By Dr. James M. Dahle, WCI Founder
Before we get into how to buy a car, you should know that my views may be extreme. Not quite Mr. Money Mustache extreme (I take a car, not my bike grocery-shopping) but extreme enough, especially for someone in my tax bracket. You see, for me, a car is a very utilitarian item. My cars usually don't impress anyone. For instance, I only wash my car in the winter. I don't care if it is dirty, I just want to get the salt off the bottom after a run up to the ski resorts. I'm undoubtedly overly cheap when it comes to cars, but I think if you are rich, you should buy and drive whatever car you like. If you are not rich, but would like to be someday, realize that like a college education, there is a dramatic difference in cost for a much smaller difference in actual quality and that sometimes, the much less expensive option actually has better quality.
Why I Drive Inexpensive Cars
I am frugal with automobiles for various reasons. I grew up riding in and driving inexpensive cars that we worked on ourselves. One of the funniest moments of my childhood was immediately after a snowstorm when my dad, driving our Chevrolet Chevette, changed lanes through a foot-tall pile of snow and ended up with a lap full of snow. He didn't think it was nearly as funny as I did, but cars rust out quickly in Alaska, and the floor on that car had completely rusted out. It was now a Flintstone-Mobile. The best part, however, was that he then installed a board for a floor and we kept driving that car for a while longer after that incident.
I also like feeling like I got a good deal on a car. But mostly, it's just inertia. It's a lot of work to go buy something new if you really want to buy it well. It's much less work to repair a car than to shop for, buy, insure, and register a new one. So if it even remotely makes sense to repair it, I do. If it even remotely makes sense to keep driving it, I do. Because of that, I've had some rather remarkable experiences with cars as an attending physician.
You Aren't What You Drive
For the longest time my daily driver was a 2002 Dodge Durango. I bought it for $4,000 in 2010. It wasn't a great car and got lousy mileage. I don't recommend you get one. But it hauled everything I needed it to, slept two at a trailhead, and got to the ski resorts on a powder day. It had 107K miles on it when I bought it and had something like 180K miles when it finally gave up the ghost in late 2016. I did have to replace the transmission at about 130K miles. That was kind of lame because the price was pretty close to its value. But I went ahead with it and got my money's worth out of that and it was built better than the original. It had a hole in the manifold, so it rumbled a bit, but still passed emissions, so I just left it. In early 2016 it Blue-booked at being worth $3,000. So, counting the transmission and some other minor repairs, and the decrease in value, this transportation cost me $1,000 a year. That's not quite as good as my previous daily driver, which may be the greatest deal ever. I bought it for $1,850, drove it four years replacing the battery, two tires, and the windshield wipers, and sold it for $1,500. I figure that was about $100 a year (the tires were used).
Sweet car, huh!
I tell those stories to point out two things. First, reliable transportation need not be expensive. Both of those cars were very reliable. I did have to get the first one jumped one cold morning at work (the day I replaced the battery), and we had to get a tow when the transmission died on the second one. So two minor inconveniences in nine years that cost me about an hour total. Pretty darn good I think. So reliable transportation need not be expensive. Second, attending physicians do not have to drive fancy cars. You aren't what you drive.
Driving to the Poorhouse
I think many people stay in the poorhouse due to what they drive. I'm always appalled to hear about someone making $30K-$40K a year who has an $18K car loan. Bizarre to me. If you only make $50K (the average American household income) and are losing $5K a year in auto loan interest, repairs, and car depreciation, then it becomes very difficult to get ahead. Most docs can afford to drive whatever they want and still save adequately, so it's not as big a deal for this audience, but if you're not rich yet, realize that if you really want to, you can probably save enough on your transportation compared to what a “normal” person does to fund a Roth IRA every year. $6,000 a year from age 20 to age 65, invested at 8%, adds up to $2.5M, far more than most people, including doctors, retire on.
Car Buying as a Medical Resident/New Attending
Enough ranting. Let me answer the actual questions asked. First, the best car to “buy” as a resident or new attending is the one you already own. Eking out another year on your car is worth several thousand dollars. Plus, it gives you another year to save up for what you really want. But if your car dies, and you're still not rich, then buy something inexpensive. It doesn't have to be as inexpensive as my two cars mentioned (although that is a good method to speed your way to wealth). It doesn't even have to be used. A $15K-$20K brand new economy car driven for 15-20 years is also very inexpensive. But even if you just buy something reasonably priced, planning to drive it for 5 more years until you're rich, that's great.
Additional Resources:
Should I Pay Off My Car?
Car Loans Are a Bad Idea
I find it hilarious the justifications that people use for taking out car loans. Don't be an idiot.
- “But I got it at 2%. That's like free money after inflation.”
- It's still 2% worse than 0%. Besides, how much money are you really making off that arbitrage? If you run the numbers it might not be worth the hassle.
- “I'd rather use the money to put toward paying off my student loans.”
- What? You still have student loans? All the more reason to drive a beater. You're worse than broke. That better be a $2K car loan.
- “I'm leasing because I can write it off as a business expense.” (A lease is basically a loan in disguise.)
- Leasing only looks reasonable if the alternative is buying a brand new car every 2-3 years. Either is a very expensive method of paying for transportation.
- “I spend a lot of time commuting and so want something really nice.”
- We all want something nice. That's not a reason to buy something you can't afford.
- “I'm a car guy.”
- I'm a yacht guy. But I don't own a yacht because I can't afford one.
Fine. Get a car loan. I don't care. But I still think you're an idiot. Mostly because I view a car as something you should cash flow. Like a washing machine. Or your groceries. Or a vacation. Imagine yourself applying for a washing machine loan. Or a grocery loan. Stupid-looking mental picture, right? That's what I'm talking about. Since you can get a reasonably reliable car for $2K-$4K, and even a resident physician should be able to save up that much money in less than 3-6 months, the fact that you have a car loan tells me that either your finances are so out of control that you are basically living hand to mouth or that you honestly believe reliable transportation costs more than $2K-$4K. Neither of which impresses me much.
It's even worse if you're highly paid. Let's say you make $400K. That works out to $33K a month. That's the average price Americans pay for a brand new car. It's a month's income. I'm not talking about a beater. I'm not talking about an economy car. This is a nicely equipped full-size car like a Nissan Maxima. So if you stop your savings for 2-3 months, you should be able to buy it with cash, assuming you have NOTHING saved up when you realize you need a new car and get NOTHING for the old one. My car in 2016 was worth $3K, right? How many of those do you think I could have bought per month without impacting my lifestyle in the least? I assure you it was more than one.
So, to answer your question—yes, there probably are “special types of loans”. But don't use them. That means use the money you have to buy a car. If you need a loan, then by definition you cannot afford it. Don't buy stuff you cannot afford.
How Much Can You Afford to Spend on a Car?
I don't really have guidelines on how much car to buy. I feel if you're not rich yet, you should buy the least expensive thing that will be reliable and safe. If you are rich, buy whatever you want. But some people like guidelines, so here are Dave Ramsey's:
- The value of all the things you own with motors (cars, boats, planes, etc.) should be less than 50% of your annual gross income.
- If you have a car loan, pay it off instead of selling the car and buying a cheaper one if you can get out of all your debt except a mortgage within 18 months.
I think those guidelines are pretty good, even if they're aimed at Joe Everyman, not a high-income professional. Just realize that even a doc can get over 50% pretty quickly. A $60K SUV, a $50K pick-up, and an $80K boat is more than 50% for a specialist making $375K. But there are plenty of docs who cannot or will not get their student loans paid off within 18 months.
Car Insurance
Car insurance is relatively straightforward. The key point is to make sure you have plenty of liability insurance. Your state probably only requires you to carry $50K. I don't think that's nearly enough. I can run through $50K pretty fast in a hospital with a single injured person. A brand new SUV costs more than $50K. So bump that up and add an umbrella policy on top of it to the tune of $1M-$5M. As far as collision/comprehensive, I don't really care. The company line is if you can afford to replace the car (which as I've convincingly argued above should be the case for most physicians) you don't need that coverage. But the less expensive the car, the less expensive it is. Plus it's nice to have that coverage for when you rent a car elsewhere. So if you want it, fine with me. I've gone both ways in my life.
4 Tips on Actually How to Buy a Car
#1 Auction
Both of my previous two daily drivers were bought at an auction, the first during the auction and the second before the auction. You can get a car very quickly (if you can wait until the auction), but you may not be able to test drive it. Plus, you need to have a portable blue book available (smartphone with internet service) and stick to your price. Overbidding is obviously dumb.
#2 Private Party
For a used car, go for the private party over a used car salesman. Used car salesmen have their reputation for a reason. They also have a business profit that must be made to stay in business. Frequently they also do “237 point inspections” and “certifications” which jack up the price significantly, whether they add value or not. It's not that there is no value there, but the cost is probably higher than the value in most cases and you have no way to know it was all actually done unless you do it yourself anyway. A private party selling their car, on the other hand, need make no profit and will charge you no certification fee. They're also far less talented and motivated to deceive you. In fact, sometimes they are far more motivated to get the car sold than to get the best price for it. I've even seen people selling cars who didn't bother blue-booking them. Of course, sometimes that means they're asking a ridiculously high price for the car or refuse to negotiate to an appropriate price, but at other times it means you get a steal. Plus, you can use all the little things that are easy to fix or that you don't care about (that would be fixed on the 237 point inspection) to barter the price down a little.
#3 Dealer
Have fun with it—when buying from a used car dealer, realize it's a game and have some fun. I spent five weeks buying the car my wife is now driving. We bought it in 2009, right in the middle of the recession when NOBODY was buying cars. That car just sat on the lot. It was exactly what we wanted. Unfortunately, it was the only one like that within hours and hours around. But we weren't desperate to buy it. And they had mouths to feed. So I stopped in there once a week on the way to or from the disc golf course. Eventually, they sold it to us for a pretty darn good deal. (Yes, it cost a lot more than $4K. Just because I was willing to drive a beater at the time, doesn't mean my wife was.)
#4 Buy Over the Internet
When buying new, there is little reason to go to the dealership at all, except for a test drive and to sign the papers. Just find your closest 3 or 4 dealerships (and pray you don't live in Anchorage) and send each an email saying you are ready to buy and will buy from whoever gets you the best price, tell them exactly what you want, and then play them off each other until you get the best price.
#5 Get It Checked Out by a Mechanic
Have your mechanic go over it. I have a great, trustworthy mechanic. He treats me well, and I bring him plenty of business from friends, family, and these older cars I'm willing to drive.
[Editor's Note: I actually applied #4 with our 2016 purchase and it worked great!]
What do you think? Do you spend a lot on cars or are you frugal there? Do you buy new or used? Do you buy collision/comprehensive or just liability? What tips do you have for a resident or new attending buying a car? Comment below!
[This updated post was originally published in 2016.]
For me buying new is avoiding the hassle of going through unanticipated repairs at least in the first 3 yrs. WCI got a deal on his cars in the sense that he did not need to do expensive repairs, but the story might have been different. We save over 50% of our income and just bought a new car on cash and plan to drive it for a long time. It has all of the new safety features. If you look at the IHHS safety ratings most of the top picks are the newest cars. For my family safety is first. At the end buying new, if you can afford it, might be a financially reasonable decision. Plus you get the “new smell” which obviously is the most important factor.
If you can save 50% of your income and still buy new cars with cash you’re either already wealthy or will be very soon so drive whatever you like. I mean seriously, run the number on what saving 50% of your income ends up looking like in the end. Imagine a doctor making $400K and saving $200K a year. $200K at 5% real x 30 years = $13M in today’s dollars.
I see that the figure you use is based on the gross salary. If that is the case then we are saving only 35%.
A mere 35% eh? You’ll probably be eating Alpo in retirement. 🙂 Seriously, that’s a ton of money for anyone anticipating a 25+ year working career.
I now buy new cars. I should say my wife buys new cars. She does her shopping on the internet and plays the car dealers against each other and really has done well getting a good price. For years we had a car account and dripped money into it every month until we had enough to buy our next car (usually from the car auctions). I drive to work and spend a hour or more daily in a rural area in all kinds of weather. Washing the car regularly is important in snowy parts of the midwest with salt on the road a good part of the year. I agree with AllexT that two years in a newer car is worth it to me. But I still drive them until they die.
I drove my parents 12 yo car in college, a beater in med school that i paid for in cash, and when that had zero chance of passing another NY state inspection in residency i got a cheap, one year old used vehicle that was a rental car–no carfax history and passed an independent inspection. Turns out it was likely in an accident as well as driven fast at a low gear, and my transmission started going when it was 4-5 years old. Just bought my first new car in the fall when i just couldnt safely drive the other anymore and it wasnt worth the repairs. However its not a luxury car and i like to hold onto cars as long as possible. I am tired of inheriting other people’s car issues and poor care of their vehicles!
my partner bought his Subaru 2 years ago online, bought the car in california and picked up in tucson
worked out amazingly, great deal, no hassle
i think that’s exactly what i would do to buy a car in the future.
except i’d charge the whole thing on my 50 limit credit card and earn 2-5% cash back, ride the interest for 18 month free at 0% interest rate, then pay it off with cash flow 🙂
Great idea if you can. Our last two cars limited us to only putting 2K on a cc. The rest we paid in cash.
I have not read all of the responses, and perhaps this is a lame reason to buy or keep an older car (perhaps reflecting my age!)–newer cars, and we have two in the family, have much more complicated electronics to master. My wife has a 2015 Volvo (purchased new), and my son drives a 2013 Acura (purchased used), and learning to manage the radio, the bluetooth, the navigation, the climate control, etc. is quite a chore. In fact, I dread driving either car. Even my son, who is a relative tech wizard, has abandoned his car’s navigation and bluetooth, in favor of Google maps on the iPhone and the “aux cord”.
In my 2011 Prius, other than the fact that the radio is digital (not an analog dial), the electronics are about as complex as my first car, a 1984 Accord! Whenever I get an inkling to “upgrade” my car, I think not only of the punishing buying process, registration process, registration fees, increased insurance costs, increased personal property tax, depreciation, etc., but also the hassle of learning the new electronics. I now tell people now that my next car will be autonomous, if I even ever need another car of my own.
We also don’t use the navigation on our cars. Not because we don’t know how to use them, but because google maps is more accurate.
I think this is true for most everyone, the big map is pretty…pretty useless. Some cars have google maps nav, Volvo I think.
Great article. However, one aspect of car buying that a lot of folks on WCI or Bogleheads discuss much less is car safety. I am all for buying inexpensive vehicles, but the rate of the addition new safety features in cars is impressive. Before becoming an MD, I worked as an EMT/paramedic and in the 1990’s I remember seeing a remarkable difference in patients we picked up after traffic accidents with airbags and newer cars than folks in older cars (sure this is very subjective/anecdotal). I think nowadays there are continued new safety improvements in newer cars and I value my family’s and my safety far more than the saving of driving a beater.
For example, I was recently involved in a motor vehicle accident (some one ran into my car) and my car was totaled. I sustained minor injuries, but feel strongly that I came out of the accident better, because my car was about 1 year old and built quite well. Overall, I think the bigger vehicle that you drive also will protect you better than a lot of smaller, lighter cars out there too. But I feel that driving a small ‘beater’ car for 10+ years, can put you at much higher risk if you were involved in a more significant accident.
I’m sorry, but my 10+ year old German car has AWD, seat belts, air bags, and electronic stabilization. I think it is no less safe than a new car. If there is a difference in safety it is marginally so and not worth another $30k 3 years used just yet.
A couple of tips:
1) If you are searching for a used car, there are old age homes/retirement communities that publish newsletters with ads. Typically the cars that are sold here have very low mileage and have been driven, well….like a grandma (which is a good thing).
2) Check how much insurance will cost you before you buy the car. Hondas have great re-sale value but they typically are costly to insure because they are the most stolen cars.
I wouldn’t recommend purchasing a new car as a resident since they are relatively expensive no matter how low-end you buy, but if you do, tip #5 is very true. A lot of dealerships have “internet sales” offices, so I’d recommend calling dealerships directly and asking what their best offer on X car is today. The larger dealerships tend to have the better deals, I believe because the manufacturer offers more incentives to dealerships that sell larger volume, so your best bet is to try them first. Also don’t tell them you intend to pay cash until the sales contract has been drafted and signed.
This has been addressed so many times already I suppose but I feel a few points shouldnt’ be overlooked.
1) Car loan rates are ridiculously low right now so buying new isn’t a horrible idea if you have the money for it (most residents don’t). I just bought a car yesterday at 1.99% Frankly Id rather pay the low rate and hang on to my mind then empty it out.
2) The value of a warranty shouldn’t be overlooked. Again most residents aren’t in position to buy a new car but most people that run with the “buy a beater” mantra also have had a string of good luck in regards to repairs. Cars rarely have significant issues in the first 4 years and if they do its usually covered under a warranty. Many argue you could set that money aside which is true. But even simple repairs (AC going out) can run $1500-2000 dollars. That’s 6 months of car payments for a new car.
Also I would much rather take a loan at 2% and keep 30K in my hand than pay 30K for a depreciating asset.
That’s silly reasoning. Instead of paying 30k for the depreciating asset, you pay 31.5k for a depreciating asset with a 5 year loan.
Now if you are literally going to put the money into something better, great. But usually it just sits in the bank or gets spent on something else. But don’t kid yourself into thinking that a loan with interest helps to make a depreciating asset depreciate less.
Agree on the warranty. It is the only time I buy one. My son recently bought a new to him (used) Honda Accord. Because it was 3 years old and less than 36K (35,935 miles to be exact), he was able to purchase a HondaCare warranty for 5 more years or 120K for about $1000. He will get through med school and internship with the warranty. If it’s like most of our Hondas have been, it should make it through residency as well. I was not aware that a warranty could be added to a used car.
This may be one of the differences for people who drive used versus new. There is no reason fixing a/c should cost $2k unless yout drive a porsche. The compressor or condenser shouldn’t cost more than a few hundred bucks and a few hours work (at most) and more likely a $40 can of refrigerant will fix the problem. If you can’t be bothered to do simple repairs yourself, the money saved buying a used car is certainly reduced.
Well a new ABS system for a VW Jetta 09 costed me 2000
I got a used volt with 100,000 miles 3 years ago for 10 grand. I’ve driven it another 100,000 miles with free electricity from my place of work. Spent maybe $500 in maintence over the last 3 years because I had to buy two tires. This is the cheapest car I’ve owned.
That’s a lot of miles in three years!
Four years into practice I bought a new 2013 Tacoma. It was smashed from behind by a semi truck one year later (truck destroyed, but cab completely intact). My insurance gave me more for it that I paid new! I guess they hold their value very well and I must have negotiated pretty well. I was able to then get a 2014 Tacoma and had some insurance money left over. I looked at buying a 1-2 year old Tacoma, but they were priced a little higher than new. I asked the salesman about this, he said that part of the issue is all the incentives that the manufacturer offers, but also that some people are heavily against buying new, so they won’t even look at a new truck thinking they will save by buying used. So occasionally the dealer will sell a 1 year old truck for more money than a new one!
Waiting for Tesla Model 3 to finally enter production.
everyone is forgetting the mot important thing about car buying, that is move closer to the things you do ie. work, play, etc. Drive less miles put yourself at less risk for accidents, spend less wasted time in a car, more time doing things productive like work, exercise, spending time with family. Also if your beater breaks down you aren’t far away from home
I read in the comments that multiple people purchased their Hondacare warranty online — I can’t find a link on Honda.com on how to do that (just a FAQ saying I can purchase it at the dealer). Can someone share the information on how to purchase this online? We’re planning on purchasing an Odyssey this summer so this would be of great value.
I used Hyannis Honda in Hyannis, MA. Ask for Sean Rausch. I live in Alabama. I found them through the Honda Pilot Forum at http://www.piloteers.org. Many recommended them from all over the US as low cost. Your warranty is with Honda so doesn’t matter where you get it. Our local dealer couldn’t match their price. We have used them for a warranty on my new Pilot and my son’s used Accord in the last 6 mos. Saccucci Honda in RI was also recommended, but was not as cheap as Hyannis. Good luck.
Saccuci and Hyannis Honda Care are the ones I’ve got quotes from. Do both as one is usually a little cheaper than the other depending on what you have.
Saccuci and Hyannis Honda Care are the ones I’ve tried. Do both as one is usually a little less than the other depending on what you have.
Hopefully this one works, the last reply was held up…
I agree with Ricky. Hyannis was better both times for me. My first comment was held up too.
As with medicine, preventative maintenance goes a long way. Buying a used car that has properly been taken care of and continuing with oil changes, transmission fluid changes, brake changes etc. at required intervals will make your car last well into the 200k mile territory.
Also, if you think washing your car is a waste of time please think again!! Washing helps remove residual salt, road grime, and acidic residue from the cars paint and frame which helps prevent body and frame rusting so that the car maintains structural rigidity in accidents. This is especially important in mountain west states and eastern states where salt is heavily used on the roads in the winter. Although it might be a “pain”, I try to wash once every 2 weeks and then use a heavy wax every half a year as well as spray off the undercarriage of the vehicle in the winter.
Hope this helps and happy driving to 200k!
It’s also important to consider the cost of repairs. I had a Jetta that broke all the time and seemed to cost $800-$1000 per issue, even at a local mechanic. I don’t know why German cars are so expensive to maintain and repair. Now I have a Toyota and it’s always a pleasant surprise how inexpensive the maintenance is. I’ve been lucky enough to not need any major repairs yet.
I enjoyed reading about KAWHI Leonard (The San Antonio forward) he’s the best defender in the NBA.
The 24-year-old last year signed a five-year $94 million deal with the Spurs — but it hasn’t changed him. As Sports Illustrated reports, Leonard is not your average NBA star.
The 2015 defensive player of the season happily admits he still drives the same 19-year-old Chevrolet four-wheel drive he calls “Gas Guzzler” that he used as a teenager.
“It runs and it’s paid off,” he told si.com.
“Just because I’m willing to drive a beater, doesn’t mean my wife is.”
This applies to me as well. At least she doesn’t care about luxury cars. There would be some trouble then.
If you are looking for a “new” car you should look at rand’s auto in bountiful utah. He buys cars with very low miles, 1 owner clean titles and sells them for dirt cheap. His strategy is to sell the cars quickly with low positive margins. I haven’t found anywhere else that beats his prices.
On the other topics, best bang for your buck is to buy a car and drive it until it literally can’t be driven.
I’ll have to take a look at that for my next one. Hopefully that day is half a decade away, but maybe not given mine already has 205K miles on it. Still runs great though and doesn’t look too bad.
I came across a comment on reddit that reminded me of this article: https://old.reddit.com/r/slatestarcodex/comments/bcx6fs/rationalish_car_purchasing_guide/ekusa71/
Quoted below:
There are about 5 deaths per billion KM. (e.g. http://discovery.ucl.ac.uk/1380581/1/1380581.pdf)
Double that to 10 to take into account injuries. (e.g. https://bmcpublichealth.biomedcentral.com/track/pdf/10.1186/1471-2458-14-765)
Then halve it to take into account that a lot of people drive drunk, don’t wear seatbelts, or make other terrible decisions.
Take the value you put on your life. E.g.: $20 million.
Take the number of km you drive. EG: 10k
Then the annual “death cost” of driving, assuming a typical car, is about
10000km/year * $20m/death * 5 deaths (or adjusted severe disability events) / 1b km = $1000 / year.
So something that halves my death rate would be worth about $500/year to me and more/less to you based on how much you value your life and your driving patterns.
Now how does the vehicle you drive impact your safety? You can look at death rates by vehicle, but it is hard to determine causality.
In general, the most important things are
1) Not riding a motorcycle (appx 20 times the death rate http://blog.brendanmitchell.com/wp-content/uploads/2011/03/death-rates-transport.jpg)
2) Not driving drunk (three beers appx double your death rate, can’t find source).
3) Wearing a seatbelt (appx halves your death rate https://www.roadsafetyobservatory.com/HowEffective/vehicles/seat-belts)
4) Not driving too fast. Death rates increase rapidly with every 10mph increase in speed (http://3.bp.blogspot.com/-pNcEQ09eMmI/Teqc5_gPaTI/AAAAAAAAAFU/WVWQzV7q9XY/s1600/Fall_Fatalities_real_graph.jpg)
5) Driving something big (appx halves your death rate, with the caveat that causality is hard https://www.iihs.org/iihs/topics/driver-death-rates).
6) Driving something made within the last 10 years (appx halves your death rate https://www.iihs.org/iihs/topics/driver-death-rates).
Hi guys, I want to buy a very safe mid-size sedan that will last forever, and I don’t care if it is new. From reading this post the best deal I could get in the long run would be a used car bought not at the dealer, but by a private seller, correct? Does this hold true if the dealer is offering to buy out the last few months of my current lease? (I have a Mercedes C300 currently). I can I buy from used car dealers around the country? Would they add significant fees to deliver a car to my location? Also, I was focusing in on a 5 year old car or around there. Knowing myself my “risk tolerance” of a 10 year old car needing a major cost repair in 5-10 years is not that high and would rather pay a little extra money and get a 5 year old car that might need one in 10-15 years- is that reasonable or is it truly worth it to get the 10 year old car? Finally, my mid-size safe and last forever criteria I have narrowed down to either a camry or accord- any thoughts on other models?
Thanks guys!
If you want a car that will last as long as possible, buy a brand new one. If you can’t afford to do that, then buy the best you can afford. But if you want the best “deal” on a car, I’m convinced it is cycling $2-5K cars.
Yes, the rule of thumb is that you will pay a dealer more than a private seller for the same car. Obviously, there could be an exception every now and then.
Ha thanks! during my research I came upon a great comment on bogleheads forum:
“Thanks all. All this talk got me thinking. If cars were investments, what would they be?
1. U.S Bonds: Late model Japanese Sedan. Historically bulletproof, but have they peaked?
2. TIPS: Hybrids – Is the cost of gasoline inflation protection worth it?
3. TSM: Late model US Big 3 Sedan – mainstream, a little riskier than bonds, but better value long term
4. TISM: Jetta TDI or Subaru WRX – A little exotic, a little fun, but very practical
5. Facebook: Tesla – Potentially revolutionary, but at what multiple?
6. Mortgage: 10 year old German luxury sedan – you regularly throw monthly repair payments at it.”
I myself am still leaning toward 5 year old camry/accord- would be my equivalent of the Vanguard Total Stock Market Index. US stock market lasts long, great track record, has only crapped out severely/black swanned minimally over the past 100 years, and will get great value the longer I invest.
I think a 10 year old 2-5K car might be a more REIT index- potentially bigger bang for your buck, though more of a risk than VTSMX.
I think that it is going to be helpful to follow the tip that you gave to choose a car that will be less than fifty percent of our annual income. My wife and I have been talking about finding a car that we could use to go to work and run errands, and we are on a tight budget. To be sure that we could stick within our budget, I will consider choosing one that is less than fifty percent of our annual income.
I think that it will help us be confident in our choice of which car to get if we were to get it checked out by a professional mechanic before we would buy it, so I appreciate the tip that you gave to do so. My wife and I are going to need a new car because we sold her old one, so we could upgrade, and it will be important for us to know that we are getting the right one. To help us be confident in the one that we choose, I will get it checked out by a mechanic.
What would you suggest for an incoming PGY1 whose beater has broken down and needs to purchase a new car? Would lease or buy used be best? I want something reliable and safe with good gas mileage so although Craigslist may be the cheapest, I’m ok paying more for reliability.
Buy used. If you need to borrow, don’t borrow more than $5-10K. I would borrow $5K. That’ll get you a 10 year old civic with 120K miles on it. That’ll certainly get you through residency and your “live like a resident” period. Then you can buy a Tesla.
Leasing is the most expensive way to drive.
Any recommendations for an arrangement where an employer gives $400/mo as a vehicle stipend but has a requirement that the car must always be <5 years old?
Assuming I am with this employer long term, this has been a challenge to decide how to approach between leasing (which I thought I’d never do) and buying new (which I also thought I’d never do). I currently drive a 2008 but have my wife’s 2016 listed in the paperwork to receive the incentive. On January 1 the car will be 6 years old and I will lose that incentive until I replace it.
I don’t want to lose out on $400/mo but also don’t want $4,800/yr to entice me on spending $70k on a new Ford Lightning. I have NEVER entertained leasing, but seems it might be an option here as it would always keep the car “new”?
(No debt other than mortgage. Saving 20-25% of annual income yearly for retirement)
Sounds like a stupid employment requirement to me, but if you otherwise like the job, I guess you’ll have to go lease a car since the job requires it. Unless you can just buy a car every 5 years and still get the money. Then just do that and alternate between yours and your spouse’s.
Thanks, the alternating between hers/mine is what I was thinking. Would allow ~10 year ownership while still receiving the incentive. I’m really trying to avoid a lease.