By Dr. James M. Dahle, WCI Founder
This rant started from reading an email sent to me by a doc several years out of residency whose medical school was paid for by the military looking for general financial advice. I was surprised to see that he still had a negative net worth. The main reason was that his family “owned” a year old car on which $30K was still owed and a brand new car on which $29K was owed. There was a little bit of educational debt, and some retirement and non-retirement savings, but the liabilities far outweighed the assets, despite several years of attending-level compensation and no medical school debt. As you might imagine, I recommended he spend less and save more, starting with his choice of automobiles. I had a similar conversation recently with a nurse who was leasing a car that was worth about her annual salary.
You Aren't What You Drive
In the Millionaire Next Door, Stanley and Danko had an entire chapter entitled “You Aren't What You Drive”. So what do rich people drive? They noted that only 23.5% of millionaires owned a car from the current model year. In fact, 55% of millionaires owned a car older than 2 years old. Half of doctors aren't even millionaires. In fact, a large percentage of doctors in their 30s still have a negative net worth. If most millionaires don't drive new cars, why should a doctor? Stanley and Danko write about what buying habits among used-car buyers reveal:
“What factors explain variation in wealth accumulation? Income is a factor. People with higher incomes are expected to have higher levels of wealth. But note again that members of this group of used-vehicle buyers have a significantly lower income than the average for the other groups of millionaires….Occupation is another factor. We have noted many times that entrepreneurs account for a disproportionately large share of the millionaires in America. Conversely, most of the other high-income-producing occupations contain disproportionately smaller portions of high-net worth types. These include physicians…dentists….attorneys….
But there are exceptions. For example, each of these non-entrepreneurial occupations is represented in the used vehicle-prone shopper group we are profiling. Used vehicle-prone shoppers are unique even among their millionaire cohorts. Note that, on average, they have the highest score values on all seven measures of frugality. Behind their frugal behavior is a strong set of beliefs. First, they believe in the benefits of being financially independent. Second, they believe that being frugal is the key to achieving independence. They inoculate themselves from heavy spending by constantly reminding themselves that many people who have high-status artifacts, such as expensive clothing, jewelry, cars, and pools, have little wealth.
Being frugal is a major reason members of the used vehicle-prone group are wealthy. Being frugal provides them with a dollar base to invest. In fact, they invest a significantly larger portion of their annual income than do any of the other types of vehicle buyers…the used vehicle-prone shopper group also contains the highest percentage of prodigious accumulators of wealth (those with a high net worth to income ratio).
The majority of people do not have the ability to increase their incomes significantly. Yet income is a positive correlate of wealth. What then is our message? If you cannot increase your compensation significantly, become wealthy some other way. Do it defensively….They successfully innoculated themselves from contracting the high-consumption lifestyle that many of their neighbors adopted. More than 70 percent of their neighbors earn as much or more than they earn. But fewer than 50 percent of their neighbors have a net worth of $1 million or more.”
You can save a lot of money on automobiles in two ways.
#1 Buy a Used Car
New cars cost far more than it takes to maintain a used one.
#2 Drive an Old Car for a Long Time
Even a new car buyer can get a great value if they keep the car for 10 years. Older cars also save you money on insurance and taxes. They can even save you money on maintenance. Who needs to fix a broken electric window or fix a little dent on a car with 150K miles? But on your brand new one, you're going to pony up some cash to keep everything working and looking sharp.
How Much Can You Save By Driving an Old Car?
Consider this. Physician A buys a $60,000 car. He drives it for 3 years, then sells it for $25,000 and repeats the process. He will also pay more in sales taxes, registration fees, insurance, possibly maintenance, and most likely finance charges. I'd estimate his cost of car ownership at $10,000 per year, not counting gas.
Physician B buys a $5,000 car. He drives it until it dies in 5 or 10 years. Then he buys another one. He paid cash for it, didn't fix any of the little things, and paid minimal registration fees and insurance (liability only). I'd estimate his cost of car ownership at $1,000 per year, again not counting gas.
After 30 years, what is the difference between spending $1,000 a year on transportation versus $10,000? Invest the difference at 8% and you'll get a million dollars. Yes, you read that right. Is driving a new car worth $1 million to you? Most Americans retire with far less than $1 million. Multiply that by two, or even three cars, and you'll quickly realize the sum of money available to the frugal driver.
The example might be a little extreme, but run your own numbers and see what you get. I'm convinced that many Americans are kept in the poorhouse simply because of their automobile choices. No consumption item, except a house, will make as much of a difference in your accumulation of wealth.
Now I realize full well that I'm a bit of an extremist on this subject. My parents have only bought two brand new cars in their entire life, and neither was bought during the 18 years I lived at home. I rode in beaters and I drove beaters, including a true Flintstone-Mobile due to a rusted-out floor. But they were able to raise 6 kids, retire a little early on a middle-class income, and even own a small floatplane (I did grow up in Alaska, after all).
I learned early on that you're not what you drive (although I confess that in high school I was jealous of those guys with the jacked-up little Toyota pick-ups). In fact, my “first car” was an old Geo Prizm my parents sold to me for $3K as a college senior. I was just happy to get an interest-free loan from them. Prior to that time I rode a bike or got a ride, so this was a huge upgrade.
I sold it after 2 years for $2100 and we got another one for $6K. I totaled that one after 3 years, and the insurance company gave us $5,500, which we put toward the next car.
My third car cost $8K. It was totaled after about 3 years and we got about $7K for it from the insurance company. Before it was wrecked we bought a second car for $1850, which was sold 4 years later for $1500. We took the insurance money from the totaled car and added it to our savings to buy the car we really wanted, which we bought 4 years old for $18,900.
When I got out of the military, I bought a car for $4,350 and drove it for 6 years before it died. When it died, we were rich, so we bought a brand new car. We've bought two other cars since then for our daughter to drive, the infamous $800 beater and, when it died a year or two later, a $5,000 car that is going strong.
Initially, I thought I was just saving money now so I could drive whatever I want to drive later. After a few years of driving beaters, I've realized I no longer care what I drive around in as long as it runs well, is comfortable to sit in, and can carry what I need to carry and pull what I need to pull. I do like driving the $60K car better than the $5K car, but not 12 times better. I probably won't buy any more cars that cost less than $10K for the adults in the house to drive. We simply no longer need to, given that we're already FI and are both still working (I'm still working two jobs). We basically stopped buying cheap used cars when we had no non-mortgage debt, had a good chunk of equity in the home, had started college savings for the kids, and had a portfolio on track to allow an early retirement. Can you say the same? Then what's with the Lexus or Tesla you share with the bank in your driveway? I'd much rather have the ability to walk into a Lexus dealership and pay cash for a brand-new, top-of-the-line Lexus than actually have one in the driveway.
Do you drive a swag wagon? You're not alone.
Some complain that they can't drive an inexpensive used car because they need something reliable. I just don't buy it. I haven't commuted in a car with less than 100K miles….ever. I've had to get a jump once on a cold morning after a night shift. Replaced the battery that afternoon. When the $4,350 car died we had it towed to the mechanic (and then to the junkyard). Insurance paid for the tow. That's it. Even if you add on the cost of a AAA membership, you're still not going to get anywhere near the cost of driving new cars. Others worry about the cost of repairs on older vehicles. It's a rare car repair (not a collision) that costs more than $1000-2000. Most are a few hundred dollars. It doesn't take long to pay for that when you don't have a $500 a month (or a $2,000 a month) car payment. Even if you insist on having one nice car for road trips and driving the kids around, you can still buy a cheap commuter as the other car and save thousands. Who says your car has to be as nice as your spouse's?
Should I Buy a New or Used Car?
In the end, spend your money on what makes you happy. Do you need to drive $3K cars to be financially successful as a physician? Certainly not. But you do need to save and invest 20% of your income a year. If you can't do that AND buy an expensive car then you'd best line up your habits with your true priorities. Just keep repeating “You aren't what you drive….you aren't what you drive” until you believe it.
What do you drive? Do you feel pressure to drive a certain type of vehicle just because you are a physician? Comment below!
totally agree. People underestimate the secondary costs of owning a nice car.
I find this is true with anything. Things generally have secondary costs and expensive things generally have higher secondary costs that people forget about when comparing costs.
I think I have heard this advice before somewhere…. I urge others to read “The Millionaire Next Door”, unfortunately I read it 6 months to late. I have since bought several copies for friends. A must read in my opinion.
Yes! I’m just a few years out of training, and a big key to my positive net worth is the fact that I drive a 14 year old car. I am the only person from my residency class who did not buy a new car within a few months of finishing residency. The peer pressure to keep up with the Joneses among doctors is astounding, but my decision to hold on to my car and use the saved money to completely pay off my student loans and invest in retirement funds has provided a level of peace of mind that no BMW can ever provide.
You mentioned in this post:
“No consumption item, except a house, will make as much of a difference in your accumulation of wealth.”
Can you touch upon houses and what your strategy is on those in this comment thread or a future posting?
For instance, if it’s true that the 30 year mortgage is one of the best inflation hedges, then is being “under-housed” a bad choice for overall wealth accumulation?
My last car was bought used: it was 3 years old and had 48000 on it. I drove it for 10 years and added 111000 miles to the odometer. Reliability was a problem. My residence was close to where I worked, so it wasn’t a major issue taking a taxi to work, when the car was in the shop. But with my new job, I commute 55 miles daily, and I bought a new car.
Interesting, what type of car?
Sounds like you’ve got a great philosophy when it comes car ownership. Yet again, another good post with some great advice. Although, I have to say if you start giving driving tips on your blog I’m not listening (2 cars totaled???) 🙂
I was just gonna say- I know Alaska and all, but wrecked two cars? Another good way to save money- drive carefully.
Excellent point.
Keep in mind it doesn’t take much to total a beater.
Keep in mind that new or newer cars have the latest safety technology. I think a good option is to buy a car coming off of a 3 year lease. I’d rather have my wife and kids driving in a vehicle with the best safety rating, and it ain’t likely the type of car as depicted above.
A 3 year old car doesn’t have the latest safety developments. If that is your highest priority in life, you should buy brand new, no? Not to mention move closer to work/school.
To your first point, I can probably find a 3 year old car with a better safety rating than a newer one. You should also have valuable time left on the warranty. But to each his own. Your second point does not reconcile a multitude of problems. In particular, you mention moving to your family and they would sooner poison your cereal. So, you do……..?
Drive a high quality used car. A Toyota Avalon can reach 250,000 miles on a regular basis and is extremely safe. Automobile safety reached a point of diminishing returns with rear cameras several years ago. I paid cash for an 2008 and saved $29,000 .
I bought a new car in ’04 before i got some finance religion. i even financed it, although i paid off that 3 year note in 1 year.
I’m still driving it though, and i hope to be one of those that gets 10-12 years out of it.
bought a gently used car for my wife though.
I make enough to do everything i’m supposed to savings wise and still at least drive something semi-new… i probably wouldn’t go quite as cheap on wheels as you do… not that there’s anything wrong with that.
Interesting read. From reading your blog I’d say we agree on a lot of things, but this is not one of them. I do agree you are an extremist in your approach to cars. Clearly there is a spectrum where cars can at one end provide the most basic transportation and at the other end extreme luxury overshadowing the primary purpose of the vehicle. But there is a middle ground, and a $3000 vehicle is not it. Especially for those of us that commute and spend an hour or more per day in the car, it’s silly to drive a beater. There is no doubt that on average a $3000 car is going to be less safe, less comfortable and less reliable than a 10-20k car. At the other extreme one should not drive a high-end luxury car at the expense of saving for retirement. But to some of us a car is a luxury we decide to spend our money on. Most every physician chooses to spend some of their money at least one luxury, like shopping at nicer grocery stores, eating out, vacations, a nice house, new clothes, etc. As long as it fits within your budget and you can still meet your long term financial goals, there is nothing wrong with choosing to spend a portion of your discresionary income on any luxury, including a car. I suppose you could live in exteme austerity, drive a 3000 car, cram your family into a 1 bedroom apartment, never take vacations and eat beans bought in bulk, but that wouldn’t be much of a life. It also seems just as foolish to me as the other extreme of careless spending and racking up excessive debt. Moderation in all things…
JR- Well said. I agree. Where did we disagree again? Remember that just because I drove a $3000 car for a while doesn’t mean I plan to drive one forever (and in fact am not.) Well, I guess that’s not entirely correct. One of our two current cars was $5K including tax and title. That’s pretty close to $3000.
Jake- Interestingly, neither wreck was my fault, but I still had to pay my deductible for both of them- one driver was uninsured the other was a friend of someone on the police force (he hit me from behind and I got cited….let off in court though.)
Z- A house is a bit more of a balancing act. The benefit of buying a house over a car is that it generally keeps up with inflation. It’s the house that is the main inflation hedge, although I suppose a fixed mortgage could be pretty advantageous in a time of high inflation. However, I think “under-housing” is a better way to accumulate wealth than overhousing. I “under-housed” for 4 years out of residency but am no longer doing so. As other posters have said, it’s about spending your money on those things that make you most happy, not trying to deny yourself in an effort to have a bigger brokerage account.
I’ve had basically 4 cars my entire life and I’m in my mid 30s. The first was a beater truck my parents gave me which I drove for a couple of years. I think it cost $1400. Then I helped purchase a $9,000 car which I drove into the ground for 4-5 years and I sold it for about $3,500. My next car was a BMW, but it was used and I did most of the repairs myself. I paid $18,500 for it, but unfortunately after a few years it was in an accident and was totaled. The insurance valued it at $18,000 and so I purchased my current car which I paid the difference of $4,000 as the car cost $22,000 which included an extended warranty. It was another BMW, but still a used car. This was in 2003, and the car was 2001 330Ci. I still drive this car today, even with 212,000 miles on it. Sure I’ve had some issues, but I enjoy doing the repairs and learning. What I also love is not having a $425 car payment a month. Even if I have a major expense of let’s say $2,500 for a major car repair. It would only take about 6 months for me to break even again, and then the $425 would continue to stay in my pocket.
I totally agree with this article and although my next car will be a used car, I don’t know if it will be anything less than $15,000. If I just needed a second car, I would have no issues looking for a car under $5,000 though.
I just think it’s crazy when people I know buy these $30,000 to $40,000 cars and drive them for a few years before trading them in. I guess it’s the mentality that they want to keep up with the Joneses.
my previous car was 16 years old when it died. While i certainly got my money’s worth out of it, one of the problems of my strategy is that when my car died, i didnt have a backup readily available. Shopping for a used car can take more time then a new one. I actually purchased a new acura tl since i felt pressured to have a vehicle and didnt feel comfortable making a rushed purchase of a used. My previous car didnt even have working ac for at least 8 years so this was more than just a little upgrade. Given the current cost of cars, i think its reasonable to go up to around 50k for a car (like a suv) if you plan to keep it long term. ive never driven a car better than my current vehicle but i doubt there is much more improvements above this price. There are some things such as quiet ride that has a value to me personally and i didnt realize this until purchasing the acura. Im almost at 100k miles over the last 3 years and i plan to take it 250k. Unfortunately at my current rate, that will be a lot sooner than 16 years.
I’ve had a number of comments on my Ford Fiesta from other doctors getting out of their BMW’s, Mercedes, etc. in the physician parking lot. Funny thing is that those docs all seem to work a lot more shifts in the ER each month than I do.
Article great. I wrote similar post/blog recently
http://richdrpoordr.wordpress.com/category/cars/
While I agree that most people buy cars they shouldn’t, I am also of the thought that saving for retirement, although very important, isn’t all that one should have in mind. There are some who buy cars for status or what not, but also are others who cherish a car for it certain characteristics or qualities. Like another poster said, it wouldn’t be much of a life if u didn’t “live” it {within means}. Make sure that you are not so focused on one thing that u miss out on the joy of another. Remember, all you really need to survive in the USA can be had for very cheap. Small house in average sized town, beater cars, little eating out, public education, no designer clothes and no bad habits- and you can live on a basic salary and still save. I know many people who have followed that formula and have retired in their mid 50’s! With a salary of 200k, one should be able to do that and more while driving a BMW! Just make sure u don’t get a new one every 3 yrs. Thank you WCInvestor for a great blog
Also you have to look at the opportunity cost of buying a 100k car versus a 15k car plus the extra repair expense. I bought my saturn new when I started med school because I needed a reliable car for the commute. I still have the car today with over 300k miles, and everything still works on it and it is in perfect condition. I financed it for 0% for 5 years. So personally, I think it is best to buy a new car that you know you did all the repairs. I think between maintenance and repairs over the last 13 years I’ve spent about 3,000 bucks. I do the brakes and oil changes myself, so that saves a few bucks. Sure I’ve replaced an alternator, starter, battery here and there but still a lot cheaper than buying a new car every 3 years.
Hi
I am a very frugal spender and I too drive a beater (2000 dodge for $2k. Now using for 2.5 years). However, I have had to spend about $1.7k on repairs for this upto now. When I bought this, I had the cash to buy a 10k or a 15k car.
My question: If I can afford to pay, is it economical to buy a 2 year old car for 12K or a beater for 2k. what is the sweet spot?
That’s a great question. Is there a sweet spot? I think there is, and I suspect it is lower than most people think. I think you’re in the ballpark. The lower the value of the car when you buy it, the less you lose on depreciation. Sure, you’ve spent $1.7K on repairs over 2.5 years, or about $680 a year. How much do you think cars depreciate per year? Any car in its first 5 years of life depreciates at least $680 a year. A nice SUV probably depreciates $3000 a year (more the day you drive it off the lot). And those cars need repairs and maintenance too. That’s not even considering the payments. Some people pay $680 A MONTH on their car, and lots of people spend half that.
You might be surprised to learn that I don’t think the goal should be to find the sweet spot, because the sweet spot is almost surely a piece of junk. And I don’t want to drive a piece of junk my whole life. So just about every time I buy a car, I get one a little nicer, a little newer etc. But I pay cash. And I don’t feel a bit guilty about driving a nicer car that I paid cash for. You can’t take it with you and all that. So if I had $10-15K I’d saved up for a car, I’d spend $10-15K. If that $10-15K were my emergency fund, it might be a different story.
But I’m quite sure the sweet spot FINANCIALLY is in the beater range. Low insurance, reasonable maintenance costs, no financing costs, and almost non-existent depreciation make for a high hurdle to overcome. Two other very nice ranges in my experience are the car with 20K miles (serious discount for a nearly new car) and cars coming off lease at 39-45K miles, which are usually around half price for a new one. Since most cars go at least 200K miles, you get over 3/4 of the car for the price of 1/2 the car. Even a new car can be a good deal, see Joe’s story above. But you can’t be getting a new one every 3 or 4 years and think it’s a good deal.
Thanks for that insight WCI.
Extreme because there is sales tax even on used cars bought for cash, at least in my blue state. Hidden costs of older car include less safety. What will you do with your savings when your 0-1 airbags (or missing airbags, not uncommon in older used cars) leave you seriously injured or dead in a serious accident, vs. the 20 pillows I’ll be crashing into – if my stability control, ABS, new powerful brakes, etc fail to avert the accident.
That car was apparently just fine for you to drive 3 years ago when it was brand new. The value of additional airbags seems pretty limited compared to many other lifestyle choices we all make every day. If it’s worth thousands a year to you feel free to spend your money there.
The cars I bought 3-5 years ago are top safety picks and have a plethora of airbags and safety devices. The car I bought this year has even more. In other words, what was once considered safe and acceptable, no longer is. E.g., once everyone drove around without any airbags and indeed without any seatbelts. That is considered unacceptable today. Also, I took it from your remarks that you are not referring to a 3-year old car, but to a 10+ year old car. Most 3-year old cars don’t sell for for the low 4 figures, unless they were economy cars with few safety features to start with.
In any case, your point is taken that the cost of this safety is something to weight against other risks, and spend accordingly, depending on individual tastes and risk tolerances. But if you are doing the analysis of cost/benefit, I think it’s fair to mention that, in return for paying more for a new and more expensive car, you get a better, safer product, at least if you shop wisely.
I wouldn’t drive a small beater, however. My first “new” car after residency will be a certified pre-owned mid-size or large “compact” car that has relatively low mileage, costs 15,000 or less, and has the best IIHS crash test ratings. Then, I’ll drive it until it dies. I wouldn’t get a 13 year old Chevy Prizm that has 3/5 stars for the older, easier crash tests and only two air bags in lieu of modern cars with 6-10 air bags, ESC, and subjected to much more strenuous tests.
Right now I use an old compact car but will use something else after resideny.
You only live once! What will your kids, grandkids or even the government do with ALL that money you saved once you pass? …that’s right spend it faster than the time it takes your body to get cold once six feet under. 🙂
I think there really is a “sweet spot” for cars that is higher than the “beater” range because it is important to also consider opportunity cost. First off, I do think a “beater” is at more risk of breaking down or needed major repairs. This is likely especially true of a beater that you are buying from someone else vs. one that you have owned from the beginning. Unfortunately, we can’t choose WHEN a car will break down or not start. I get paid when I work and I don’t get paid if I don’t. Furthermore, my main work-site is 42 miles away and there is no public transportation. If my car breaks down the morning I need to go to work, I either need to take a taxi, which probably will cost at least $100 each way or give up on about $1000 worth of pay and likely, I will delay cases in the OR for the entire day. It would upset the surgeons and my chief quite a bit even if I made it with a taxi late. This is not a great way to start a job. Time spent on repairs in the shop is also significant if your time is worth $100+ an hour, even just for the time to drive to and from the shop to pick up your car and make it there before they close.
With this in mind, I think the “sweet spot” to getting a pretty nice car that is reasonably reliable is to start with a reliable make that is about 5 years old with approx 50K miles and well maintained. It should be 50% off the new one at that point but still be new and may even be better than new because it has been “road tested for 50K”. Drive it for about 5-10 years depending on how much you drive and how good the car is doing probably until somewhere around 200k miles when repairs just start happening more often and less predictably in my experience. You could probably still sell it for 40-50% of what you bought it for and it would be easier to sell than a total “beater”.
Another opportunity cost is the time needed to sell the car which is likely more time consuming with a beater. You may be tempted to just trade it at a lower price given your high opportunity cost vs. sell a not-yet-beater car privately.
WCI, thanks again for a great post. I think the used car method is great tool for building wealth and always a topic that gets a lot of reaction either way.
I agree that buying as cars come off lease (around 40-42K miles and about 50% off the new car price) can be a great option. I agree there seem to be fewer repairs in the 50-100K range than the 100K-150K range. But I disagree that the cost of those repairs is more than the difference in price you pay at 50K vs 100K.
I don’t see any reason an attending physician HAS to buy a beater. It isn’t that hard to save up for 2-3 months to buy a $10-15K car. That’s way beyond beater range.
We are starting the process of looking for a car. Did you buy your used cars through dealers? or private party? My biggest concern is how these cars were driven. That could lead to the most costly repairs (transmission, engine). I suppose we could go with a “certified pre-owned” vehicle but those sound like they put a bow on top and charge a premium for it.
We’ve only bought a few new cars but have driven them till they died. My last car I put 213K on it and am proud to say never had to replace the clutch!
My $0.02 and random thoughts, based on my anecdotcal evidence and personal experience: According to the only honest mechanic I know, a good used car is a rare thing. Most people simply don’t take care of them and there are all sorts of laundered lemons and salvage titles, concealed and lied about accidents, and other scams out there. Caveat emptor. To buy a third beater SUV, I looked through 1000s if not 10000s of online ads, emailed or called about 100s and viewed and test drove dozens of cars over months – spending a lot of time with this new, unwanted “hobby”. Most were junk, flawed in one way or another that wasn’t disclosed online or on the phone, with 9 of 10 sellers trying to pass them off as pristine despite obvious flaws ranging from title issues to ex-rental to accidents to leaking oil and misc. other mechanical and cosmetic issues. Frankly, if you are meticulous, and holding long term, I think you may be better off with a new car that you can control the history and maintenance of, rather than an unknown quantity that may well be less than you think you are bargaining for. The cream puff with all records and meticulously maintined, for sale as a used car, in my experience, basically didn’t exist. I also bid on cars I liked well enough using edmunds.com as a price guide, which prices used cars $1000s below KBB. So I offended many sellers and helped drive the price down for many a buyer who followed in my wake. I eventually purchased an American SUV with hi miles for its year, but 1 owner, clean Carfax, from a rust/snow-free state, etc. – w/ 3 cars and 2 drivers, among other reasons, we are low mileage drivers – from a Honda dealer that had had it a while, from a trade-in, and seemingly wanted it gone. (There was also another such vehicle, at another Honda dealer, but it was sold before I got there to buy it – I waited a half day too long – so perhaps this is a mini-theme.) They had it priced reasonably, I offer less, and they took it. I still spent $1,000 immediately bringing it up to snuff, despite the dealer’s alleged 50-point inspection and maintenance blah blah blah, and then another $1,000 for an in-dash navigation and a rear-view camera upgrade, installed. This is on a sub-$10K purchase. And then recently, a year or so later, the water pump went out and the honest mechanic noticed that the one-owner and dealer rehab had never included a radiator flush, and some other maintenance, so that was another $600. I am fine buying used, but prefer to buy new and baby and maintain and control the situation and keep it a long time, but that didn’t fit our m.o. for this particular purchase. For my other recent (non-beater) auto purchase, it was a $70,000 1-year old SUV, driven on lease for a year, 14,000 miles. This one I had inspected professionally, and it was deemed a new car that had been broken in, one of the cleanest ones he’d ever seen. That saved $20,000 at least versus buying new, for an essentially new car. Don’t regret either used car purchase, but I was very suspicious and carefuly and spent a lot of time searching for each vehicle, whereas with a new car you can do a bit of internet research, hit the dealers, and be done in a day. YMMV.
If you care about your cars enough to spend $1000 on an in-dash navigation and rear view camera upgrade, then I doubt you would be happy with any car worth less than $5K. There is no way I would look through tens of thousands of online ads nor email 100s to find what I was looking for. If I was that picky, I’d order it exactly like I wanted it from the dealership, and I’d expect to pay for it. My main criteria for a beater is “Does it run?” and “Do I have to put any money into it in the next month?”
Nothing wrong with getting a nice car as long as you can afford it and still meet your financial goals.