This Fall I found myself having to make the big decision to purchase a car.
I had been driving an older Volvo SUV I bought used and though it had served my family well, it was on its last legs.
In all my car buying years I have always been a staunch believer in buying a USED car. The idea that by simply driving off the lot, a car loses 20% of its value in its first year astounds me. That’s a lot of lost value in one drive.
That said, I did also grow up with conflicting messages because I remember my father telling me that buying a new car would ensure me several years of “stress-free” driving. And who needs more stress? Not me!
I know he just wanted his little girl to be driving around in a safe car but after buying my first new car in my early twenties I had a rude awakening – yes, the car was new and drove great but there were still lots of heavy on the pocket payments and the scheduled maintenance appointments that come with a new car (and can't be avoided) cost a great deal of money. Nothing was covered by the warranty – and the in-house mechanics are not the cheapest.
So many of the considerations and after driving my brand new car for 13 years, yes I drove it until it was no more, here I am, in the market again for a car, choosing between new and used.
Yes, the concept of “stress-free” driving. The idea is that when you buy a new car, you will have no problems in the world. I love the picture of driving off into the sunset, wind blowing in your air, and enjoying the beauty of a brand new car.
Now while a part of that scenario is true – there is something amazing about getting in and driving a brand new car – I can assure you that even though driving a new car is great, you still end up with problems, not to mention all the times you need to come in for those scheduled dealer appointments.
Obviously, when choosing a car, one of the most pressing considerations is how much you can afford.
When buying a new car, most people will finance their vehicle. And this is a major factor in how affordable your car is. For example, I was talking with my friend Katherine today and she told me the story of a guy she knew back in 1983 who had to purchase a new car at 22% interest. (Obviously, inflation was a dumpster fire back then.)
Part of any good planning is looking at your loan options.
Buying a used car if you finance it generally has a higher interest rate. You can’t beat the interest rate available on new cars especially when you have good credit. Sometimes 0% interest!
When we decided, to go new because of the 0% interest rate, the next question for us was to buy or lease.
Buy or Lease
Leasing always seemed to me like a poor choice. And I had accountant friends who agreed (in most circumstances.) You basically “rent” a car for an extended period of time, make your payments and then end up with nothing.
You’re not building into an asset you actually own.
And it makes sense if you always want (and are willing to pay for) a newish car. You are enjoying the prime time of the car before you have more erratic maintenance issues that, may come up.
In the end, I decided to buy a new car – in part because of the dealer special that month to finance at 0% interest for the entire purchase term. It helped me afford a better car than I would have otherwise been able to fit into my budget.
If you’re struggling with the math of it, here’s a site I used to check out some different numbers to see what was in my budget.
Remember, when buying a car, it’s important to think not only of how much it costs now, but how that payment will look 3, 5, 7 or even 10 years down the road.
And whatever you choose, good luck on your new car!