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I always bought cars that were 3-5 years old with <50k miles for $5-7k and drove them until 150k miles or until they collapsed. In general, the acquisition cost was between 5-8 cents per mile that I received from them.
My frugal friend went out in 1992 and bought a 1992 Toyota Camry NEW for $14k. He drove his car until 2009 and 194k miles.
When we compared notes, our total cost of ownership was pretty similar. The only difference was that he did it on one car and I had three over the same period.
The current USED car situation is NOT favorable. "Cash for Clunkers", lower new car sales, and reduced rental car and corporate fleet purchases have driven the used car values to some of the highest we have seen in years. (My source is GE Fleet Services.)
I would NOT rule out the purchase of a new vehicle IF AND ONLY IF you can afford to pay cash. There are some great incentives out there right now.
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.
I'm much like you, very frugal.
With that said, when you are 75-80 and looking back you will have 10k more in the bank but life is a journey now isn't it?
I'd go ahead and get it.
I have lived VERY frugally all my life and after a very very tough stretch in my life came into some extra money. I splurged on 2 new cars last year after driving my old ones for 10 years (and they were bare bones). I paid cash, I still have a nice reserve and no debt so why not? Go for it.
I always bought cars that were 3-5 years old with <50k miles for $5-7k and drove them until 150k miles or until they collapsed. In general, the acquisition cost was between 5-8 cents per mile that I received from them.
My frugal friend went out in 1992 and bought a 1992 Toyota Camry NEW for $14k. He drove his car until 2009 and 194k miles.
When we compared notes, our total cost of ownership was pretty similar. The only difference was that he did it on one car and I had three over the same period.
The current USED car situation is NOT favorable. "Cash for Clunkers", lower new car sales, and reduced rental car and corporate fleet purchases have driven the used car values to some of the highest we have seen in years. (My source is GE Fleet Services.)
I would NOT rule out the purchase of a new vehicle IF AND ONLY IF you can afford to pay cash. There are some great incentives out there right now.
Good post.
The Manheim Index that tracks used car prices has seriously rebounded, there are some really good deals on new cars out there.
I know that people have a negative attitude about smaller, more fuel-efficient vehicles, but I think terms like this have got to go. There is no reason to cast aspersions on a car that you can get for less, that will have a lower fuel cost, and that will, in all likelihood, last longer than a bigger, more expensive vehicle (I'm thinking Honda Civic or Toyota Crolla vs. almost anything bigger by an American manufacturer). Calling these good, small vehicles econoboxes is like saying you prefer to spend more money than you have to on an asset that is absolutely guaranteed to decline in value as soon as you drive it off the lot, and every year that you own it. The smartest thing you can do is spend no more than you have to.
I know that people have a negative attitude about smaller, more fuel-efficient vehicles, but I think terms like this have got to go. There is no reason to cast aspersions on a car that you can get for less, that will have a lower fuel cost, and that will, in all likelihood, last longer than a bigger, more expensive vehicle (I'm thinking Honda Civic or Toyota Crolla vs. almost anything bigger by an American manufacturer). Calling these good, small vehicles econoboxes is like saying you prefer to spend more money than you have to on an asset that is absolutely guaranteed to decline in value as soon as you drive it off the lot, and every year that you own it. The smartest thing you can do is spend no more than you have to.
People look down on smaller vehicles since MANY of the small cars - domestic and foreign - have been pure garbage for years. The OEMs put out a decent design in the first model year. Then for the remainder of the product life cycle, the cost accountants get involved and "cost reduce" the vehicle until it looks so cheap and becomes less reliable.
BTW, there is not an exact correlation between size of the vehicle and fuel economy. I used to get 26 mpg from my Mercury Topaz and 26 mpg from a Chevrolet Chevette but 28 mpg from a Chevrolet Impala (full sized) and 27 from a Dodge Sprinter Van (full sized).
People usually use resale value as a factor in buying a car. Assuming I don't drive it until it's not good for anything other than donating to a high school automotive class, is there all that much difference in resale value between a) buying new for $20k, selling in five years as a single-owner vehicle and b) buying a couple of years old for $16k, then in five years selling an 8 year old car as the second or third owner?
People usually use resale value as a factor in buying a car. Assuming I don't drive it until it's not good for anything other than donating to a high school automotive class, is there all that much difference in resale value between a) buying new for $20k, selling in five years as a single-owner vehicle and b) buying a couple of years old for $16k, then in five years selling an 8 year old car as the second or third owner?
With the exception of a few models, most cars depreciate 40-60% in the first three years. If you sell in five years, you have absorbed nearly 75% on the depreciation.
If you buy after three years, you are laying out about half of the money and you will have less depreciation.
You will generally always do better the longer you hold onto the vehicle, new or used.
People usually use resale value as a factor in buying a car.(only because they are told to.) Assuming I don't drive it until it's not good for anything other than donating to a high school automotive class, is there all that much difference in resale value between a) buying new for $20k, selling in five years as a single-owner vehicle and b) buying a couple of years old for $16k, then in five years selling an 8 year old car as the second or third owner?
"resale" or"trade in" value is one of the many way used to keep people in debt..forever. Buy a vehicle that will last then drive it until it dies of old age. THAT is the only value a vehicle ever has.
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. And travel. I spend far too much on travel, but I love it.
One niggling feeling
