tax & insurance that are based on the total value of the car.
Now my wife & I try to look at Craigslist and find cars that have been taken care of. Plus we have a mortgage payment and can’t really afford a car payment at the moment either.
Those last two points are crucial – considering insurance and sales tax! Thankfully, our insurance company seems pretty pleased with my Camry and its 87 airbags 😉
First of all, I think being a Camry driver and being irresponsible are mutually exclusive. 🙂
Secondly, thank you for this post! This is exactly why this is one of the few personal finance blogs I still read. I got tired of the attitude of so many other finance bloggers, so I just stopped reading. Everyone has different situations, different perspectives, different lives. FIRE isn’t right for everyone, new cars are right for some people, and people have really personal reasons for doing what they do with their mortgages. Thank you!
I cannot even tell you what a huge honor this is, Christie! I was so scared to post this because I really felt like I was in the minority. The comments here showed me just how many people have bought new cars and made really smart decisions around them. I hope that my posts echo people’s voices, not muffle them. You seriously made my weekend!
Alyssa @ Generation YRA
This. I love this. I feel like this is one of those highly debated topics in the PF sphere and no matter how much you slice & dice it will always be a different situation for each person! (You NAIL it at the end when you point out to not put people down for different financial dreams etc.). For me, my first job out of college required driving 500+ miles a week in ALL weather conditions. Each employee participated in a car reimbursement program that took car of gas, depreciation, and your monthly payment. Given the circumstances of how often I would be driving, I selected a new SUV that could handle any situation safely. This was my circumstance, I wasn’t just buying a brand new car out of college to reward myself! (As some people would view it). It’s why it’s so important not to make assumptions towards people’s financial decisions and circumstances. 🙂 I LOVE that your dad assisted you through the process and supported you. I’ve learned so much from my husband on cars – who, worked at an auto auction for 7 years and has actually MADE money on used cars (I don’t know how he does it?!). But he recognizes the value in the cars he selects and is incredibly methodical before the next. The car debate will always be a mystery to me. Quite honestly, I wish I knew better and had a trusty Toyota or Subaru that I could drive foreverrrrr (but my young self didn’t know better at the time!). I just want to say thank you for sharing this, I really appreciate your perspective!! 🙂
THANK YOU! It drives me crazy (no pun intended) when PF bloggers trash buying new. Often, they associate buying new with 1) buying more car than you need, 2) taking out a long loan like 5-7 years or 3) buying a new car every 4-5 years.
They also assume that used cars are plentiful everywhere you go — definitely NOT the case where I live! It’s a seller’s market, and good quality cars like Toyotas tend to hold their value.
I did the math with my recent car purchase — buying a 4 year old car and driving it for 8 years versus buying new and driving it for 12. Over the life of the car, buying new was the better deal. (And I know this because my first car was purchased new and driven for that long.)
I hadn’t even considered the availability of used cars, Beth. I could definitely see why and how that could influence a buyer’s decision. It was my pleasure to write the post. Thank you for taking time to comment; it really made my weekend!
I think if you’ll drive your new car like you did with the Camaro with over 200,000 miles, there’s nothing wrong with buying new. This is especially true with Toyotas and Hondas because they hold their value pretty well so buying a used won’t get you as much of a discount. Although I did just buy a used Toyota…but every scratch, ding, and French fry crumb doesn’t bother me in the least. And with a growing family, I bought a minivan and I’d have a heart attack paying $30k for a new car.
I imagine I’d feel quite differently if there were kiddos and car seats involved. Though that is one reason I went with the Camry rather than something more compact. More room in case there’s ever a family…or a dog! 🙂
We bought our old Odyssey cash out the door. We just traded in that car for a new (to us) 2014 one with all the options (DVD, NAV, leather, back up camera, etc) coming off a lease that was MINT.
We decided though we had the cash to pay (especially since our other Odyssey though a lower trim level but had a good trade in with very low miles for that year and was paid off), we decided to take out the car loan through our bank. For 2.5 percent it’s under $300 a month, and we could write a check and pay it off anytime. We also decided to pay it off within 1 year even though we have the money now since the balance on the loan is a small amount for our income level. (We also only pay for one car, my husband gets a company car and a certain amount is taken out of his gross pay for personal usage.)
It made sense for us to upgrade because between 5 kids and sports we are in the car ALL the time! I missed having all those extra’s I used to have years ago that ARE a want, but make traveling with kids on longer trips so much easier. We could have bought a middle of the road model or slightly higher trim brand new, but for less money we bought a fully loaded 2014 with 40,000 miles (this is nothing for a Odyssey lol) and we also felt our investments make much more than the paying the cash outright. We plan to hang onto it for a very long time hopefully!
Wow, I finally got around to reading this post! Congrats on you being you!
The judgment of PF blogs is what turns off a lot of normal people. You notice that a lot of people that read PF blogs are from the choir (finance converts). A lot of people that should be reading them actually don’t because finance bloggers are judgey.
My parents bought new cars but they always wrote checks for the full amount. My parents bought me a new car because they didn’t want me spending money on beaters, having to fix them when they went broke, wasting time and money, etc., and would rather that I focus on my studies.
I’m pretty grateful they got me a car. =)
I trust other adults to make good decisions with their money since they have different data and priorities from me. I don’t have a car at all. I’ve never had a car. I have not driven since 2009. If I needed a car, I would probably buy a used one first because I am so unused to driving that I am certain I would do a less than stellar job at first. Once I felt comfortable with car ownership, I would likely want something fresh so that I could worry about fewer things.
Each to their own I say!
I think most people who buy new or even nearly new used cars are insane but that’s up to them and I would never “hate” on anyone for it.
Our vehicle costs including buying and maintaining a used car works out to be around £85/month not including gas, which is $103 / month.
So you are paying a minimum of $300 extra per month in the short term (5 years) for that new car buzz. When it’s 5 years old and finally “yours” it’s not so brand new any more and will no doubt need a lot of servicing by that point as well.
As I say I just can’t get my head around why anyone would do this, it just doesn’t compute with me – I just want to get from A to B for the cheapest amount possible (I do a lot of walking / running for transport where possible)
But then I bet there are plenty of things I spend my money on that don’t compute with everyone else… so I think it’s fair to voice your opinion but respect that everyone is different 🙂
My car is 6 years old and the only “new car” servicing it’s really needed has been new tires. That’s the problem that no one talks about. When you drive really short distances all the time, you turn so much…so your tires wear quickly! Other than that, oil changes, rotations, cabin air filters, nothing major. Maybe all the Toyota hype is real! 😉