new car or used car advice

See the many benefits of buying a new car versus a used car

For most of my adult life, I fell for the adage to get the most out of a car purchase:

“Buy a slightly used car and run it into the ground.”

This sounds like sage financial advice…

But the reality is buying a used car is often more expensive than buying a new car.

I ran cars into the ground twice in my life – driving almost 250,000 miles on each.

Crunching the numbers shows used cars can be more expensive than new cars

I would never buy a used car again.

Because when I arm myself with a calculator, a little knowledge and an open mind, I discovered this:

It is actually cheaper to buy new cars than used cars… especially nowadays.

This is not advice on buying a new car vs a used car…

I avoid giving advice.

Because your situation is probably different than mine.

Instead, I am revealing why buying a new car is always the right move for me and my family.

When deciding between new and used cars, there are hidden factors to consider

Yes it is true…

The sticker price on a brand new 2015 RAV4 Limited is more than the same model with 15,000 miles on it.

But there are many different hidden costs I consider when choosing between a new car or a used car:

  • Gas
  • Maintenance
  • Repairs
  • Insurance
  • Opportunity costs

In the past, I was guilty of not considering these hidden costs of owning a car – whether new or used.

And as a result, I actually paid out more money “driving the car into the ground” than buying a new car every few years.

Gas is more expensive in a used car

Used cars slowly “leak” fuel efficiency the longer we own our cars – especially when we do not keep up with regular maintenance recommendations.

And these “leaks” combined with the high price of gas adds up quick.

I just checked:

My new 2015 Toyota RAV4 currently averages 25.3 miles per gallon. (And this should improve a bit once I surpass 5,000 miles driven).

And my other 2011 Toyota RAV4 currently gets 23.9 miles per gallon.

This might seem like a tiny difference…

But when I paid over $4.00 per gallon for gas (and drove 42,000 miles a year between the two cars), my older car cost me over $600.00 extra dollars in hidden gas costs.

And the difference is going to get greater over time…

Because in 2012, the US government announced it will increase fuel-economy standards to 54.5 mpg for new vehicles by model-year 2025.

When I choose a car, the cost of gas is always part of the cost of buying a car…

And this nifty lookup site offers up-to-date fuel economy information on every model car:

New cars cost less to fix and maintain

This online lookup site shows the average cost of maintaining and repairing any model car.

For most cars, maintenance and repairs skyrocket once the car is 3 to 4 years old.

Not only do these hidden costs add up quick…

It also kills our cash flow.

Used cars usually include big-time, nasty surprises

Buying a used car always come with the risk of a whopper of a repair bill.

There is nothing worse than finding out we need a new oil seal, a new alternator, a new oxygen sensor – or worse, a new expensive transmission…

Get this:

My wife’s best friend just celebrated paying off her expensive new car…

Soon after, the transmission stopped working. It was toast.

She towed the car for a fix. And the repair estimate was over $9,000.00. She did not want to sink a ton more cash into her used car…

Then came the really bad news…

Her just-paid-off car was worth virtually nothing…

A Subaru dealer gave her $500 towards a replacement car.

New cars costs much less to maintain and repair

We have not paid for maintenance in more than a decade….

We have not paid for repairs in more than 15 years…

That is because we continually trade in our 2- to 3-year old cars for brand new cars. And new cars include free oil changes, maintenance and repairs…

The only cost is tires, brake pads and a few oil changes. After that, that is all.

Buying a used car is a big gamble

Most used cars are for sale because they have significant, underlying issues:

– Used cars begin to “nickel and dime”… plunging the value of the car.

– And/or their car needs an expensive repair, and they do not have the cash flow to foot the bill…

– Or their car is beyond repair and do not mechanically trust their car anymore.

In the vast majority of cases, buying a used car has merely inheriting other people’s problems.

But it gets worse:

Dealerships resell “pigs”

Used car dealers aim to invest about $1,000 into each vehicle to be resold – no matter whether it is in good or bad condition.

These used car dealers put “lipstick on the pig” – mostly on cosmetic improvements… not fixes or repairs.

Filling scratches, removing stains on seats, and new tires quickly add up to a used car dealer’s budget. This leaves little room for fixes under the hood.

This is why used-car warranties are typically just 60 or 90 days (compared to many years for a new car).

Is insurance for a used car cheaper than new car insurance?

If a myth is repeated often, it becomes perception and reality.

And one common myth is that new-car insurance costs more than used-car insurance.

Car insurance premiums are highly related to the likelihood of a theft.

And the most-stolen cars are models with parts that have not changed much over the years.

Why?

Because people steal their car of the parts and resell them.

Year after year, the most-stolen cars include mid-90s Honda Accords and Civics, early-90s Toyota Camrys, and slightly later Ford F-150s.

As cars age, their replacement parts become harder to find – thus forcing the cost of insurance to rise.

Safety counts for car insurance companies, too:

My 2015 Toyota RAV4 is DRAMATICALLY safer than the same car from just two years ago. As a result, my insurance rates nudged up just $8 a month (even though it is a brand new car).

In the end, most of our car’s insurance premium is based on how safe we drive…

A clean record is what gets us the lowest car insurance rates – not as much the age or mileage on the car.

New car opportunities

Let us be honest, shall we?

New cars give us opportunities that used cars do not…

For example, as soon as my cars exceeded 150,000 miles, I no longer felt comfortable returning from a distant trip.

A lot of times, my car sputtered and stalled out without warning. And this seemed to happen on Sundays (when most repair shops close).

New cars eliminate stress. We jump into our new cars and go. We never think about dead batteries and stalling. The high, hidden cost of stress is eliminated in a new car.

Whether it is fair or not, other people judge us by the new cars we drive – everyone from bosses to new friends – even the police take notice.

A new car helps our egos. It gives us an extra boost of confidence. When we meet with friends and family, we feel good about ourselves…

On the flip side, picking up people in a used car was a bit embarrassing – even draining.

Here is the punchline about buying a new car vs a used car

I am not naive.

I know that we are always paying to own a car.

If it is a new car, we make payments to the finance company…

If if is a used car, we pay off the car and pay for maintenance and repair bills instead.

Either way, the car company has their hand in our bank account.

In the end, the math tells me new cars costs a little less to own as used cars over our lifetime.

As a result, I choose to drive new cars.

Published by

Markus Allen

Family man. Truth seeker. Life hacker... more about me here...

 


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