Is buying a new car not frugal? Is it wrong to spend money on a new car? Not minimalist? I don’t think so. Should you buy a new car? I think most people should. There is a lot that goes into buying a car and many people that want to save money only buy used cars. Is that the right option? I don’t think so. I think you should take another look at that new car you have been wanting. I think it might be the best option for you. Let’s Look.
I recently traded a one owner 2002 4Runner with 300K miles in for a new 2017 Honda Civic Hatchback. I will keep this car until it either stops running forever or hits around 300K miles. My parents went through two new cars when I was younger and didn’t get rid of them till they stopped running. There are many things you need to think about before you get a new or used car.
Price Over Time:
According to Edmunds, the average used car in 2016 cost $19,189. While my car is not top of the line, I paid $26,500 for a 2017 Honda Civic Hatchback EX-L Navi. According to the IHS Market, the average car on the road is 11.4 years old and people owned cars for 6.5 years before selling them or trading up. Assuming you will be like 12% of new car owners and keep the car for the long haul, lets look at the math.
- A used car that is 6.5 years old only has (on average) 4.9 years left before it stops working or gets traded in. If you pay $19,189 for that used car, just the payments over the life come out to about $3,900. Even if you keep that car for 10 years you still “pay” about $1,900 per year.
- My new car costs $26,500 when I purchased it in December of 2016. If I manage to keep it for 15 years like my last car, then I’ll end up with about $1,700 going out of it per year. If I’m like the average owner, keeping it for 6.5 years, then it’s outrageous at about $4,000 per year.
What to think about?
– Do you plan on keeping your car for a few years or the life of the car? If you keep you car for the life of the car, then the price you payed for the car becomes less over each year you have it.
– Do you want to resell the car without loosing most of the value? If you really care about the resell value of the car, the a new car is not for you. If you don’t care about the resell value, then a new car is still in the frame.
– Are you in a stable job? If you are not in a stable job then a new car might be hard to pay for. If you are in a stable job with little to no chance of change, a new car is much easier to pay for.
– Do you need a fill out your credit score? Do you already have a good score? I didn’t have any credit when I got my new car and because of that, the interest was awful. If you can’t afford this interest, then a used car might be better. However, if you are looking to build some good credit while also getting a good long lasting car, a new car is perfect. On the other hand, my father’s credit is so good that the interest on any new car he gets is less than the interest eh gets from his savings at the bank. In that situation you can take as long as possible to pay off the car, making payments easier.
If you get your car from a person, you probably won’t have a warranty of any kind. If you get a used car from a dealership, you could have a good one or a bad one. If you get a new car, you will usually get the basic warranty, or nice if you pay extra. The important thing to remember here is that if something goes wrong on your car you might not have the extra money to fix it. With a used car, you may be out of luck, with a new car, for at least 5 years, you’ll probably be completely covered.
What to think about?
– Can you handle the problems that might come up with a used car? If you have a used car, the car is already closer when things that go wrong and need replacing. If you have a new car, then most basic things that go wrong are still miles and miles away, and if they do go wrong, warranty covers them for a long time.
Regular Maintenance & Gas:
Regular maintenance is the same for a new or used car now days. When it comes to gas, my old car got about 17 miles to the gallon, my new car averages anywhere from 34 to 40 depending on how and where I drive. The savings on gas along is tremendous.
- MadMan has a 2007 Ram 1500 that gets 17 mpg average.
- My Parents have a 2015 Ran 1500 that gets 26 mpg average.
- If they both drive 300 miles and pay $2.00 per gallon:
- MadMan will pay about $35 for the trip
- My parents will pay about $23 for the trip
- That’s $12 extra. For most people, (driving 1000 a month) that $40 extra a month. An extra $480 per year plus interest to add to your Financial Independence goals.
My case was a bit more extreme, I went from spending over $200 on gas a month to spending less than $100, though my mpg pretty much doubled.
Tech & Other Factors:
Tech on a newer car can be life saving. Tech on a newer car can also just be for fun. My new car has all around air bags, but it also has an amazing sound system. My old car was also pretty good, but it was a bit lacking as it only has 2002 tech to go on.
Simple things you forget about. Leather seats. Newer cars have leather seats more frequently than older cars. It was something I was not willing sacrifice. Over the life of the car, my leather seats will end up in much better shape than the clothe seats would have.
In December of 2016 I got a Honda Civic Hatchback EX-L navi for $26,500. I, with my father’s help, put down $12,000 via selling both my car and my recently passed grandmother’s car along with some extra. My car costs more than all used cars and is rather nice for a person of my age; however, I plan on having my car for the next fifteen years at least. By the time that I get rid of my car, I will be at least 35.
I think my choice was frugal. I think that in the long run I will save money. I think, if given the choice again, that I would for sure get the car I have. We’ll see as time goes on. I’ve already had my issues with this car, however, they have all been covered so far.
Getting a car is a big choice. If you live in a city where you can live without a car ( Like New York or Portland) that is the most frugal choice. If you don’t have money saved up for a new car, try getting a used car. If you are trying to be your most frugal, you should look at what option will give you the most money saved.
Update August 2017:
The civic has almost 8k miles on it in about 8 months. We’ve taken a few road trips in her and we have saved over $100 a month in gas! We drive this predominantly and leave the RAM for when things will get messy. Getting a vehicle good on gas was the best decision we could have made.