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You Don’t Need a New Car

*This post may contain affiliate links, please see my disclosure

As I’ve been sifting through the blogosphere, I’m finding more and more that people are afraid of automobiles. And I get it. I used to be there. When I was 16 years old, I bought an old, crappy car for $1600 and it lasted less than a year. I didn’t even know where the oil dipstick was in the engine bay. It wouldn’t start after a while and I ended up selling it to a friend because I had inherited some money and could buy another vehicle. He ended up blowing up the motor on that car because he knew as little about cars as I did at the time.

What Vehicle Should You Buy?

I’ve been seeing a lot of articles pop up lately that have to do with purchasing a vehicle. This can be your first car, a replacement vehicle or just a newer car because your old one is getting high in miles. Living in a developed country, especially America, means that at some point in your life, you will probably own a vehicle to transport you to work, store, etc.  Since owning a car is inevitable (unless teleporters are developed soon [I’m looking at you, Science!]), you should probably know what you are getting into before dropping thousands of dollars of your hard-earned money into your transportation device.

And what is wrong with my current vehicle? If it still fits all of your needs but has higher miles or is in need of repair, you may end up saving yourself thousands in the long run if you just do a little maintenance yourself. If you absolutely cannot do that, have a buddy check it out or repair it for pizza and beer. If you don’t know anyone who can do that, price out a local repair shop with good reviews online. It’s still cheaper than replacing your car.

If you still think you need to buy a car, then you should commit to doing some homework before buying. There are tons of options to research your impending 2-ton purchase, including car forums and review sites like consumer reports and edmunds.com.  Personally, I open up the google machine and type in things like “common issues with (insert the car you want here)”. In 15 seconds, I can find common issues with the car I want to buy and know what to look out for and what to ask the seller. Here’s an example:

We are looking at getting a minivan, because we’re cool like that! We’re not getting very soon, but with our growing family, I wanted to do a bit of research ahead of time, because I like saving money and knowing what I am buying. I knew that I would probably want to look at a 10-year-old Honda or Toyota, because those are the vehicles I still see driving on the road. After one look at the older Toyota mini-van’s, I almost puked because they are so ugly, so we decided to look at the Honda Odyssey. I google’d “2001 Honda Odyssey common issues”. I went to the edmonds.com site (3rd link down) and found a long list of transmission issues. So now, when searching for a car, I am looking for a rebuilt or replaced transmission in the car. Just 15 seconds, and I just saved myself from breaking down on the side of the road and dropping a few extra thousand dollars on my minivan. It really is that easy!

You Don’t Need a New Car

New cars are horrible investments and a waste of your hard-earned cash. You will lose 10% of the value just driving it off the lot, and another 60% over the next 5 years. Not to mention that most people reading this blog can’t actually afford a new car at all. You will end up financing this depreciating asset that’s value is dropping faster than the IQ of a NASCAR fan. New cars are also unproven. Who knows? It might be a lemon or only last you a few years. Hopefully it would at least last you long enough to pay it off and waste all your money πŸ™‚ .

Still don’t think it’s a waste?

Let’s play with some numbers, shall we?

Average Cost of New Car – $28,860 -ish

Loan Term – 60 Months

Interest Rate  – 3%

Monthly Payment – $519

So you’re going to drop $519 a month for 5 years to buy this awesome, $28,000 car. Cool. Well, bummer, because your car is losing over 10% of it’s value every year. No worries, at least it’s an awesome car. Fast forward 5 years. Your finish dropping $28,000 on your car + $2,200 in interest to have your new car. During that time, your car dropped about 70% of it’s value. So you paid over $30,000 for your car that you can now sell for $8,400! Right on! If this were a stock that you invested in, I’m sure you would drop your entire nest egg in that hot commodity because with returns like that, YOU’RE GOING TO TAKE OVER THE WORLD. Don’t worry, I won’t depress you more with what your $28,000 could have done if you invested it, because hey, you didn’t even have the money in the first place! πŸ˜‰

Final thoughts

I have a ton more to say about cars, because I think they are one of, if not the biggest place where we can save money. We’re talking tens of thousands, maybe hundreds of thousands of potential dollars that you can keep if you start to make better purchasing decisions with your vehicles. I’ll put together a “How to Buy a Car” post, or even series coming up, but for now, I’ll sum everything up in this flowchart:

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

73 thoughts on “You Don’t Need a New Car”

    • This is the way to go. I’ll be putting together a car purchasing guide at some point, but just a tip; Make sure to pick a car that has a good track record (Honda or Toyota) and is not a complete redesign from the previous years. You want to know this car has been time tested by others and that you are not the first one to beta test the new design.

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  1. Old habbits die hard!.. Just picked up a 2012.VW passat diesel… 29k swapped payments from our 2010 VW CC .. On the upside were getting 40 mpg on daily driving and about 52 mpg on the highway!.. its pretty cool and we almost cut our fuel bills in half.. I have been driving like a grandma trying to squeese every mile out of each trip.. Never thought going so slow would be so much fun!. Thanks for letting me share budget dude!.

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    • Haha. At first I read “Old rabbits die hard!”. Which is a funny Volkswagen joke. Anyways….. Cutting your gas bill in half is impressive! The bummer is that your new car is losing more value than you are saving in gas, so it’s a bad investment, unfortunately. But if you drive the wheels off that thing, and it lasts more than 10 years, you’ll get your money’s worth. Plus you’re now “greener” because of diesel πŸ™‚

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  2. That’s a very clever diagram, I love it. Yep, there sure is a lot of money needlessly spent on new automobiles. Decades of marketing by car companies targeting our emotions and psyches have really done a job on us! I mean, people even yearn for the toxic brew called “new car smell”! Quite a marketing accomplishment when you think about it.

    The carshare cooperative I help run just bought a 2009 Pontiac Vibe with ~20,000 miles. I think we got a great deal (with the help of a supportive local dealership), it’s a perfectly nice car that will meet our needs well, and we saved thousands vs. buying new. I feel good!

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    • What’s carshare? That sounds pretty awesome. And you’re right, the marketing machine has definitely brainwashed the masses to live in a new “normal” of always having a car payment. I heard a commercial the other day “step up your vehicle, but not your payments…” which is how you waste thousands of dollars a year just to get from point A to point B.

      Also, did you know you are required to have comprehensive insurance coverage when financing your vehicle? I have a used car with only liability and not only save thousands on NOT buying a new car that loses a ton of value, not only save thousands on NOT having a car payment, but I save thousands by having only liability insurance. It’s a WIN WIN WIN deal.

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  3. Very nice diagram. Whenever I talk about getting a new car, I always clairfy “new to me”. I know some people swear by brand new cars, but that car payment and increased insurance just doesn’t do it for me. I may eventually have to have a small car payment but I hope not. We are trying to save up to get a new to us car as our current car cost us only $500 but on the flip side, it only cost us $500. So some of the repairs needed are just insane and only worth it if it is necessary (like tires/brakes). And the next new to us car, we want to plan ahead and get something that can be used as a family car. (I don’t know if that is weird or not as it won’t happen for another year or two)

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    • Nice work on the $500 car! My cars were $2000 and $1600. They both have over 250,000 miles and still run great. They also both get over 30 mpg! I love getting used cars because you can get all the options for so cheap. My $1600 car has leather seats, sunroof, power everything and a premium, higher HP motor. It’s a blast to drive, family friendly and super practical.

      I think it’s smart to plan ahead for a growing family. So many people wait until the last minute, stress out and make an impulsive buy instead of thinking it out, doing some research and buying ahead of time.

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    • Good to hear! I think people often confuse “maintenance” with “car repairs”. Maintenance should be expected and will extend the life of your car and save you money in the long run. Nice work on keeping the van for so long, you’ve definitely gotten you money’s worth….. (though, of course, I would have bought used πŸ˜‰ )

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  4. That’s a good strategy for researching reliability of the car you want to buy. I do the same when buying other products and services. So I’ll have to remember to do that when I need to buy a car again. I paid close to the amount you mentioned in your example for my new car and it was definitely a big mistake. Of course not all cars drop by 10% every year, but it is depressing to know how much my car has dropped in value since purchasing it.

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    • It’s weird that people will do research on many lesser purchases, but when dropping a buttload of cash on a HUGE purchase they prefer ignorance. I’ve definitely done that in the past for sure! But now I believe that you shouldn’t fork over any money for ANYTHING that you don’t understand.

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  5. Nooooooo not a minivan! Haha. I always tell my husband that I will NEVER drive a minivan because I don’t want that “suburban soccer mom” image. That’s just me though, and if it works for you go for it. πŸ™‚

    I held on to my 20+ year old car for a long time, and I’m very glad I did! After much research and saving, we finally purchased a 3-year-old car because we wanted something more reliable and safer for me and future kiddos. It was a large purchase but we’ve never had buyer’s remorse because we saved diligently and did thorough research beforehand.

    Good luck with your van search!

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    • Hah! Michelle lived in that same camp forever! But van’s are just SOOO practical. And the Honda’s aren’t too ugly either.

      Nice work on the purchase. That’s how it should be done! Buyer’s remorse will never happen to those who ACTUALLY UNDERSTAND WHAT THEY ARE BUYING! It’s so simple, but it seems to elude most people. I guess that truly is the power of marketing.

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  6. More flowcharts!! That really capped off the whole debate! I can only see buying a new car if the cost is magically lower than a used car, which is pretty much a diamond in the rough. My only discouragement is not to buy something too awful just because its cheap – you are trusting it with your life and need it to be reliable. Are the brakes still working ??

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    • Nowadays, there are almost some deals where a new car might be cheaper or the same price as a 2-3 year old vehicle. But I don’t buy anything newer than 7 years old or so.

      As far as safety and reliability, that’s where the research and a little know-how comes in. I would not place my family in a car that I feared would break down or put them in danger. I make sure to read up on common issues, especially safety issues. And honestly, I trust a car that’s been on the road for 10 years more than a new car than no one knows the reliability of. That’s what really scares me.

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  7. we had our third kid recently, and are going to need a bigger car at some point in the next year or so… in truth, we are on borrowed time as it is, because our boys keep getting older and taking up more and more space.

    we will most likely be going the “slightly-used” option when we do buy..

    Oh, and CONGRATS ON KID #3!!!

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    • Slightly used is awesome. My definition extends to cars with less than 100,000 miles on them, though πŸ˜‰ And being on borrowed time does not mean you have to also be on borrowed money (see what I did there? lol). Sounds like you know the inevitable is coming, time to save up for it and buy with cash! πŸ™‚

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  8. I’m all for buying used cars. We recently bought a used car but we replaced a ’99 Nissan Altima that had 160,000 miles on it and it just kept breaking down (plus it needed $2,000 in repairs when we got rid of it).

    While we have the “newer” car (which I love by the way), my wife puts around in a ’97 Accord with 195,000 miles. I hope that baby can make it to 250k!

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  9. I’ve been driving used cars for years and I know I’ve saved lots of money. The one new car I bought was a lemon and I’ll never buy a new car again. I’ve had fewer problems with my used cars than with my new car. I’m about to do the final accounting on my last used car and I think I’ll end up with a final total cost per mile of around $0.20. I don’t think that would be possible with a new car.

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    • Thank you. i think people think that New Car = More Reliable when that simply is not the case. Reliability to me is measured by how long that car is on the road. I look at what cars from the 90’s are still driving around, and it’s all Hondas and Toyotas.

      Nice work on the accounting. That’s some cheap mileage on your car.

      I’ve always wanted to walk up to someone when buy their car that they purchased new and thank them for subsidizing my purchase by eating all of that depreciation! I’m not sure how well that would go over, though…

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  10. I have to agree with you that a car should never be looked at as an investment (unless it’s a 65′ Pontiac GTO) We typically buy used vehicles. Our last purchase was a 2000 Ford Expedition Eddie Bauer that had 80k miles on it, and paid only $9900. Crazy that it costs upwards of $50k brand new and we got it for 1/5 of that price with over half the life left in it. I have bought one car brand new, a 2008 Chevy Cobalt and paid $14k for it. So far it has been a pretty good investment (not talking in terms of actually gaining money from it) but for cost per month it has been pretty low and I plan on driving that thing as long as possible.

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    • Nice work on the Expedition. The Eddie Bauer’s are pretty darn nice! I would say bummer on the new car purchase, but since you’ll be driving the wheels off of it, I’ll forgive you πŸ˜‰

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    • Minivan is inevitable for us. We want tons of kids, and no other 7-seater is as practical. But I’m definitely getting the V6 with leather and all options! I have the luxury of choosing that because I’M NOT BUYING NEW! πŸ™‚

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  11. A new car is MOST DEFINITELY one of the dumbest things people do with their finances.

    Stick w/ my 1/10th rule of car buying which states that one should spend no more than 1/10th their income on a car purchase, and we’ll all be fine!

    Want a $50,000 car? Make $500,000!

    Sam

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    • Definitely look at private sale, used vehicle. And do some research on common issues before buying a car. Even better, find a good used car and take it to your mechanic for inspection before making the purchase. That way you’ll know the reliability before dropping the cash.

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  12. I don’t view buying a new car as an investment, but purely as an expense. As a result, I do a lot of research comparing the cost to own the car – purchase price, fuel, insurance, maintenance, depreciation, etc. Once I have all of that information, I make my choice on which car is best for me financially.

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  13. Yeah, having a new car is almost pointless. I can’t stomach the thought of my super expensive car depreciating so much each year. It’s like throwing money out of the window. I bought a used car, but it was very gently used, for $12K. I anticipate being able to use it for 7+ years.

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  14. I just sold a 2002 Nissan Pathfinder with 63,864 miles and bought new Nissan Rogue. Now having buyers remorse. Should have read this article first. Googled ” how long do you need to keep a new car to get your money’s worth” and found this. You are so right about NOT needing a new car.

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  15. I completely agree. Used cars are a great choice and doing your homework on a car is really important before getting one. There are certain brands that are known to break down all the time (I wasted tons of money on a Mitsubishi I inherited!). I’m lucky enough to have a brother who knows tons about cars and can help me find one a reliable one. If you don’t have someone like that, I recommend Googling the car make and model and seeing how many issues come up. Try to find one that doesn’t have a lot of major problems that come up frequently.

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  16. This is a great area to save. What I tell folks who ask about car buying is that I look at it as buying miles, not buying a car. You are buying miles. The cost of those miles is based off of three main factors: the cost of the car + the cost of gas + the ancillary costs of insurance, registration, maintenance, etc. By far the largest of these costs is the price of the car, even if the price of gas is $4.50 a gallon (which it is not even close at the moment), the cost of the car is the single largest part of the equation and anything that can be done to decrease that cost will decrease your total cost for miles.

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    • And people never take depreciation into account, because it doesn’t affect their bank account each month. The car industry is SO good at disguising depreciation, and make it as painless as possible to essentially RENT you cars for life. Such a waste.

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