Does it ever make financial sense to buy a new car?

Question

All the financial gurus talk about how you should never buy a new car because it's a depreciating asset, but I recently did the math and saw that I've poured over $10,000 into buying, maintaining, and repairing two cheap used cars over the last 5 years and I only have a resale value of around $1500 to show for it on my current one. The best thing would be to not own a car at all, but I just can't do that where I live now. Does it ever actually make sense to buy an inexpensive new car instead of overpaying for a late model used one or driving old beaters that cost more in repairs than a new car would in depreciation?

Answer 1

Hello - Buy a car that is a few years old, not a really old one.  Or find one, like I did (took a while), that was a city livers weekend car, so very low mileage and most of that highway to the weekend house.  I bought that car for cash 9 years ago with 65K miles, its a 1991 maxima, runs great, i have put some money into it, new muffler, tires, battery, those types of normal things, but nothing serious.  Now that same car has 105K miles, runs great, and seems to be more valuable than it was before according to my mechanic because it has good parts.

So try to take the time to find the "right" used car to buy, the one that may be 3 - 5 years old, or older with low mileage and good maintenance records and go from there.  

New cars are great to have if you can buy them outright for cash, without spending your retirement etc., then the depreciation may not be as big an issue to you.  So rich people can and do buy new cars and can really afford to do it.  The rest of us should let them buy the new car, and then sell it to us after a few years for less than half the cost, when they have to have the latest newest car.  

good luck -

Answer 2

It depends upon your wants and needs and how long you intend to keep it.  If you drive 30,000/yr on business you want something comfortable and reliable and your customers may have more faith in you if you look successful.  If you just need something to get to work, you need something reliable, but not necessarily that fancy.

If you are going to keep a car for a long time you would know how a new car you bought has been maintained.  If you get antsy and want a different vehicle every few years, you would take a big depreciation hit buying a new car every few years.

My current car is a 95 Maxima SE 5-spd purchased new May 94.  It is now 14 years old and still runs great.  But there was a time after I bought it that I was deeply in debt paying for that.  My other vehicle is a 2001 Pathfinder purchased with cash in 2004 (3 yrs old) for half the price of a new one (~$14,000 vs. $28,000).  I let somebody else take the initial depreciation hit on that one.  It did have 99,000 miles on it when I bought it, but those were easy highway miles, and it still looks new and runs great.

So even if you are thinking new, you can get more for your money in a vehicle a few years old with plenty of life left in it before it becomes a maintenance headache.

Answer 3

I generally buy new but I keep them for as long as they can be reasonably maintained:  10 to 15 years.  The real losers are those who buy new and trade in every few years.

Answer 4

there is a happy medium...buy a car that is a year old that still has some warranty life left and don't buy an old beater.

Answer 5

Some people have good judgement about used cars, my approach has always been to buy new, maintain the car and keep it until large maintenance items start to occur.  We've had our mid-size SUV for 7 1/2 years and our hybrid for almost 4 years.

We save money each month for our next car so we can pay cash and we've been able to give away our last to cars to people in need.

Good luck and God bless!