My wife’s 2005 Acura MDX recently failed inspection and needed a minimum of $2800 in repairs to “maybe” pass (no guarantees). After over 200,00 miles and a recent slew of repairs needed it is finally time to get a new car. But I should be clear, I mean new to me..not new. I’ve never purchased a new car and never will!
When you are researching cars online and going to the dealership and seeing all the nice,fancy cars it is easy to forget one important thing. A car is a depreciating asset. Unless you are buying a classic car or exotic sports car as soon as you drive it off the lot it will lose around 10 percent in the first month. Afterwards it will lose 15 to 20 percent of it’s value every year.
So my rule of thumb is simple. I buy a used car that is a few years old for around $25K or so for all cash. I then drive it for at least 10 years or so until it falls apart. I’ve never understood why some people buy brand new cars and pay over $500 per month for up to 6 years. Even worse some people get upside down on cars which is when the loan is more than the car is worth. My brother-in-law is currently in this unfortunate situation.
I’m not saying you should drive around town in an unsafe beater. I’m just recommending that you be responsible! Remember what is new today will be old tomorrow. And I’ve found that it doesn’t matter how nice or luxurious something is. At some point you will get used to it and it will be the norm.
Just imagine what you could do with an extra $500+ per month. That’s $6K per year that you could invest in a mutual fund, put towards your mortgage, or invest in individual stocks.
You might be saying to yourself how the hell do you expect me to have $25K laying around to pay for a car. Well you will be surprised to see how much you can save if you drive a car around for years without a note. Living below your means can be a very powerful thing and allow you to save loads of cash!
So hopefully we will find a car soon for my wife as hers is on its last legs but we have time. I never rush myself during a major purchase and do my best to keep my emotions in check. Cars are a dime a dozen so if a dealer doesn’t want to negotiate I let my feet do the talking and I keep looking.
In fact the dealer yesterday was playing games when I told him I was planning to buy with cash. He probably saw his margins shrinking since I wouldn’t be using their dealership for financing and I definitely wasn’t buying their over priced extended warranty. So I left. Ha!
PSA: you should avoid Drivers Select aka Echo Park at all costs. They only allow you to use their financing (at non-competitive higher interest rates)and lure you in with low advertised pricing and then push over priced extended warranties. In fact, once our sales person found out we were planning to to pay all cash he serviced other customers and ignored us until we left. We wasted a Saturday afternoon at the dealership. Lack of transparency and old school “bait and switch” pricing. Worst car shopping experience I’ve ever had. Just check out their terrible reviews on Yelp.
