The reality is, if you want a new car, you gonna buy a new car. If you want some financial reason to put you over the hump, about the only one is this: if you get a new car, and you die 2 years from now, you will have had enjoyment out of the car. Where’s if you don’t buy it, and You die, that 30-40k not doemt on the car is of zero value to you, what with being dead and all.
From a financial point of view, start shopping for exactly the car you want. Then not buy it. Buy it 3-5 years from now, used. You will have exactly the car then as if you bought it now, but with 8-14k more in your pocket.
But we all know you’re going to buy the car now, and there is absolutely nothing wrong with that.
(Except that 3-5 years from now you can probably buy an electric car that will cost less than half to maintain, less than a third to drive, and could last decades. 
)
Today, many grocery stores deliver and Amazon has two-day delivery. There are car-sharing services like Zipcar, food delivery services, and Uber and Lyft in addition to yellow cabs. What I’m getting at is that, particularly for a person in an urban area and/or a retiree (who of course no longer has the daily commute), the cheapest option may be not to own a car. It may seem a radical idea, but if you’re looking only at the actual cost of transportation, it may make sense.
On the other hand, my eighty-something parents will sometimes get in the car and drive just to get out of the house. I’ve suggested the grocery delivery services to them, but they’re out in suburban Connecticut, so going to the store is a form of social activity.
A few years ago they also bought a brand-new Lexus sedan, just because my mother wanted to and could afford to do so. (I suggested that a loaded Toyota Camry might be cheaper and similar, but they went ahead anyhow.)
I challenge the notion that most people look at car ownership in this way. If that were the case, cars would not feature so many superfluous luxuries like heated steering wheels, heated/cooled seats, 350+ horsepower, power windows, seats, & mirrors with memory settings, Bose / Harman Kardon audio systems and a long list of other things that are in no way essential for transporting oneself to work or shopping. If most people did not enjoy small luxuries, car manufacturers would not bother to offer them as they would not affect sales and would only cost the company money to design. Most people are not merely getting a new car when the old car stops working. Many people are getting a new car because they want something more comfortable and/or enjoyable. They desire a better commuting experience.
It’s like televisions. Most people aren’t buying a tv because the old one broke. They get a new one, because they want a better and more enjoyable viewing experience. A tv is only going to drop in value, though. So it’s not something you can try to calculate as an asset or an investment. You just have to decide if the pleasure you gain is worth the money you will spend. For some it is. For others it isn’t. Everyone has his/her price point where the price isn’t worth the luxury or where they simply can’t afford it. But, IMO, to try and calculate the most fiscally responsible way to purchase an 85" 4K tv is silly. It’s going to drop in value, period. You’ll never get your money back. You just have to decide if the money is worth the enjoyment you gain. It’s the same with a new car. Waiting 4 or 5 years to purchase a new car means you’re missing out on almost half a decade of potentially more pleasurable commuting experiences.
Also, as Dewey Finn points out, there might be better economical options for getting to work, shopping for food, etc.
Sure, but as I previously noted, I’m a retiree with a 15-year-old car that seems to have a marvelous ability to keep running reliably with all its features working. No one can predict when it might have a major failure and that’s why many people – and all businesses with leased cars – only keep them for 3 to 5 years. But the most economical option is to keep it running as long as it’s safe and reliable until that major breakdown does happen. Businesses can’t afford that kind of risk but I usually can. I take the risk that it might break down when I’m going somewhere important, but 99% of the time I’m just going grocery shopping or something equally mundane, and even so, major problems in a modern car rarely take the form of being suddenly stranded on the roadside.
To be fair, I’ve spent significant money on maintenance – this is not a car from some mystical other-worldly universe of perfection – but that totally pales in comparison to the cost of a new car. My desire to keep it in perfect running order is undoubtedly why it remains so, but my point is, it’s not that expensive to to do so. For example, when there was a problem with one of my headlights and the replacement bulb was not aimed correctly and the adjustment screw was stripped, I just had my mechanic replace the entire headlamp assembly. $400, but good as new, and less than a typical month’s lease cost, and those kinds of things very rarely happen.
One more variable to add to the equation: new cars are safer. Older drivers lose their faculties slowly (vision, reaction time) and arguably need these safety features more. It’s also safer for other drivers on the road and pedestrians if older drivers replace their beaters with a more up-to-date model.
Thats a valid counterpoint.
Here is a 1998 vs 2015 Corolla crash test.
No, no it cant. That whole idea of a car depreciates a third once you drive it off the lot was based upon older cars, which had about a 3-5 year life. Now cars easily make it 10 years or more, look at the OP.
Go to a car dealer note that their certified late model used cars sell for maybe 10-20% what a new car does.
Except you forgot safety. New cars have significant safety features a 2007 car wont. And then there’s reliability, older cars tend to break down- exactly when you dont want a break down and cant afford to fix it.
So yeah, save a year’s worth of payments up, and get that newer safer car.
I’m not sure how y’all know, because I sure don’t.
I found this out at the beginning of the process when I was deciding new vs. used. I was very surprised how little the price difference was between a year or two-old vehicle and new.
Additionally, (and I may be wrong on this), aren’t virtually all late model used vehicles turned-in leases or fleet vehicles? In other words, during its short lifetime it was very possibly driven by someone who had little incentive to be kind to it.
This is also a consideration that I had not mentioned. Blind spot warnings, stay-in-your-lane alerts, etc. are features I would be interested in.
Yes. Those used to the Convention Wisdom of a car depreciating 30% or so once it drives off the lot are not in contact with the modern market. It just aint so no more.
Yes, mostly leases. But leases are not quite as bad as rental cars.
and those safety features are good for older drivers.
The group consensus is that you should start making car payments now; the question is to whom? To the car company/bank & in return you’d have a new car or to yourself, in which case you’re building up the down payment for your (future) new car, while also preparing your budget for that cost. If you start saving $x, say $400/month. If you’re eventual new car payment is $400 or less per month, you’re already covered by moving those payment from your savings acct to the car company/bank. OTOH, if you payment is $500/month, you only need to find $100/month in your budget, not $500. IOW, immediately start putting money away towards that new car every month.
I agree with this, if the car is running fine & not severely missing some of the current safety features why not keep it. Minor repairs are less than the cost of a new car payment, if/when you get a major repair that’s when to think whether it’s worth it to repair or replace. If that point is two years down the road, then you’ll have a nice down payment for that new car.
I wouldn’t count on a new car lasting through out your retirement years. One idiot texting and driving can change everything. Insurance companies will total cars with little damage these days. I learned that last summer after a fender bender. I was beyond shocked the other car got totaled. It was State Farms decision & not mine.
I’d go ahead and look around. Check the make & model on Consumer Reports. Research the model’s repair history and overall reliability. CR has saved me from bad mistakes several times.
OK, here are some actual (ballpark) numbers.
I expect to pay around $30,000 for the vehicle. Right now I have 10k to put down. Current loan rate is 3.49%.
Scenario A (buy now): I put down 10k. 5-year monthly payment is $364. In 2024 I will own a 5-year old vehicle for which I have paid $31,840.
Scenario B (buy in 1 year): I sock away $400/month for one year. In one year I buy, putting 15k down. 4-year monthly payment is $335. In 2024 I will own a 4-year old vehicle for which I have paid $31,080.
Scenario C (buy in 2 years): I sock away $400/month for two years. In two years I buy, putting 20K down. 3-year monthly payment is $293. In 2024 I will own a 3-year old vehicle for which I have paid $30,548.
Of course there are a million variables and unknowns, but any thoughts on this?
So you drive over 10,000 miles per year. That’s a lot. You really need the safety features that have become standard in new cars.
If you don’t have a backup camera in your current car, then it’s a no-brainer. Get a new car.
If you have a backup camera but no collision warning/automatic braking system, it’s not quite as clear cut, but I’d still say get a new car.
If you have both, or if you’re about to retire and will only put a few hundred miles a year on it after that, just going to the store or something, then do whatever you want.
No it’s not; Chrysler offer 10, 12, & 15m/miles per year packages in their leases.
Pep Boys sells two backup cams for < $100, with one < $70. The more expensive of those two has the screen in the rearview mirror, so no extra monitor needed. They typically mount to the license plate frame. Even with professional installation, you could get out for < $200.
Leases are usually a bad deal, unless you want a new car every few years.
What car are you looking at? 30k seems a little pricey to me, but I tend to buy on the low end of the scale so my perspective is skewed anyway
I spent $9,000 cash on a CPO ‘12 VW Golf TDI with 50,000 miles, it has a 2 year unlimited miles bumper to bumper warranty and a 4/140k powertrain/emissions warranty, that’s a darned good value no matter how you look at it, it still looks and feels brand new, and so far has been utterly reliable, is fun to drive and gets 35-46 MPG.
It’s a real sleeper of a deal.
Thats nice that you believe that, but its not my experience. It also depends on the make, some brands depreciate faster.
Then I’d find a car for $10k.
And put a backup camera in it, like I just did with my old(er) car.
Which is irrelevant to the point being made, which is that 10K miles/year is “a lot.” It isn’t – the average American drives just shy of 14,000 miles per year, which is why the leases offer those particular options.