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?
Want FREE help eliminating debt & saving your first (or next) $100,000?
Money Under 30 has everything you need to know about money, written by real people who've been there. Enter your email to receive our free weekly newsletter and MoneySchool, our free 7-day course that will help you make immediate progress on whatever money challenge you're facing right now.
We'll never spam you and offer one-click unsubscribe, always.