I have written elsewhere on this site about the frugality of buying a good quality, 2-3 year old used car and that a new car typically loses up to 40% of its value in just a few short years. You are literally taking a butt-kicking when you buy a new car. Oh, I know, I know. The new car smell, the warranty, the upgrades in technology, saying to yourself “I deserve it”, blah blah blah….but you and I BOTH know that it’s always “I WANT” a new car. It is never “I NEED” a new car. You might need a new-to-YOU-car, but it doesn’t have to be new. You are fulfilling your desires, not your needs. And sometimes that’s OK. There is one guideline that says, you should not buy a new car until you have a $1M net worth. And of course, you should only buy a car with cash, whether new or used. Also – the value of all your vehicles, to include motorcycles, boats, and jet-skis, should all total be less than half your annual income. Why? Because if not then you have too much of your financial life tied up in depreciating assets – things that are going down in value.
Why am I telling you all this? Because a few days ago we bought a brand-new car. Knowing everything I know, we chose to buy new. I checked most of the boxes up front – paid cash in full, still have an emergency fund (both our cars are in dire need of replacement and we’ve been saving for a couple of years to do this), and the value is way less than half our annual income. We do not have a $1M net worth yet but are well on our way. We have no debt (we are on Baby Step 6) The only thing I was hesitant on was the depreciation, the butt-kick, the literal price difference between a new car and a 2-3 year old car.
Well, when the smoke cleared, we ended up paying just $1700 more for a brand-new model as we would have for a used two-year old version of the same car (using KBB valuation) with 15,000 miles on it, same trim level, same everything. We were at the dealership for a couple of hours which I always question why someone spends so much time at a car dealership. People tell me they spend 3-4 hours there sometimes. But the majority of our time there was waiting on our particular car to get delivered (it was being transported from a nearby town) and the “make-ready” process. You know how you always sit down with the finance manager? We were in his office less than ten minutes. Just long enough to fill out title paperwork and hand over a check. It was awesome.
We got a deal. A deal other dealerships in town wouldn’t match. How? I’m not going to tell you how. I learned it from following the techniques at Fighting Chance and that’s where you should go too. I get no compensation from sending you there. I like to pass along good products, good information, when I find it. And the negotiating techniques that you’ll learn when you buy this program can save you thousands. It did for me on the purchase of a new Honda Civic and that’s not an expensive car by any standard. But cars are still the 2nd most expensive thing you and I buy next to our home. So never, ever, just wander onto a car lot and get suckered into a “low monthly payment”.
You will never build wealth, you will never win with money, if you have the mindset of “You’ll always have a car payment, so you might as well drive something nice”. Until a few days ago, Christie drove a 2004 Saturn approaching 200,000 miles that has some issues. Plus it has manual transmission. After 14 years she’s tired of shifting gears in Houston traffic and I don’t blame her. Me? I’m (still) driving a 2005 Saturn with 306,000 miles on it. And I’ll drive it for another year until we’ve saved up enough to replace it. We drove older cars while we were getting ourselves in better financial position; we paid a price to win.
If you meet the criteria, check out James Bragg’s Fighting Chance site to learn more on buying a new car.