Forget that new car smell, it's only temporary
Apr 11 '09
The Bottom Line How reliable does your transportation need to be? New is costlier and more reliable but used should keep you into the financial comfort zone, just find an honest mechanic.
Is buying new really worth it? Here's a little info on the "Good & Bad" to car buying new & used.
It seems automakers are always luring consumers with some enticing incentives but this latest offer to make your car payments or pay you $500-$700 each month if you lose your job does not excite me the least bit. For one thing, I'm self employed and I'm sure if you read the fine print there's a clause that applies to individuals who are laid off, not fired.
Buying new verses used isn't out of necessity, it's because you want that new car and you know you can afford it. In my 33 years as a licensed driver most of my personal vehicle purchases were used because that's what I could afford. Believe me when I say "There's nothing like owning a vehicle free and clear because payments can really stress me out"
It's best if you know how much you can comfortably afford to pay each month or how long you want to keep the car. A lease is nothing more than a committed long term rental but will get you behind the wheel of a nicer vehicle for a lot less money. Typically your payments can be as much as half compared to conventional financing, but there will be a higher amount due at the initial signing.
The other catch or downsides to leasing are mileage limitations, paying for excessive wear or damages to the vehicle at the end of the term. My first and last lease was a new 1985 BMW 318i. It was my wife's daily driver. I was caught "hook line and sinker" from one of those irresistible full page newspaper advertisements. A new Bimmer for only $199 per month! Conventional financing was a little more than $400 for 60 months but I'd own the car at the end.
What makes leasing less expensive is you're just paying for the depreciated amount and at the end the lease company owns the car. BMW's typically have a higher residual or resale value at the end of a 36-60 month term so this equates to even lower payments compared to other manufactures. Leasing a vehicle only works for certain people, I'm obviously not one of those. I keep my cars and trucks well over 5 years, take excellent care of them plus I don't put over 8,000 a year on any of my personal vehicles.
Only lease a car or truck if you plan on replacing it with another vehicle at the end of the term and you do not expect to go over the set mileage or they will really sock you at the end. They hire an independent appraiser to evaluate its worth so expect to pay for body damage, bald tires or even torn upholstery. Most leases have a buyout option or extension should you want to keep the vehicle. Their rates may be much higher though compared to what a credit unions finance rates are.
Reliability:
One of my biggest reasons for buying new would have to be dependability and reliability. Having the next 60-100 thousand miles to be nothing but trouble free with only regular maintenance or replacing wear items is all I want to think about. If something unexpected does happen, it better be under warranty! New technology in fuel management not only results in higher mileage but a lesser impact on the environment.
Safety:
Most all new cars have improved with much higher safety standards thanks to crumple zones, (ABS) anti-lock brakes, both driver and passenger side air-bags. While shopping for a new car or truck, survivability from a car crash may not be a major purchasing consideration but a lot of cars are being equipped with crash avoidance systems. Some manufactures go to great lengths to make sure you're a customer for life while some motorists feel safer by displaying a "baby on board" sign in their window thinking this is an accident prevention device.
Buying used:
It's cheaper in the long run but if you're not mechanical get ready to pay someone $80-$110 an hour to keep you on the road. The first owner absorbed most of the depreciation, it snowballs down a steep hill its initial 3-5 years. Exception: That classic 1963 split window Corvette coupe will appreciate in value. The bottom line is over the same term it'll cost you less per mile to own used. But don't spend all that money you're saving just yet as it will cost you more on maintenance and repairs.
Are you buying someone else's problems?
Not always but "buyer beware". You hope the seller is honest and will divulge all the faults but most times they don't tell you every little thing that's wrong. This is when you need someone who's mechanically inclined that will take the vehicle on a thorough test drive. Two of my biggest tips would be don't make your finale purchase decision on a single night or "in the rain" inspection. I recently helped my 18 year old son avoid a disaster on a car he thought was fine but it had major oil leaks. The other is to subscribe to a vehicle history reporting agency. Knowing the cars history is vital such as how many owners or if the vehicle was involved in an accident.
Over the years used cars and trucks have worked for me, but this due in part because my mechanical knowledge and skills. In my small business I've been buying new trucks because of their much higher reliability factor and "up time" which is overall more productive and profitable.
Finally:
It's not a coin toss, either you can afford new or you can't. What are your finances like? Do you really want to be stuck with 60-72 car payments? If new it shouldn't be how much car can your dollar buy but how much car do you need? Car buying should be practical, not wasteful. Sure I'd like to have one of those behemoth Hummers, I can afford one but it's just not me. All I need to do is get from point A to point B!
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