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Okay, I know it's never okay to buy a new car if you're focused on the bottom line. I had this reiterated when I posted my conundrum in the autos forum. So let's take the particular car out of the picture, and look at the money only.
I am generally a frugal person. I have a pay-as-you-go cell phone that I only need to top up once every few months. I don't eat out very much or spend a great deal of money on entertainment. No gym membership -- any time I have to run in place could be better spent outdoors dragging my dog along. I occasionally splurge on expensive yoga classes, though . And travel. I spend far too much on travel, but I love it.
So I have managed to build my emergency fund, life happens fund, and what-should-I-use-this-for fund quite comfortably. I could pay an entire year's worth of housing expenses for both where I currently live and my mortgage, even without rental income.
Now it is time to buy a car. I don't own one now, but I very much need one. I plan to pay cash. My original plan was financially responsible, setting my budget for a used car that gets good gas mileage.
Now I'm in love with a particular new car. It is $10k more than I originally planned to spend, but again, I could do cash and still have a decent savings cushion. I REALLY want this car, but I am having a very hard time justifying the expense -- too focused on the bottom line. But I know that I would feel a pang of sadness whenever I'm sitting in a practical, frugal-friendly 2003 Honda Civic or whatever and this particular car pulls up alongside me.
So I need you to tell me that I've done well up to this point, and it's totally okay to splurge on a new car if it will make me happy and not put me into debt.
I know that walking into a frugal living forum and asking for validation to make a frivolous, big-ticket purchase is like walking into a tiger's den dressed in fresh kill and asking the furry little animals to consider going vegetarian. So feel free to try to knock some sense into me as well. I don't plan to make a final decision until tomorrow.
Just promise yourself to take care of that car and love it and drive it for the next 10 or 15 years. Especially if you're paying cash, and I think you should if you can.
Check Consumer Reports about reliability before doing anything. As the previous poster said, you'll want to be able to promise to drive it for 10-15 years. So if you are in the position where you can afford to replenish the savings you will be depleting, then sure, but if not ...
It's interesting that you posted on here. Were you hoping someone would tell you no because you know it's not in your best interest ...?
After research and lots of looking, I bought a car that I really wanted that was alittle on the expensive side but at slightly used at the time, a good choice. I drove it for 9 years and put over 250,000 miles on it. I just did the same thing again, having decided that the new 4 door Jeep was my dream car and managed to find one 10 mo. old w/ 12K mileage so it's practically new, for WAY less than brand new. See if you can find that car you want slightly used. I looked for almost 2 years the first time before I found the one (it's a model no one ever sells!). You'll find it, just be patient.
In today's economic environment, a new car makes more sense than ever before, but probably still more costly in the long run than used cars. You can buy a car with minimal finance cost, or pay cash for it with money that can't earn you any interest. So really, the price of the car is now what you pay.
The difference, if you qualify for low interest, is maybe a thousand dollars a year, but that's peanuts to the median worker making 45K. So, if you're in middle income range, buy a new car if you want one. If your income is low end, forget it. You won't even want to pay the collision/comprehensive premiums that will fall due on a new car, coverage you would be a fool to buy on a 5 year old car.
I'd rather have a 5-yo car, just to avoid all the silly bloatware they keep adding to new models.
I wouldn't do it. New cars are so expensive and the value drops as soon as you drive it off the lot. Can you get the same car, but a few years old and through a private seller? Or does this car have particular features you could get in a used car?
You're really asking two questions: is it okay to buy the car that you have your heart set on, even though it's more expensive than basic transportation, and is it okay to buy it brand new rather than getting the same car with a few miles on it?
I wouldn't say that everybody has to buy the most stripped-down Civic they can find, even though it would meet almost everybody's transportation needs, probably far better than the cars they wind up buying.
I would say that you can probably buy the same car as you want for a lot less than the price of a new one.
OTOH, there are a lot of new car financing offers at 0% interest right now, and if the car you want is available for free financing why commit your own savings to the purchase?
Finding a very slightly used version of your car is an excellent idea. Though I know how tempting it can be to spend another 3 grand to know that you got it brand spanking new!
You say if you pay for this dream car in cash that you'll still have a good savings cushion. Is this true? I know Suze Orman says you should have at least 8 months salary in liquid savings, I don't agree that this rule always applies, though. Maybe figure out the absolute longest you think you would ever go with out a job (for example, if you're not makng much and are flexible with what field you end up in, it won't take as long to find a new position as it would for someone with specific requirements, like a computer programmer looking to make 80K a year). Take that length of time and double it, then figure out how much it would cost you to live your current lifestyle for that long.
If you can buy the car with cash and still have enough savings to cover a worst case scenario like that without lowering your quality of life, then I say go for it.
OTOH, there are a lot of new car financing offers at 0% interest right now, and if the car you want is available for free financing why commit your own savings to the purchase?
Just to ensure you don't have any late fees or accidentally spend the money elsewhere. Though I see where you're coming from, it takes a disciplined person to just sit on 20 or 30 grand of "extra" money.
Where are you guys finding this 0% financing? My credit union is asking ~ 5%, and even the dealer's best rate is 3%.
The car is in its second model year. I did search for a used one, found one, but took too long to jump on it and someone else bought it :-(. Can't find any others within 200 miles, whether through private owner, dealer or Carmax. I did consider trying to buy one out of state, flying out to get it and driving back, but using nationwide searches, these vehicles are few and far between, and the used (one year old) price isn't that much off the asking new price. I am looking at the most basic of the basic model, no options added, manual transmission.
I suppose I could get a basic econobox and wait to see if I'm still interested in an upgrade in a couple of years. But I do have to a buy something now. And if I'm going to buy new, I should do it before the end of the year for the sales tax deduction. (Not really isn't a deciding factor, btw, the deduction is only $600, which translates to maybe a third of that in actual refund, but if I'm going to buy new anyway, might as well wring every dollar out of it I can.)
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. And travel. I spend far too much on travel, but I love it.
