True penny pinchers always buy used cars over new ones for one rock solid reason: new cars depreciate by thousands of dollars the second you drive off the lot. But three years ago, before my financial epiphany, I bought a new car, and I don’t regret it. I concede that buying used is usually best, but there are times buying new isn’t as bad as some say.
To understand how I arrived at the conclusion it is sometimes OK to buy a new vehicle, you have to understand that I went from thinking I was being smart buying a new car, to deeply regretting it, back to being at peace with the decision after all. Talk about a flip flopper!
But before I justify owning a new car, let me recap the advantages and disadvantages of buying a new car or a used car.
Advantages of Buying a New Car
- Factory warranty
- No previous owners (and unknown accidents or mechanical incidents)
- Low financing rates usually available
- Few maintenance costs for 2-3 years
Disadvantages of Buying a New Car
- More expensive
- Immediate depreciation
- Unknown reliability for model year
- Higher tax and insurance costs
Advantages of Buying a Used Car
- Less expensive
- Slower depreciation
- Lower tax and insurance costs
- Reliability data available from Consumer Reports, etc.
Disadvantages of Buying a Used Car
- Unknown accident and mechanical history
- Higher financing rates
- Higher dealer markup
- Higher maintenance costs
On paper, the new vs. used debate seems fairly balanced. Financially, however, one can usually prove that buying used will save you a lot of money – even when markups, interest rates, and maintenance costs are factored in.
Why I Bought New
I admit my new car purchase was driven by the frustration of 10 years of driving used cars. Not just used cars, but 10-15 year old, 150k+ miles, USED cars. The kind of cars that I prayed would start each morning, and the kind of cars that I prayed didn’t just die on me driving 75mph down I-95. And they were the kind of cars that did not start many mornings and often did die on me driving down I-95.
When it seemed like I could afford a car payment, I jumped at the chance to buy a brand new 2WD Toyota Tacoma pickup. It had utility, excellent reliability ratings, and was a 4-cyl 2WD model, so it still got decent gas mileage. It seemed like the perfect compromise between practicality and the itch for a new car.
Why I Started to Wish I Bought Used
For the first six months, I was ecstatic with my decision. You don’t second-guess yourself when you still enjoy that new car smell each day. And then, while I was parked on a suburban street, somebody swiped my driver’s side door and left a softball-sized dent.
I was a wreck. I am embarrassed to admit, I was a bit attached to my truck back then. But I had dealt with dings and dents before. And I knew people who drive around Boston and get a fresh bruise on their car every single day! I was so upset, however, because this was still a brand new car!
That’s when I started to realize the futility of trying to protect a shiny new car, and the drastic effect actually driving a car around (dings or not) sends the car’s value plummeting.
Why, Ultimately, I am OK With Buying New
Eventually, I decided not to repair the dent. My insurance deductible is $500, and I estimate it might cost $1,200 or so to repair if I did it on my own. If I ever thought I would resell my truck, I would have to get the repair, but I decided to drive the truck into the ground. The dent doesn’t affect the body or drivability of the truck in any way, just cosmetics, and $1,200 – even $500 – for cosmetics, especially on a “truck”, seems silly.
The reason I know I will never trade my truck in or sell it is that I drive way, way too much—more than 25k miles a year. I figure if I drive for eight years and 200k miles, it won’t be worth anything and I will replace it.
For somebody who drives as much as I do, and who is OK with driving one car for 8 years, I think a new car ultimately made sense. I wouldn’t be able to get 200k out of most used cars, and I would start hitting costly maintenance much sooner given how much I drive.
I expect that when my life settles down a bit I will drive much less. At that point I will probably buy my next vehicle used and – hopefully – pay cash!
What About You?