Buying a new(ish) car

20130530-232506.jpgKJ: One discussion we’ve had several times over the years has actually been a little contentious at times: how long do you keep a car before you call it quits? The answer is seldom clear. Unless you have a crystal ball to know exactly what the future may bring (please tell me if you do as that would be quite valuable), you can’t really answer this question with certainty.

    Do you drive it into the ground until it no longer gets you from point A to point B regardless of repair costs?
    Do you replace it when you’ve paid off the loan (provided you didn’t plan and pay cash…)?
    Do you replace it when the repair costs start to get close to the carrying cost of a new car?
    Do you replace it when the warranty expires?
    Do you replace it predictably every three, five, or ten years?

Weighing repair costs with monthly savings (or loan costs)
Having replaced our two cars in the past five years (one was owned about five years before being replaced – longevity of about 7 years, and the other car almost hit the ten year age mark), we’ve had a bit of a discussion of how much is enough when it comes to repair costs. My car was great for the majority of its life. We had very few repairs that needed to be done (some could be done at home quite simply with a headlight going out, worn out fuse, etc.) and not too much ongoing maintenance was needed either. However, the last couple years of my car’s life with our family involved a little over $1,000 in repairs/maintenance. Was it cheaper than buying a new car? Most certainly! When you look at the cost of a new car, the monthly payment is likely to run about $200-500+ per month even on the low end of the spectrum (again, whether that’s through a loan or through building up cash ahead of time). Are you spending less than $2,400-$6,000 per year on maintenance (I sure hope so!)? Then, maybe it’s not quite at the point where it’s economically worth getting a new car. A car is not an appreciating asset. In fact, it loses value each month (and sometimes quite significantly when you look at how quickly it loses value in the first five years), so you have to weigh the market value loss of the asset in conjunction with any other expenses you may have.

Throwing good money at bad?
Sometimes that open-ended commitment of an aging car that could potentially need a new transmission ($$$$ anyone?) or other significant expense might not be worth the stress it can bring, so learn to find that delicate balance about throwing good money at bad and see if it’s about time to replace that aging car. With the average age of cars on the road in the U.S. around 10 years, you are likely to be in the camp that replacing one of your cars is on the table. Most people don’t want to spend money when they don’t have to – and if you did, you probably wouldn’t be reading this blog – so it may be a tough decision that involves shifting your goals a bit. I REALLY don’t need to get a new car, but I’m willing to push getting some new furniture for a few months or I’m willing to shift our dining out expenses for a little while to make sure we stay on track.

Large, unexpected expenses can be scary
There are few things that are scarier than a large unexpected expense. You can’t possibly plan for EVERYTHING, so learn to adjust and adapt. Change can be scary, but it’s not the end of the world, so cope with the change and make it a positive event. I wasn’t quite ready to part with my car (especially being SO close to the 10 year ownership mark), but I’m happy to have a new-to-us car we can call our own.

Start your search with used cars
Especially with so many dealerships offering extended warranties on used cars, used is the new new, so you can often live with the comfort and certainty of a new car, but without the price tag. Win-win in my book. And, with how much a car loses its value in the first several years of its life, searching for used cars can help your financial picture in the long-term. We’ve both happily taken advantage of certified pre-owned vehicles that have just as great (or better) warranties than when you buy the same vehicle new from a dealership. Kirby’s car literally had less than 5,000 miles on it when we bought it certified pre-owned, and now we have an awesome warranty and an essentially new vehicle. Win-win indeed!

    What is your take on getting a new car?
    Did you get it out of choice or were you forced to make the decision (wreck, stolen, etc.)?
    Tell us about your experiences!

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