Buying a car with cash

[Dion]

Originally Posted by Red John

It's one thing to say you saved money when buying a pre-owned car that's less than a year old. You still have the newest possible model and someone else took the initial depreciation (and couldn't have driven it much to offset that).

It's another to buy several years old and say you "saved money." No you didn't. You just bought a cheaper car which is that much closer to the junk heap - that's why it's cheaper.

As far as i'm concerned I saved money as opposed to buying new. If I bought "new" all the time i'd would be spending "a lot more money" for my vehicles over my life time. If you think it's better to buy new - be my guest.

[GP_Matt]

I hired a guy last year who was having car trouble. He mentioned that he was getting to the end of the life of the car but it was okay because he only paid $2000 for it and it worked for most of a year without having to put much more money in it. That to me seemed crazy. $2000 a year on a crappy car would buy him a $14000 new car every 7 years with some value left when he sells it. That doesn't even factor in the time that he lost whenever his car broke down and the cost for random repairs throughout the year.

For me a car definitely isn't an investment though. I want something that I can buy and not give any thought to afterwards. I don't really like taking my car in for basic service and would really prefer not to deal with the car going in for repairs if possible. With a new car I also get the newest technology/safety/mileage features.

In the end it is a personal choice and not an investment. Besides, the money has to be spent on something. I am certain that I could look through the finances of anyone here and find something that they spend their money on that others would consider wasteful.

[DownhillGoat]

Originally Posted by GP_Matt

That to me seemed crazy. $2000 a year on a crappy car would buy him a $14000 new car every 7 years with some value left when he sells it.

Not that I disagree with the general sentiment, but what new car could you buy for $14,000, drive it for 7 years, and have any value left?

[Derek Sutton]

I guess it's how you look at it and the terminology you use. Really what you are doing is avoidning the depreciation, as soon as you drive a brand new vehicle off of the lot the value drops and yourdown money say $8000 on a $40, 000 car. But when you buy something a few yrs old the value really doesn't change once you purchase it.

I'm currently drooling over the new Ford Explorers (and Durangos and X5's and etc...) and found one that had only been in service for 9 months, a 2012 model for under 30k so it is about 10k less then brand new, to me I would be saving 10k buy buying used. Luckily for me my wife is very level headed and said we don't need a new SUV even if we would be saving 10k, it would still be spending 30k just because I like the looks of it.

[GP_Matt]

Originally Posted by kunkstyle

Not that I disagree with the general sentiment, but what new car could you buy for $14,000, drive it for 7 years, and have any value left?

There are a few cars in the price range. I haven't looked in a while buy off the top of my head:
Hyundai Accent
Ford Fiesta
Smart fourtwo
Mazda2
Kia Rio

None of them will be worth a ton, but I would assume you could get a few k after 7 years to put towards your down payment.

[kevman]

You also have to factor in maintenance into your "I saved a ton" comments. That and how long you plan to keep your vehicles. If you buy new and keep it for 15 years you're not far, if at all, behind buying a pair of used vehicles in that time.

Example 1: If you buy car a for 20 grand, you get 5 years of warranty and then pay an average of 1 grand a year for maintenance until vehicle death at 20. Car b you buy for 10 grand 5 years used and start spending 1 grand a year for maintenance. After 15 years car b cost you 25 grand while car a cost 30 grand. 5 more years car 1 cost is now 35 and you needed to buy another used car... Sure this is mega simplistic but there is more to it then "buy used, it's half off!"

Example 2: A new Tacoma is about 40 grand. Used a 5 year old Tacoma is about 25grand with 100k. Assuming a 300k vehicle life the new one costs 13.3 g's/100k and the used one costs 12g's/100k. You pay the same maintenance for mileage 100k-300k so really you're paying a minor "premium" of 2.5g's over 100k for a new vehicle. (I made all those numbers up for simplicity but when I bought my Frontier new vs. used was pretty close to a wash.)

As for paying in cash - there is no such things as 0% financing. You will get a better deal if you pay cash. My truck was 0% for 5 years or $5,000 back. I would have needed a guaranteed after tax return of about 5%/yr on my investment to make 0% financing come out ahead of the cash discount.

Just for fun, the TSX is up ~2,000 pts or about 20% (~4%/yr after tax) since I bought my truck. 0% financing would have been pretty close after all...

[Red John]

Originally Posted by Dion

As far as i'm concerned I saved money as opposed to buying new. If I bought "new" all the time i'd would be spending "a lot more money" for my vehicles over my life time. If you think it's better to buy new - be my guest.

My car wasn't bought new nor is that my opinion. Merely saying that buying an old used car isn't saving money so much as its buying an old used car.

It's like saying you saved money by getting a $150k condo instead of a $2m home. No you didn't. You bought an inferior product at a cheaper price point.

[DownhillGoat]

Originally Posted by Red John

It's like saying you saved money by getting a $150k condo instead of a $2m home.

Wouldn't it be more like saying you saved money by getting a $100k used condo instead of a $150k new condo?

[Dion]

nm

[opendoor]

Originally Posted by Red John

My car wasn't bought new nor is that my opinion. Merely saying that buying an old used car isn't saving money so much as its buying an old used car.

It's like saying you saved money by getting a $150k condo instead of a $2m home. No you didn't. You bought an inferior product at a cheaper price point.

No, because a $2m house doesn't eventually depreciate into a $150K condo. When people talk about "saving money" buying used, they're talking about getting the car at a better spot on the depreciation curve when compared to buying new.

[The Yen Man]

Originally Posted by opendoor

No, because a $2m house doesn't eventually depreciate into a $150K condo. When people talk about "saving money" buying used, they're talking about getting the car at a better spot on the depreciation curve when compared to buying new.

Some people just like new cars, I don't see anything wrong with it. If they get more enjoyment out of owning a new car, who are other people to judge if it's a "bad investment". It's not an investment, it's a material good, just like a computer or a tv.

Heck, some people spend insane amounts of money going out for dinner or out drinking. But you don't see people telling them they should eat at home or buy booze from the liquor store instead since its such a bad investment to go out all the time.