why we’ll never buy a new car and neither should you

why we’ll never buy a new car and neither should you

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When Mer and I first met I was 22 years old. At the time, I was a poor university student, obsessed with all things material and downright impressed by Mer’s cool set of wheels. We met in the month of April and Mer had just purchased his first vehicle: a brand new SUV. He treated that truck like his baby. He washed it weekly and pampered it like a proud papa would. To the outside world it looked awesome, impressive even but what no one knew was the ugly truth that that truck was costing Mer nearly 700$ a month for 5 years. Holy hell – that’s a ton of money right?

Frugal math tells me that the truck with interest cost Mer nearly $42 000!!

I think the notion of buying a brand new car is something of a right of passage for a young adult right? Your first car in some respects is a right of passage into adulthood and bestows freedom and adult responsibility for perhaps the first time. But, what freedom are you actually acquiring for yourself when you’re obligating yourself to hefty monthly payments for a good part of your immediate future?

That truck stuck around for nearly 10 years. Once he finished paying it off (5 years after we’d met) he opted to keep it and “drive it into the ground” so that we could avoid committing ourselves to a new costly car payment. During that time, we got married  and moved into our first apartment as a couple and our bills started to pile up and a new car payment was simply out of the question. Eventually, we did trade in the truck against a smaller fuel efficient 4 door sedan. It might seem crazy but financially it made more sense. The truck was starting to break down requiring costly repairs and fueling it was becoming extremely pricey with rising gas prices. At one point when gas was at its highest we were spending around 100$ to fill it up each time. Mer commuted a good distance to work and back so keeping the truck running was actually costing us more than it would to replace the truck with a used fuel efficient car.

This time, we opted to buy a new used car. We went into this transaction with the mindset that we wanted to buy a reliable, fuel efficient used family vehicle. Our goal was actually to spend 30% less than what we knew we could afford. Essentially we applied the principle of buy less car than you can afford when test driving and perusing potential vehicles.

Why buying used is the only way to go

New cars are a horrible investment of your money: did you know that in the first year of owning a new vehicle it depreciates by nearly 22%. So if we employ some frugal math a car that you paid 25k for will only be worth 19500$. Scarier still is that once your car loan is up say 5 years later the car has probably lost more than half its value. So, that brand spanking new set of wheels you paid 25k for is probably only worth 12 500$. So if we analyze this even further it means that roughly halfway through your car loan you’re essentially flushing your monthly payment down the toilet because by the midway mark you’ve essentially paid in what the car will be worth to you at the end of the term.

Warranties will expire well before you pay off the car: According to consumer reports the average car loan is 60 months or 5 years. Most cars however only provide you bumper to bumper warranties for 36 months or 3 years leaving you with a hefty car payment for 2 years and absolutely no warranty to cover issues that might arise. Most people claim that they buy a new car to avoid the headaches associated with a “used” car. Sure, some used cars are lemons but so are some new ones and ultimately it’s a risk you take whether you buy new or used.

Used cars are simply a better value for your money: Let’s get one thing clear. Cars are a waste of money but a necessary evil for anyone who has a long commute. They make our lives easier and although we could all technically use public transportation or other means (hi bicycle) to get to where we need to go having a car has become somewhat of a necessary to the average north American family. Buying used not only saves you a heap ton of money but can allow you to reap the benefits of a nearly new car at a fraction of the cost. Our frugal advice would be to shop for a car that is in the 3-4 year age range so that it likely has had only one owner, was covered by warranty and has low mileage. Remember the depreciation talk above, well hunting for a car in this age range almost guarantees that the bulk of the depreciation was assumed by that first guy who bought the thing brand new.

Buying a brand new car is one of those things that I think everyone does once at some point in their life. You get this brand spanking new vehicle and by the time you’ve paid for it you hopefully realize that you’ve wasted a ton of money on a vehicle that you could have easily bought used. We’re a frugal family so we’ll never buy another new vehicle – we’ve been there and done that and learned the hard way (hello 42k truck) that an expensive vehicle and consequently hefty monthly car payment don’t enrich our lives in any tangible way.

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Now tell me, have you ever bought a new car? Would you do it again?

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18 Comments

  1. June 7, 2017 / 9:43 am

    I bought my first new car two years ago and would never make the same mistake again. Not to mention I discovered about a year into driving it that I actually don’t like the car. The things that initially drove me to buy it actually bother the heck out of me now, like automatic transmission (I’d only ever driven stick until this car, and had my previous car for 11 years), “radar” cruise control – which has nearly gotten me killed several times – and the braking system if my car gets too close to another car. If I had to do it all over, I would buy a better car, but used, and still enjoy driving it.

    • June 7, 2017 / 11:00 am

      is it paid for?

      This is essentially the story most people tell me. They are either totally dissatisfied with the car or in way over their heads when paying for it. I think there’s a tendency to buy far more car than we really need ya know?

  2. June 7, 2017 / 12:02 pm

    Yeah, we only buy new if we can pay cash up front for it. I would never get a car loan! Of course not everyone can save up for a car before buying.
    On the flip side, having a new car means you pay basically nothing the first few years for new tires, repairs, new air filter, etc etc. You may pay a higher value, but buying a used car means you often have to start paying for tires, brakes, and miscellaneous repairs right away. That adds up!

    • June 7, 2017 / 4:32 pm

      Its a tough one alright, as you can sometimes end up buying someone else problem…..

      • June 7, 2017 / 4:34 pm

        We’ve had a very good experience. We had the car inspected and it checked out just fine. I should have mentioned it in the post but I highly recommend buying from a reputable used car dealer.

        • June 10, 2017 / 6:56 pm

          For sure, it does make a difference! When we got ours we also had a friend come with us who was really handy with cars and asked questions I would never have thought of like the timing belt etc…..

  3. June 8, 2017 / 11:26 pm

    I totally agree with this! I’m a big believer in buying pre-loved cars and paying them off. My next goal is to buy in cash!

  4. June 13, 2017 / 9:45 am

    it’s kind of frustrating reading 100$ instead of $100 as a reader. just my 2 cents. thanks! good article and I agree 100%! dave ramsey preaches this too. also, buy a used car with cash you saved up from an individual, not a dealer.

  5. Cindy
    June 14, 2017 / 8:25 am

    It’s not the American way, but you shouldn’t buy something you can’t afford. So no car payments to worry over.
    Other point, you usually don’t buy a new car to drive it only two years, so telling us it’s not worth what you paid for it is weird. We buy a new car and exchange it after 6-8 years when it’s still worth quite a lot but you rolled back on the first depreciations and you don’t have expensive repairs yet. For the extra money, I drove a new car that won’t break down, is fuel efficient, up to the newest safety standards. Won’t trade that for second hand as long as I can afford it.

    • June 14, 2017 / 8:27 am

      Very good points Cindy. Unfortunately though people buy far more car thank they need and can afford.

  6. June 21, 2017 / 4:35 pm

    Hi Jenny! Thanks for the ‘like’. You are a girl after my own heart. I never have and never will buy new, and I’ve never had any serious problems cos I got them checked first. I love the idea of used and recycled stuff…and a new car loses $000’s immediately after you’ve bought it. jx

    • June 22, 2017 / 6:36 am

      Love finding other frugal minded people! Welcome to TTBH!

  7. June 22, 2017 / 11:21 am

    I’m a believer of this although I’m very wary of used cars sometimes. However, I don’t believe in financing new cars that are super expensive either. I also don’t believe in leasing car after car after car. Why would you want constant car payments that never go away? I purchased the car I have now brand new but I paid for it out right and will keep it until it falls apart. It has a 10 year warranty and I know I don’t have to worry about it breaking down on me. My next car will probably be a gently used one and I’ll pay for it in full too. I really do hate that cars are a necessity and such a money pit.

    • June 22, 2017 / 11:26 am

      Yup yup yup. I think that your approach is probably the best one. If you can buy it outright whether new or used your making a super wise financial decision.

  8. June 23, 2017 / 10:37 am

    I always had the mindset you shared. I went against my better judgement and bought a new car. MISTAKE! Your 3 points are very on point.

  9. June 27, 2017 / 5:59 am

    Hi Jenny, thanks for the like. Well, you know, someone has to buy new so that you can have a used car to purchase down the line! Like one of your earlier commenters I buy new, paying up front with no loan. I keep the car for five years to get the best use of it before trading it in for the next new model. (some people do that with wives!)

    • June 27, 2017 / 6:31 am

      Haha! That’s fair!

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