In the never-ending quest to convince myself not to buy a new car, I had a revelation. Of course, it was from other frugal friends and blogs repeating it over and over until it sunk in:
Your cheapest new car is the one you already own
Granted, there’s a disclaimer that if you bought a $500 clunker and you’re spending thousands per year to keep it running, it’s time for an upgrade, but consider the following:
- When I say “time for an upgrade”, it might be a $1000 “commuter car” rather than a cheaper clunker, if you can even find those anymore. I don’t mean go from a 1990 Ford Escort with 200,000 miles to a 2012 Ford Mustang GT500.
- Compared to a NEW car (not a used car), the money that you spend in payments, interest, or even cash if you pay in full, is going to be significantly more than most things you would buy for your car (unless you’re driving luxury German or Italian car), including a transmission and even a new engine. Seriously.
- If you’re swapping in your gas guzzler for a smaller, more efficient car, you’re an idiot. That’s unless you bought your guzzler used and someone else took the big depreciation hit, but with current prices, you’ll still take a hit. If you’re trading in a newly purchased vehicle (1-3 years old), you’re going to lose a chunk on depreciation right off the lot plus a lot because people are shying away from guzzlers.
If you own your vehicle(s) outright, like I do with my 2006 Honda Ridgeline and 2007 MINI Cooper S, and you keep it maintained regularly, it can last 10-15 years easily. And if you follow the news, owners are keeping their cars for a record 10+ years on average. I wonder if they’re just using average age of vehicles registered on the road to get that number because I can probably name 1 out of 10 people who actually have owned their car 10 years or more. I’m at 6 years this month with my truck and that’s a record for me.
Now, let’s throw out another disclaimer about my statement that what you got is cheaper than what you could buy new. If you own something you can’t afford, it’s not worth keeping. If you bought a BMW 5 Series but can really only afford a Chevy Sonic (it’s a good car by the way), then you might want to try to sell it on the market, take the depreciation hit and get yourself into a more affordable vehicle. If you can’t afford paying off the remainder of the loan (cause you won’t get what you owe on it), you might be stuck negotiating on a trade-in, but saving $30,000 or more on a car is usually the more economical thing to do, even if if it hurts and you have to pay off the depreciation for some time.
Here are other bonuses of keeping your car:
- You know it’s history
- You know it’s strengths and weaknesses (like how it rides in bad weather, etc.)
- If you’re thinking about a new car because it has a flashy multimedia system, you can spend much less on buying one on the market and installing it yourself or at an expert center. New wheels? Cheaper to buy outright. New paint color? Cheaper to repaint the car. However, put them all together and yes, it might be cheaper or smarter to get a new car.