When it comes to saving money, big or small, I sweat it all. But today, I’d like to pay my respect to one of the largest and most cumbersome expenses in many U.S. households: cars.
We love ‘em here, don’t we?
I certainly have some pretty strong opinions about whether it makes more financial sense to buy a new or a used car. After participating in a BudgetPulse (#bp) Twitter chat surrounding the topic of cars, I realized I wasn’t the only one with dogmatic beliefs on the matter.
Given how passionate many of the chat’s participants were, I wanted to delve deeper into the minds of the personal finance bloggers on the new versus used car debate – in more than 140 characters.
So, I e-mailed them and asked them how they really felt.
Image Source: Accounting Degrees Online
Peter Anderson at Bible Money Matters
At our house we have two paid for cars that we saved up and paid cash for, used. My car is a 2006 Chevrolet Impala that we bought with less than 30,000 miles for less than $10,000. My wife’s car was a bit more expensive, a 2002 Honda, and it had less than 20,000 miles when we paid cash for it in 2004. It’s still running and has less than 65,000 miles on it!
Because we have no car payments, and because we didn’t have to absorb the large initial depreciation of our cars, we’ve gotten a much better deal on them, and we’re saving and investing our car payments for the future!
Craig Kessler at BudgetPulse
Preference: New (if you’re out of debt)
I had no debt at all, and my car died on me. I decided it would be best to just buy a brand new car. The reason for this is because I plan on keeping the car as long as possible, which could run 10 years. Certified pre-owned cars are not cheap. Those cars could run $17K when my brand new car cost $20K. For the extra few thousand, I would rather have a brand new car with no issues than by a car that is 3 years old. I bought a used car in the past and put a lot of money into it because it had issues. I recommend buying a new car that you can afford if you are in a situation where you have no debt.
J. Money at Budgets are Sexy
Owning a 17 year old car myself (93 Cadillac De’Ville baby!), I’m a huge believer in only picking up used cars. That’s not to say I wouldn’t get a current year’s model – but just that it will never EVER be fresh off the lot.
People say it all the time, and it’s totally true – the second you drive a brand new car off the lot you lose money. And a LOT at that. Why not just look around for one of a dozen 3 month old cars instead? It won’t technically be brand new, but if it saves you $5,000+ wouldn’t it be worth it? Just because it’s “used” doesn’t mean it’s 5 or 10 years old. People return cars for crazy reasons sometimes, not always for defects.
Kelly Whalen at The Centsible Life
Preference: New (especially when you know how to haggle)
We actually just purchased a new car. I wrote a post about it here.
The car we wanted was redesigned in 2009, and the 2009 models even with thousands of miles were the same price as new. We got an awesome rate on our loan, which made the new car a better deal. We have a 12 year old who will be driving in 4-5 years, so getting a good car we are driving for a few years first makes financial sense. We know how to negotiate, and got a great deal on the car paying about $1,000 less than people in our area typically spend on the same car.
Debt Hater at Debt Hater
Preference: Used (now that she knows better)
I’ve never purchased a used car, but that was because I didn’t know squat about buying cars when I bought my first one…or the second one. I bought the first car before I was in debt. I bought the second one while I was deep in debt. I searched for a used car when I got my second one, but couldn’t find one that I wanted. And the ones I test drove were ugly, smelly and I could just feel the other owners in the car.
I didn’t go on my personal finance journey until well after the purchase of the second car. That’s when I learned how much a car depreciates as soon as you drive it off the lot! And given how quickly people trade in gently used cars, there’s always a good used model available.
Brad Chaffee at Enemy of Debt
Preference: Beat down (until he’s rich)
Would I ever conceive of buying a brand new car? Probably when I am loaded, but only then, and by loaded I mean when I am a millionaire. I buy beaters and even though I replace them more often than I would have to replace a new car, I promise you that I still spend less when the dust settles. In 2 years I have spent $2,500 on 3 different cars. The first, (I re-sold for $300) I drove for more than a year before I upgraded. The upgrade cost me $500 and if you add that to any maintenance I paid during that time, I would say I am still ahead of the game. My wife’s car was bought for $2,000, in 2008 and is still running strong.
Cars depreciate, so why would anyone willingly “overspend” just to satisfy the kid within them who says a new car smell is worth the money lost? Not me Jack!
Mrs. Micah at Finance for a Freelance Life
Preference: Gently Used
Between the extra money it’d add to our overall debt, and the immediate depreciation, we decided not to get a new car. In the end, we got one that was 2-years-old, low-mileage, and priced just above Kelly Blue Book value for its year (we might’ve been able to get a better deal, but we’re not fond of bargaining). It wasn’t underwater for very long and has been easy to keep maintained.
Qi at FrugalNYC
Preference: It Depends
If you cannot purchase with cash, I vote buy used. Cars depreciate the most right after you drive them off the dealership lot. If I were to keep the car for its life, which makes the most financial sense, I think it’s wise to buy new – if you can afford it. If I planned to have a car for only a number of years, I believe it makes sense to buy used.
Red at Girl with the Red Balloon
All three cars I’ve owned were bought used. To me, it doesn’t make any sense to spend $20,000 on a vehicle that depreciates so quickly after it’s driven off the lot. I would much rather put that money into a retirement account than into a vehicle. That being said, used cars come with their own set of problems. The 1988 Chrysler Le Baron I was given for my 16th birthday had major problems with oil leakage until I finally sold it four years later.
Torrey McGraw at Men’s Playbook
Preference: Very Used
Some will argue that new cars give them a better peace of mind because they shouldn’t have any problems. But my experience with used cars has been great. My current car has 160K miles (bought with 101K miles). My last car had 220K miles (bought with 70K miles) when I sold it.
There’s some work I advise you to do before buying used.
- Check reliability ratings (e.g. MSN Autos)
- Buy private party – I hate the hassle of salespeople, and I can often times haggle when talking private party.
- Have a mechanic look at the car – You can save tons of headaches and uncover mechanical problems.
Clare at MoneyEnergy
Preference: Used (when the day comes)
As someone who does not own (and has never owned) a car but plans to purchase one within the next year to two years, I’d suggest other first-time buyers choose a used car as their first purchase. Similar to a “starter home,” your “starter car” can be a learning vehicle and will allow you to get to know what you want in a car. There is a wide range of options within the “used car” category too. You can always go with a one-year-old favorite – it doesn’t mean you need to buy a 10-yr-old car.
Well Heeled at Well-Heeled Blog
Preference: New (for certain models)
I have an old Honda sedan that I inherited from my dad, so it worked out perfectly. Even though the car has a lot of miles on it (almost 250K at last count), it’s still in very good condition for how old it is. I am trying to delay buying a new car for as long as I can, because the costs associated with a new car are so high – down payment, monthly payments, insurance, etc.
Many personal finance experts advocate buying a 2-3 year car to avoid the initial hit of depreciation. If I’m buying a luxury car such as a BMW, I’d certainly go this way. But there’s not much difference in price between a new Honda and a 2-year-old Honda, so I’d rather just buy a new car, know for certain there are no problems, and then drive it for 10+ years.
I’ll try to refrain from weighing in on the debate here and, instead, refer you to a blog post I wrote lamenting my decision to buy a new car.
This article was featured as an Editor’s Choice in the Carnival of Personal Finance #246: March is the month for … what?!? at CreditCards.com.
What factors did you consider before deciding whether to purchase a new or a used car?
Do you strongly agree/disagree with a position taken by any of the personal finance bloggers?