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No, debt is not the same as expenses. If you have expenses, with the exception of rent, they are flexible. For instance, if electric bill is too high you can adjust the thermostat, turn lights off, etc.
You still have to pay that bill that happened BEFORE you turned down the thermostat. So it works out the same. And that's the point. For some of us, debt used wisely IS a mere expense. No more than the base phone bill or cable bill. You budget for it the same as anything else. I don't want to tie up my savings on a car, usually. And I'm not going to live my life as the most miserable of cheapy cheapskates just to make some idiot on a forum feel better. For me, cars are not cheap appliances that only serve to get from point A to point B, so I'm not going to go out and get the cheapest I can. They are my hobby, they are my passion and I earn more to have more fun.
Some cars are great used car buys, and my primary car is a great example of that. A fun, hobby car that I can take to shows, enjoy on twisty back roads, and still commute in comfort and style, and it cost me $7500 used (took out a 5 year loan that allowed for a few months of cheap payments, then paid it off). My wife's car is a fun car that suites her well (a new MINI) that we are leasing. And I'm planning on adding a convertible to the stable, either an MGB to fix up, or a new Fiat 124 after they've been out for a year to get some of the bugs worked out.
But, that still doesn't exclude the fact that debt is budgeted for the same as an expense (which is technically a debt, too: you got the service and are paying for it after the fact). If you need to, you can sell the car and get out of that debt. but the monthly payment is still an expense you can budget for easily, especially on a new car under warranty that you no longer have to deal with out of pocket repairs or maintenance (on most models these days). Thus you are budgeting a traveling/commuting expense the same as if you were spending that money per month on public transit.
Certainly there is no "best" that fits everyone. But for your basic normal middle class family or person (again, this is a generic term but go with me here) I think the $13-16K price range for car purchase is a good range to start.
That immediately kills off 99% of new cars. So we're looking at used. Probably 3-6 years old with 50-80K miles on it. I think that is a good price point someone would feel comfortable about buying and not feel like they are "all in" in regards to monthly car payments.
With modern cars 50-80K miles is nothing even out of warranty. You still have a lot of life left in the car.
You still have to pay that bill that happened BEFORE you turned down the thermostat. So it works out the same. And that's the point. For some of us, debt used wisely IS a mere expense. No more than the base phone bill or cable bill. You budget for it the same as anything else. I don't want to tie up my savings on a car, usually. And I'm not going to live my life as the most miserable of cheapy cheapskates just to make some idiot on a forum feel better. For me, cars are not cheap appliances that only serve to get from point A to point B, so I'm not going to go out and get the cheapest I can. They are my hobby, they are my passion and I earn more to have more fun.
Some cars are great used car buys, and my primary car is a great example of that. A fun, hobby car that I can take to shows, enjoy on twisty back roads, and still commute in comfort and style, and it cost me $7500 used (took out a 5 year loan that allowed for a few months of cheap payments, then paid it off). My wife's car is a fun car that suites her well (a new MINI) that we are leasing. And I'm planning on adding a convertible to the stable, either an MGB to fix up, or a new Fiat 124 after they've been out for a year to get some of the bugs worked out.
But, that still doesn't exclude the fact that debt is budgeted for the same as an expense (which is technically a debt, too: you got the service and are paying for it after the fact). If you need to, you can sell the car and get out of that debt. but the monthly payment is still an expense you can budget for easily, especially on a new car under warranty that you no longer have to deal with out of pocket repairs or maintenance (on most models these days). Thus you are budgeting a traveling/commuting expense the same as if you were spending that money per month on public transit.
That only works if you pay it down faster than the depreciation. Many loans these days are so long that the buyer is upside down for a while and cannot just sell.
Certainly there is no "best" that fits everyone. But for your basic normal middle class family or person (again, this is a generic term but go with me here) I think the $13-16K price range for car purchase is a good range to start.
That immediately kills off 99% of new cars. So we're looking at used. Probably 3-6 years old with 50-80K miles on it. I think that is a good price point someone would feel comfortable about buying and not feel like they are "all in" in regards to monthly car payments.
With modern cars 50-80K miles is nothing even out of warranty. You still have a lot of life left in the car.
Just depends.
When I looked, again for the second time, that's right around where I wanted to be. Unfortunately for the car I was looking at you were looking at 4-5 year-old cars with more like 100k for $14,000. Since I could buy the same car brand-new for $20,500 that wasn't worth it at all. Even if you assume the car will do 300k as trouble free as the first 100k, which it won't, it's rather absurd. With that assumption, which is as said false, by 100k the car has used up about 1/3 of its useful life and should be priced at no more than 2/3rds of what you can buy new. It was actually higher than that. Factor in the warranty, new car being nicer than a used one where you may be inheriting the previous owners lack of maintenance and abuse along with normal wear and tear, and that cars with 200k+ miles are just not as reliable as ones with 0 miles and the fact that it cost more than 2/3rds the price of new, it clearly was better to buy new.
That was a case of a car that holds its value very well at that time, less so now with cheaper gas prices, and was being discounted because it was old and overdue for replacement and wasn't selling well so I got about $5,000 of MSRP on a $25,000ish car. If you change 300k to 200k, however, that's probably a more accurate figure. You'll find a lot of cars, especially economy cars like Civics or Corollas, that end up being little better to buy used than new. For more family sedan type vehicles or up, especially if you want options which tend to go for very little more than the base models which come fairly well equipped today on most cars, buying in that 3-5 year-old range regardless of whether it's over $13-16k price is often the best way to get them. The car Toyota mildly pushed me towards was about $40,000 before TTL. I could pick one up that's 2-3 years old with 30-40k miles all day long for 25-30k. I'm all for paying less than 2/3rds of the actual selling price (less than 60% of MSRP) on a 3 year-old Toyota with <40k miles. Huge amount of that is options. There's $6,000 of options, the base model sells for around $34k (actually it's no longer sold, dropped in 2015). Once it's a few years old those $6k in options only command an extra $1-2k on the used market. That's much more reasonable. Absolutely no way on earth I'd pay $6k for the options. $1-2k is worth it and I would.
Other thing is a lot of the depreciation wonders (like the Ford Taurus) don't really depreciate that much. Residual value gets calculated off MSRP. You can pick up a base model Taurus for just over $20,000. Huge chunk of the "depreciation" occurs before the vehicle is sold. That's not depreciation. Brand-new for $20,000 or 5-year-old for $12,000 with 70k miles for $12k. That's not bad depreciation. It's a five-year-old car with about average mileage selling for 60% of what it did new. The loaded Toyota depreciates almost as much in half as many years as the so-called depreciation wonder Ford Taurus. Options is a huge part of it. Taurus SE is one of those not so good cars that's actually a pretty good buy new. Used? Get an Avalon or Buick Lacrosse. New the only thing that comes close in price is the Impala and even that's significantly more expensive.
All in on the car payment for me, which I'm pretty much middle of middle-class would be around $50k. Assuming they don't verify income (mine isn't verifiable as I'm self-employed, and most dealers do not with factor financing) and I honestly report it that's about how much most lenders would approve me for. Certainly Toyota was happy to lend me $40k based on my reported income and credit score. I probably could have lied and said I made more but $750/mo car payment for me is where I feel "all-in." I'd prefer to keep it below $500/mo and the less the better.
All of these vehicles are within the $13,000-$16,000 range.
They're brand new with full warranty and updated safety features.
Why buy used, if you can afford new, basic transportation?
Becuase small cars are less safe less usable and depreciate way more aggressively than used midsized etc cars? Not to mention far inferior handling and user experience.
One reason why most people don't have $13,000-16,000 available to spend on a car is because they spend too much on interest, and too much on stuff they don't need. Interest rates are very low, but the average consumer pays much higher rates. And they go to a mall on weekends and buy lots of stuff on the spur of the moment. Stuff they don't need which is going to add to their clutter. Clothes they're only going to wear once or twice then get tired of, and put in their overcrowded closets to reduce the available space even more. Furniture and junk they think they're going to like, but it just adds to their clutter.
The real secret to happiness is simply to always spend less than you earn. Then there is no need to ever pay interest on anything. And when you have arguments about what to buy, "can't afford it" is the perfect excuse not to buy it. But if you're in the habit of putting everything on credit cards which you don't have the money to pay off, and/or loans such as car loans etc., you can no longer use that excuse, because arguments about debt are too abstract, and you would end up going into debt to divorce lawyers. Single people have it easier, because they only have to argue with themselves. But that also makes it easier to lose the arguments. And look at how much they spend on dates and entertainment. Way too many people pretend, to themselves and others, that they're a lot richer than they really are, and that keeps them poor.
When I looked, again for the second time, that's right around where I wanted to be. Unfortunately for the car I was looking at you were looking at 4-5 year-old cars with more like 100k for $14,000. Since I could buy the same car brand-new for $20,500 that wasn't worth it at all. Even if you assume the car will do 300k as trouble free as the first 100k, which it won't, it's rather absurd. With that assumption, which is as said false, by 100k the car has used up about 1/3 of its useful life and should be priced at no more than 2/3rds of what you can buy new. It was actually higher than that. Factor in the warranty, new car being nicer than a used one where you may be inheriting the previous owners lack of maintenance and abuse along with normal wear and tear, and that cars with 200k+ miles are just not as reliable as ones with 0 miles and the fact that it cost more than 2/3rds the price of new, it clearly was better to buy new.
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Yes it does depend on many factors. If you plan to keep a car for 10 years buying new makes sense, even on US brands for the aforementioned reasons. Further, the making sense argument gets stronger with Japanese brands, due to how well they hold their value. Mrs5150 had to replace her 11 year old Subaru Outback, which she bought used at 95K. Had 192K miles on it. (To make a long story short, it broke down three times in a year. My guess is the car was not maintained well by previous owner, who bought it new.)
So we looked at used Subarus and did the math. We were looking at spending 20% less for a used vehicle that was 30% used up. Bought a new Forester. Plan to keep it for 10 years.
Call it $13k and the new SE 2.5 you can get for $20k (just under).
You're getting a car 83k miles for 65% of what you could buy new. I'd buy new.
Figure it goes 200kish miles it's got about 60% of its life left.
60% of $20,000 = $12,000.
Maybe it goes 300k mile in which case it has 72% of its life left, $14,400.
$12,000 - $14,400. If you have the ability and desire to turn a wrench it might be closer to that $14,400 number. If you're paying someone to do the repairs, most stuff is going to get more expensive to keep running than it's really worth spending somewhere around 200k-300k miles and you'd be better off selling it and getting a newer car. Since I don't have the inclination to do my own wrenching I'd go with 200k.
Again, you're looking at a car that (from MSRP) to 83k miles depreciates about $12,000. Sounds like a lot. When you take away the $5,000 of depreciation that never actually occurs because you got it for $5,000 off MSRP, which you can do without even negotiating, that great deal just becomes kind of meh. I place a certain amount of value in not taking the risk of inheriting someone's poorly maintained car. If I can get a good deal, sure, but I'd want more than paying somewhere between $1,000 more and $1,440 less. I'd rather pay an additional $1,440 (even assuming it makes it to 300k, which I'm not that confident in) and buy new. Certainly if it only makes it to 200k I don't want to pay more for a used car than a new one given the useful life left. I'd skip it and buy new.
84k miles??? There are much better deals out there than this.
I bought a 2014 Fusion SE three weeks ago for $15k. It was a personal lease return vehicle, in immaculate condition, with only 17k miles. It still has the new car smell, somehow. lol
With most dealerships posting Carfax or Autocheck info on their websites now, it makes buying a used car a bit less risky. For the most part, you can tell if the car was leased, owned or a rental fleet car, or it was involved in an accident.
I do agree with the OP that this price range is a nice sweet spot for a used car. I strongly considered buying a NEW car, but like was mentioned above, that price range limits you to subcompacts or a maybe a base model compact if they are offering some big incentives. I feel I got more car for my $15k budget by buying "nearly new".
Sure, paying cash is king. But I live in reality. There are very few buyers who pays cash. It's just reality.
Cash isn't always king. Check out BillLuke Chrysler, $1000 off if you finance at a top tier.
Both Honda and Toyota offer additional rebates only if you finance in house.
And, most importantly, there is nothing wrong with financing something affordable over its useful life to you, especially when interest rates are under 1.49%.
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