Drive Free, Retire Rich

[Red Storm]

I'm 23 and have only bought one car so far in my life. Got it new, $19k loan with a 1.9% interest rate. If I were a mechanic and/or skilled with car repair I would definitely be more willing to buy a used car, but I'm not so I didn't.

 

[bignateyk]

I'm 23 and have only bought one car so far in my life. Got it new, $19k loan with a 1.9% interest rate. If I were a mechanic and/or skilled with car repair I would definitely be more willing to buy a used car, but I'm not so I didn't.

Just because you buy a used car doesn't mean you are going to be spending all kinds of money getting it repaired.

We bought a used Jeep with 40K miles on it and in 6 years we haven't had to do anything other than routine maintenance.

 

[Red Storm]

Just because you buy a used car doesn't mean you are going to be spending all kinds of money getting it repaired.

We bought a used Jeep with 40K miles on it and in 6 years we haven't had to do anything other than routine maintenance.

Yeah it's hit or miss of course, but I think it's a pretty safe bet that a used car with thousands of miles on it is a bit more likely to require part replacing/repair than a new one. IMHO.

 

[Blackjack200]

Yeah, I've been driving used cars for almost 10 years and never really had to do anything major with any of them. Biggest thing I did was put a timing belt in a Volkswagen after about 150k miles because it was WAAAY overdue.

 

[overst33r]

I'm 23 and have only bought one car so far in my life. Got it new, $19k loan with a 1.9% interest rate. If I were a mechanic and/or skilled with car repair I would definitely be more willing to buy a used car, but I'm not so I didn't.

99% of the time, the depreciation you eat > repairs on used car. buying a new car rarely makes sense.

 

[Blackjack200]

99% of the time, the depreciation you eat > repairs on used car. buying a new car rarely makes sense.

Well, that used to be true more than it is now. Have you seen the prices of used cars? I'm considering buying a new car for the first time in my life.

 

[overst33r]

Well, that used to be true more than it is now. Have you seen the prices of used cars? I'm considering buying a new car for the first time in my life.

i have. it's a bit ridiculous for some cars, but it depends on the car. if you're looking for a lightly used barebones economy car, then buying new makes more sense. midsize sedan? used all day.

 

[oznerol]

I was brought up with the mentality in the presentation - buy used, save, etc.

However, the times and markets are changing, and the "always buy used" method of thinking isn't always the best anymore.

Used cars are holding their value more and more. The difference in price between, say, a new Corolla and a 2/3 year old used one is shrinking every year. You'll save maybe 2-3k (18k new vs 15k used)?

Add that to the fact that new cars often have extended warranties and incentives - and interest rates are fairly low these days (0% with some promotions) - and there's valid reason to consider buying new.

And leasing is another thing I grew up vehemently opposing, but even that has its merits. If you're comfortable in your monthly car paying lifestyle, can deal with mileage restrictions and car wear & tear, and don't want to deal with any maintenance aside from oil changes, it's not a bad way to drive consistently comfortable.

 

[NoCreativity]

At 0% you could have invested the principal you didn't spend up front and probably could have made more than 0% (in before "my returns the last 10 years are -83%").

As someone pointed out earlier, that 0% usually comes at the cost of a cash rebate of x thousand dollars. So you may make more than 0%, but is it enough to cover that rebate you missed out on?

Well, that used to be true more than it is now. Have you seen the prices of used cars? I'm considering buying a new car for the first time in my life.

I could sell my car for about the same price I paid 18 months ago. But then I'd have to buy another so I really wouldn't gain much other than a few k miles and some warranty.

 

[GotIssues]

Yup I'm amazed how even at dealerships preowned certified are just as expensive as new cars. I was looking at a tacoma and told the guy "Wow, for an extra 1K, I could get a similarly equipped new truck! There isn't a feature on this that the others lack!" and he looks at me, smiles, and says illogically "But this one has already depreciated, its preowned certified"

My wife and I were looking for small SUVs (last winter in Minnesota, with a Neon and a Civic was not fun), and found the same thing in CRVs and Rav4s.

I honestly wonder how long the inflated used prices will last. It might be semi-permanent (10 years+).

I could sell my car for about the same price I paid 18 months ago. But then I'd have to buy another so I really wouldn't gain much other than a few k miles and some warranty.

The point is you are gaining after driving your car for 18 months. Non-collectible cars aren't supposed to appreciate in value, but they have/did. The used market is super inflated, making buying new a much more attractive option.

 

[AMDZen]

Dave Ramsey is a fucking nut case, even if he's right about this - he's wrong the other 9 times out of ten

 

[AstroManLuca]

i have. it's a bit ridiculous for some cars, but it depends on the car. if you're looking for a lightly used barebones economy car, then buying new makes more sense. midsize sedan? used all day.

That's what pushed me into buying a new Honda Fit in 2008. I actually regret it now though. I would have rather spent $10,000 on a used midsize sedan than $15,000 on a new economy car. At the time, I was looking at Mazda3s and most of them had nearly 100k miles and were still selling for $13-14k. So I figured I'd just get the best cheap economy car brand new.

Looking back though, there were a couple problems. One was that at the time, gas had gone above $4/gallon so compact car prices were inflated while the less fuel efficient midsize cars were cheap. The other was of course that I just didn't do enough research.

I don't think I'll buy another new car again. I guess I'm glad to own a car during its best years (the first 50,000 miles are always the best 50,000 miles), but it's not a great car and I'm kinda pissed that I spent this money on something that I don't love. Hence why I'm averse to dropping more than about $10k on anything.

 

[AstroManLuca]

My wife and I were looking for small SUVs (last winter in Minnesota, with a Neon and a Civic was not fun), and found the same thing in CRVs and Rav4s.

I honestly wonder how long the inflated used prices will last. It might be semi-permanent (10 years+).

Probably will be. Small SUVs are in huge demand, especially around here. Everyone wants them for the snow but they don't want the poor fuel economy of a large SUV. My parents sold their 2002 Subaru Forester (low miles, around 40k) for something like $13,000 last summer. They listed it and got the full asking price within a day. They were just glad to be rid of that unreliable POS.

 

[magomago]

That's why you don't buy used cars from a dealer

yup - going private party now

 

[DrPizza]

The point is that even at 0% interest you are making a payment instead of saving the money.

I'm not quite sure what your point is. If you have $10,000 in cash, ready to spend on a vehicle, but are offered zero percent financing, then you'd be a fool not to take it.

1. The balance of that 10k can earn interest for you while you're slowly deducting from it to make payments. Thus, you ARE saving money.

2. You're paying for the vehicle with tomorrow's dollars - ever hear of that thing called inflation? Unless we have deflation, then tomorrow's dollars are worth less than today's dollars.

 

[DrPizza]

Yeah it's hit or miss of course, but I think it's a pretty safe bet that a used car with thousands of miles on it is a bit more likely to require part replacing/repair than a new one. IMHO.

I may be mistaken - probably a good question for the garage forum, but I've been under the impression that brand new is more likely than after a few thousand miles - and then, it starts increasing again as the mileage starts going up. i.e. number of repairs 0 to 1000 miles is more than the number of needed repairs 1000 to 10,000.

 

[sygyzy]

I've known this since about 12 (thanks Dad). Never had a car payment never will. Too bad he doesn't take it to the next level and talk about what a rip off full coverage insurance is on your cash vehicle.

Can you expand on the full-coverage insurance comment?

 

[alkemyst]

Can you expand on the full-coverage insurance comment?

Cars less than $1000 or having several thousands in the bank and the car worth less than a year's premium.

Most of the time full coverage is actually cheap IMHO for the value of the car.

 

[Dr. Zaus]

I'm not quite sure what your point is. If you have $10,000 in cash, ready to spend on a vehicle, but are offered zero percent financing, then you'd be a fool not to take it.

1. The balance of that 10k can earn interest for you while you're slowly deducting from it to make payments. Thus, you ARE saving money.

2. You're paying for the vehicle with tomorrow's dollars - ever hear of that thing called inflation? Unless we have deflation, then tomorrow's dollars are worth less than today's dollars.

1: Only if that deal was on a used auto and didn't change your bargaining ability for the car. Otherwise the bargaining/used-devaluation costs must be added as prepaid expense.

2: If you go into payments for a car you don't have the money for already then you don't have the money to invest. As such you don't have an opportunity cost of investing 10k at this moment or putting it into a car: you have the opportunity cost of getting into unnecessary debt at this moment which will preclude you from obtaining the 10k to invest.


So, yes, if you have 10k to spend on a car but you go into 0% debt that costs you nothing-at-all in bargaining/used-choices then you are marginally better off taking the payments.

But the likely hood is that you don't have 10K in your pocket and so you will take out a loan for a car you don't need (even at 0%) which will cost you the interest you would have earned on saving the payments; Further 0% interest is likely to come with strings-attached "only these cars (new)" or "only this price-level of cars (used)", or simply the psychological stance "I need to barrow to get the loan, so I can't negotiate with them to hard", or simply the psychology on the other side of the table "wow, this guy has a role of 100s ready to go... I want those 100s... GIIMY!".