the old "don't buy a new car" thinking

[Harp]

So have recently a guru named Dave Ramsay - dude that wrote Complete Money Makeover, etc. He also has a daily podcast that for anyone that is having money issues such as debt, give this guy a listen!

Anyways, sometimes I am thick as wood and things take a bit to sink in. One of them is this: for yrs the thinking has been DO NOT BUY A NEW CAR since it depreciates so much in the first couple of yrs. Fair enough. But why? If someone, like me, who just bought his first brand new car in Sept and I plan on caring for my baby for the next 10+ yrs.

So, according to Dave, one should buy a car that is just coming back from a lease, say 2 yrs old. But if some idiot leases and knows they are giving it back, do you really think they drove it carefully or gently? Its like buying a car from Enterprise or Budget Car Rental. Lord knows when I rent a car I drive it differently then if it was my own.

Just looking for some clarity on this.

[stardancer]

I don't look at vehicles as 'investments', but as 'why do I need this?'. When my husband was using a vehicle as part of his work (he had to go on some pretty rotten back roads), we bought used, ran them to the ground, then bought used again. As soon as I felt the car was becoming unsafe, or too expensive to maintain, we would pick up another one. But, my retirement gift to myself was a brand new car; we are both retired, drive differently and so far have kept the car for 7 years. Again, as soon as I feel the car is breaking down, we will trade it in.

A car serves a purpose in one's life and that's all.

[brad]

I think the depreciation issue isn't so much related to viewing a car as an "investment," but rather the fact that if you buy a car that's even only 1 year old this depreciation works in your favour because you pay a lot less than if you bought it brand new. I hope nobody thinks of their car as an investment (I suppose certain antique, rare, and sought-after cars increase in value over time, but they're the exception).

Note that while Dave Ramsey has many admirers and lots of people have turned their finances around on his advice, I think you'd do well to completely ignore anything he says about investing. Just focus on his debt-reduction advice; even that is controversial but it works for many people.

[avrex]

I'm buy-and-hold when it comes to cars.

I have never bought used. I buy new and then drive it until it can't be driven anymore.
My last car I bought new for $21,000 and drove it for 14 years. That's $1500/year plus maintenance. That's pretty cheap.

I guess everyone has their own personal preference on this issue.

[Harp]

Oh don't get me wrong - I never view a car as an investment, unless its a '57 Chevy or a '69 Chevelle.
I got my brand new car because I was basically fed up with having 2 older cars and it seemed every mos it was always repairs, repairs, repairs.

I thought - will keep the one car as a winter beater but have a new car that will last at least 10-15 yrs and one that I can rely on. Maybe a knee-jerk reaction. Who knows.

I literally always thought that having a car pymt was the way "its" done. Wow was I wrong.

[Toronto.gal]

I'm buy-and-hold when it comes to cars.

I'm 'buy-and-hold' when it comes to just about everything that works/looks well, but I typically don't buy used stuff, hence things last longer, though I don't see much problem buying a solid 1 or 2 year old car, especially for those who like to update every 4/5 years.

I hold stocks, too [but no way that I sit quietly on long-term volatility].

[m3s]

A brand new car may be worth the extra cost for you based on lifestyle, safety, convenience, enjoyment etc etc etc. There is absolutely no point trying to justify that a brand new car is a smart financial decision, because it just isn't. Of course buying a beat up lease or rental is worse (if you don't use that to lower the price significantly), but there are plenty of great deals on used cars that were driven by grannies etc and there are far more reasons why they are cheaper. You can research known issues on used cars, source parts much cheaper, insurance premiums are a fraction of the cost and of course avoid the biggest depreciation hit.

I think the biggest financial mistake of new cars if buying one before you can afford it. Let's say you borrow $30k for a new car and pay $500/month. During that 5 years, you must pay higher insurance premiums to cover the risk of totaling a $30k car you can't afford to replace plus the cost of borrowing money etc. If, on the other hand you saved $500/month for as long as you could to buy a used car or took at 1 year loan to buy a car, you will get much further ahead financially over the 10 years. Besides avoid investing fees and taxes, driving a used car is probably the best way to save money however just like avoiding taxes and investing fees it takes more effort and know how to do.

Most people borrow money to buy a nicer car and save a little to invest. This is completely backwards imo. Saving up what you can to buy a car (same as a car loan payment) and borrowing to invest is far better financially speaking. The car just may not suit your lifestyle as much, but I find I can afford much nicer used cars every so often (and on average it's actually a newer car than driving a new one for 10 years as well)

[Harp]

What about the old saying, though, that buying used you are are also buying someone else's problems re: ton of repairs, lemon, etc.?

[Toronto.gal]

What about the old saying, though, that buying used you are are also buying someone else's problems re: ton of repairs, lemon, etc.?

A brand new car could give same problems as a 1 year old, no?

[brad]

I've bought a couple of new cars during my life because I felt it was important to me to know my car's history (to know that it had never been driven abusively, that it had been maintained according to schedule, etc.), but the advantages of that approach are purely psychological and not based on any evidence. The reality is that any car can come with or develop problems, whether new or used, and you take a risk no matter what strategy you pursue.

The first car I bought new was a 1990 Honda Civic that I kept for 10 years and drove 250,000 miles (402,000 kilometers). It was reasonably reliable but I had a few big-ticket repairs (new steering rack, for example) in addition to all the usual maintenance. I sold it after 10 years to a family of four who drove it another 100,000 kilomters (160,000 km) and they had absolutely no problems with it during that time. They got the best deal of all from that car, and I sold it to them for only $350 since it was so heavily used. They actually ended up selling it on to someone else after that.