By Dr. Jim Dahle, WCI Founder
Over the course of a few days several months ago, I ran into several instances that just make me shake my head. All of them illustrate the fact that what you drive has a very real effect on your ability to acquire wealth and reach financial independence and the freedom and joy that come with it.
The first episode was a lady on the Dave Ramsey show. She made $36,000 a year and owed $25,000 at 12% on her car worth $17,000. I don’t think I have to say much about why that’s a problem. The other two episodes were threads on the Bogleheads forum and the WCI forum where young physicians had car debt and were trying to justify it.
I always find it amazing how much money people will spend on four tires and a steering wheel that gets them from point A to point B. Especially, when the're spending money that they do not have. Admittedly, I have never been a “car guy” and I grew up in a house where there was always at least one “beater” if not two or three. There were important lessons learned in that house, especially over the long run. Those two parents of mine raised six kids on a very middle class, single-earner income and retired as millionaires. One of the main reasons why they were able to do so is that they drove “$5,000 cars” for a good portion of their lives.
Can You Really Get Rich Driving a $5,000 Car?
First, Let's Define What a $5,000 Car Is
Let’s pause for a minute and define a $5,000 car. If you have never had one or have never been shopping for one, this might be a foreign concept to you. A $5,000 car is a 7-year-old Nissan Sentra or Mazda 6 with 100K miles on it. That car will probably run for another 50-150,000 miles over 5-15 more years while needing a few minor repairs and a major repair. At the time of the second major repair, the car will be considered “totaled” and can be sold to a junkyard for $500. That second major repair may be 20K miles away, but it is probably 100K miles away for that $5,000 car.
$5,000 Cars Aren’t Awesome
Let’s acknowledge for a second that driving a $5,000 car isn’t an awesome experience. It doesn’t have that new car smell. You’re not going to impress anyone with it. There are a few little things wrong with it. It has a little ding in the rear bumper. The rear window on the passenger side doesn’t go down any more. It’s going to need new tires next year. It might even burn a little oil. It turns out you can buy a lot of oil for the price of an engine overhaul, but the point remains that this isn’t a car you've ever dreamed about and drooled over. If you are a middle-class earner who wants to become wealthy eventually, this might be a long term proposition, but for the high-income professional, these minor inconveniences are far more temporary.
How a $5,000 Car Makes You Rich
There are a number of costs that go into owning a car that you may or may not have considered.
#1 Depreciation
A brand new car may lose half its value over its first 5 years. On a $30K car, that’s $15K over 5 years. A $5K car basically doesn’t depreciate in any significant way.
#2 Opportunity Cost
The money you shell out for a car could be invested and earn a return of perhaps 5-10% year. The difference between a $5K car and a $30K car is $25K. Over 5 years at 10%, that $25K earns another $15K. The return on $5K is far less.
#3 Repairs
As a general rule, the more expensive the car, the more expensive the repairs. If you’re buying a $5K car, it is probably something like a Nissan Sentra, a Mazda 6, a Dodge Neon, or maybe a Honda Civic. Repairs of these popular cars are very inexpensive. Plus, when you have an old car, you are far more likely NOT to repair every little ding or malfunction. So while an older car probably will require more repairs than a newer car, the difference is not nearly as big as most assume, and may even be negative.
#4 Maintenance
Where do you take your $30K car for maintenance? To the dealership. Where do you take a $5K car for maintenance? To Wal-mart, where it is much cheaper. And chances are you’re going less often too. Who washes a car with 150K miles on it? Another saved expense.
#5 Insurance
It simply costs more to insure a newer car than an older one. That is because it costs the insurance company more to replace it, but more importantly, you are less likely to be able to simply replace the car, so you are more likely to purchase comprehensive and collision insurance instead of just liability insurance on the car.
#6 Fees and Interest on a Loan
Most people will finance a $30K car but can purchase a $5K car for cash, skipping all those fees.
The Bottom Line
Your cost of ownership on a brand new car may be $5-10K a year, whereas the cost of ownership on a $5K car may be $1-2K per year, and possibly less if you get lucky with repairs. But wait, there's more. Most households have not one, but two cars. If you're a two car household, you can double everything in this section.
The Sentra Factor
Let’s say there is a difference in the annual cost of ownership of a new fancy car and a $5,000 car of $6K per year. Now, take that $6K a year from age 18 to age 65 and compound it at 5% real. What do you get? You get rich. That’s what you get. That adds up to $1.1M by age 65.
The vast majority of America’s middle class retires with far less than $1.1 Million. In fact, many doctors retire on less. Forget the Latte’ Factor. If you want to get rich, consider the Sentra Factor. Heck, in the personal finance world I’m considered a moderate on this topic. At least one personal finance blogger suggests you shouldn’t drive a car at all and should go pick up your groceries using a bike trailer. Having done both, trust me when I say that the luxury difference between a $5K car and a bike is 10 times the difference between a $30K car and a $5K car.
When Is It OK to Buy That Nice Car?
Now, many doctors and other high-income professionals have challenged me on this point. They are correct that a mere $6K a year probably isn’t as big a deal for someone earning $300K as for someone earning $50K. They are absolutely correct. If you’re saving $60K a year, then $66K a year doesn’t get you to a dramatically different place. So if you’ve already got your $1.1M socked away, you can skip the rest of this and go buy that $30K car you want.
What’s that you say? Your net worth isn’t $1.1M? In fact, it’s -$300K? Well, then you’re worse off than Mr. Middle Class. You’re far worse than broke. It’ll be years before you get back to broke. Go get yourself a $5K car. Medical students, residents, and new attendings are usually worse than broke. Start acting like it. Fake it until you make it might work as an MS3 trying to play doctor, but it isn’t going to work in the financial independence game.
Excuse #1 – “A $5,000 Car Isn't Reliable”
There are three excuses that people, especially doctors, throw out when I suggest they drive a $5,000 car for a while until they can afford to drive something nicer. The first excuse is the reliability argument. “But I can’t drive an old car. I don’t want to be stranded on the side of the road.” The average car in America is over 10 years old. How many cars did you pass that were broken down on your commute this morning? That’s right. None. All those 10-year-old cars got where they were going just fine. Sure, a car with 150K miles on it probably does break down a little more often a car with 50K miles on it. But the difference is far more trivial than most who have never driven an inexpensive car realize.
Consider my own history. For the last 10 years, my daily driver has been worth less than $5,000. (One was $2K, the other $4K when I bought it.) In that period of time, I have had two breakdowns. The first required a jump and 10 minutes at the auto parts store to get a new battery. The second was a transmission that went out. While that was far more expensive, the inconvenience factor was only slightly worse, requiring about an hour of my time while waiting for a tow truck and a ride from a friend back to our other car.
But the point remains that despite driving a car much less expensive than $5K, I’m averaging a breakdown about once every 5 years. And it’s not like I’m not taking these cars out and abusing them. You’ve seen the pictures on my blog. That beat-up Durango has made plenty of trips into places where “getting stranded on the side of the road” could have dire consequences.
But if you absolutely cannot stand a $5K car, then fine, buy a $10K car. What's a $10K car? It's a 3 to 4-year-old Sentra with 50K miles on it. You're going to have a very hard time making the case that a car with 50K miles on it is unreliable. You still get most of the benefit compared to a $25-30K car.
Excuse #2 – “It's Not Safe”
The second excuse I hear is the safety issue. “But new cars are so much safer now. They have airbags and anti-lock brakes and stuff.” Well, guess what. Both our 2002 and 2005 SUVs have both anti-lock brakes and airbags. There is actually published data on safety, which of course varies by vehicle. It turns out that a 5-year-old Accord is just as safe as a brand new one and a 10-15-year-old Accord is only marginally less safe.
Besides, even if you buy a brand new car, it's going to be a 3-year-old car eventually and not have all the latest safety gear. Then what are you going to do? Churning brand new cars every three years is, without doubt, the most expensive way to pay for your transportation needs.
Part of the “safety argument” is just marketing. Since cars are so reliable now (remember the AVERAGE is over 10 years old) they have to come up with some other reason to get you to buy cars frequently. Look at it this way. If your “family's safety” is so important to you that you're willing to go into debt to buy a car, are you at least buying the MOST SAFE car on the road? Probably not. This is just an excuse to go into debt and not a very good one at that.
Excuse #3 – “Lives Rely on Me”
This third excuse is my favorite because it is just so dumb. It basically goes like this —”I'm a doctor and sometimes I have to get to the hospital very quickly to save a life. A breakdown could kill somebody and I couldn't live with that.” Your financial advisor or your spouse might buy that argument, but I don't because I actually work in a hospital.
“She may not look like much, but she's got it where it counts, kid. I've made a lot of special modifications myself”.
The times when minutes actually matter in medicine are few and far between and impact very few specialties. So if you're even thinking about this one, you'd better be an OB, a pediatrician who responds to L&D, perhaps anesthesia, perhaps trauma surgery, and perhaps even vascular surgery. Everyone else can forget it, including emergency docs. Your partner isn't going to leave before you get there and at worst you're going to be an hour late. Most specialists I call (including OB, peds, anesthesia, trauma, and vascular) don't even call me back for 20 minutes.
But even if you're one of those select docs in this category, bear in mind the odds we're talking about. We're not only talking about just the odds of having a patient where minutes matter, but you've got to multiply that tiny risk by the tiny risk that the car breaks down on that particular trip. Again, the odds are astronomically low. If this tiny risk is a big deal to you, then I would again suggest you move closer to the hospital because if a half hour could matter, then “that extra four minutes” could matter too.
A Reminder That You're Not Rich
One other benefit of driving an inexpensive car is you have a daily reminder that you are NOT rich, at least not yet. Expensive purchases tend to run in packs if you don't spend very consciously. Nice clothes, nice cars, nice vacations, nice homes etc. It seems silly to park that $5K car in the driveway of a $2M house. So if you'll drive a $5K car for a few years, chances are good you'll spend a little less on some other luxuries, grow into your income a little more slowly and reach financial independence much faster. If nothing else, it will give you a daily reminder of your financial goals.
Now, I don't plan to drive a $5,000 car the rest of my life. When this Durango dies, we'll probably replace it with a brand new $50K-$60K SUV, bought with cash, just like every other vehicle, toy, vacation, or home improvement we've ever bought. My business manager told me she was wondering when I was going to replace that Durango. I told her I love that $5,000 car and its predecessor because they made me rich.
[Update: The Durango died and was replaced. More details in this post.]
What do you think? How much of an effect does driving an inexpensive car have on building wealth for someone on a middle-class income? What about for a high-income professional? How did you decide when to upgrade to your “doctor car?” Comment below!
Like many replies here I am not a car guy. Not being in a profession where appearances count for much I look for reliability first and comfort second.
That said I think you missed a major point in favor of buying “cheap” cars– you just don’t have to care as much about them. For example I always have a pickup truck in addition to a good gas mileage daily driver. Last month the pickup truck wouldn’t start one day. Spent a couple of hours on e-bay motors and bought a replacement for $1,600 bucks. Sold the beater for $800. If I’d have spent $5,000 or $10,000 on a replacement I had felt the need for 10 to 20 hours of “shopping” to get a good deal. At $800 net I can move on to more important things for that time.
At what I pay for cars I can buy one almost on a whim without feeling guilty. Tired of Blue– buy something red.
Good point- the disposable car phenomenon.
I bought a “10K car” this year (actually $12K) and am pretty happy with it. Though a 5K car would have been more admirable, I didn’t want to wade through craigslist or haggle with dealerships. I ended up buying a 2015 Versa Note from Enterprise. Put it on 3 different credit cards and paid it off next statement – I only wish I could have timed it slightly differently and earned more credit card bonuses than I did.
Top 5 Reasons I love this post:
1. This is one area where I’ve been less frugal that WCI. Imagine that! We buy used, but my last 4 vehicle purchases were between $10k and $20k.
2. Excuses for “needing” an expensive car are shot down with precision.
3. Points out all the additional costs to a luxury car. It’s not just the purchase price that gets you.
4. There are cheaper alternatives to the $5,000 car as pointed out in the comments. Bikes (I bike to work often), public transportation, etc…
5. All the great discussion in the comments.
Cheers!
-PoF
The excuses section was definitely my favorite.
Given you industriousness, I believe you deserve absolution for limiting your car purchases to < $20k.
Wow! I return from a Duck Hunt to find 140 comments on a post about cars of all things. Maybe it is a good thing that I’ve got two more of these coming this year- one about the new car we bought and a Pro/Con post from someone who has participated heavily in this comments thread. Should be fun.
Speaking of trips, when is the first WCI ski trip/lecture going to be?
We are seriously debating a local conference. I don’t think getting awesome speakers would be hard, but I do wonder if we can get enough people willing to pay $500-1000 to cover expenses, much less make enough profit to justify our effort in putting it all together. It doesn’t work at 20-30 people, but would at 100. I’d do it every year if we could get 200 people repeatedly. Preliminary estimates are that the costs would be $30-50K for a 2 day conference. The main expense would be paying the speakers and their expenses.
Probably not happening any earlier than Feb 2018 at any rate.
Well, it’s on my calendar then. See you in 2018!
would it be for CME (at least some)?
Then you could really bump attendance as many of us have CME allowances.
If you have presentations on the fincancial side of practice management and billing, that could help get CME approved (and other ways I’m sure).
I would love to attend!
After reducing my net worth substantially via divorce, I sold my Porsche (paid for with cash) and bought a used Subaru. Time to rebuild wealth. The gratification comes when (1) I fill up at the pump. For a lower price (regular vs. premium gas), I an now go 480 miles instead of 210; (2) Repair costs are a fraction of what they used to be; and (3) when I see my investing accounts climb in value. It will take a few years to get my net worth and retirement savings back to pre-divorce levels. But the financial security is worth more than the thumbs-ups from other drivers at stop lights.
LOL this post has quickly become a bunch of grandpa stories about all of your cars. Everyone has an exception and a story to shout. Lots of complainypants here #MMM
Here’s the overall point: Stop wasting money on cars if your financial house is not already in order. (No student debt + maximizing 401k, IRA, Emergency fund + contributing to 529 + 15yr or less mortgage)
That would have been a very concise way to do this post.
I think another alternative is the brand new $15-20k cars that you can drive for 15+ years with minimal maintenance. I like this route because it addresses the reliability point (my priority in owning a car) and you have it from day 1, can take care of it properly and benefit financially from owning a reliable, cheap car a long time. Addressing the image aspect brought up in some posts, these cars (civics, corrolas, etc) scream practical and grounded.
I agree with Tim. I prefer to buy a car new and keep it for a very long time…
I disagree with some of the comments’ conflation that a $5000 car is a beater. Sure, you can pay “$5000” (adjusted for your market) for a beater if you don’t know how to buy a car or what you’re looking for or how to bargain. For example, a dealership tried to sell me a 2007 base model Kia Sorento with a salvage title, 150k miles, a dilapidated interior, need for some body work and a new timing belt for $7k. It was a true beater: needed body work and was way behind on its routine maintenance and no way the engine would make it another 100k miles.
However, I ended up buying a $5k 2000 Toyota Camry XLE V6 with 80k miles: nice trim, amazingly maintained, and it’s so much fun to drive! I’m hoping to make it to at least 500k miles….if everything isn’t mandated auto-driving, electric by then, anyway! My last car was a then-$4000 1992 Camry that lasted 290,000 miles with 10 years in my ownership with just routine maintenance and not a dent on the body before I sold it. Both were safe, reliable and well maintained – no reason for any one to think they’re beaters or look down on them!
It’s immeasurably more difficult to drive a beater if you’re used to a late model vehicle, but your financial situation requires a downgrade. The flip side is that getting yourself a new used car after the old beater wears out feels luxurious. My ’89 Chevy Caprice was stolen my first year of medical school (’05-’06) in Birmingham. Replaced that with a ’96 Buick Regal bought for $3500 at auction; that baby lasted through med school, residency. All that made buying a ’08 F-150 two years out of residency in ’14 feel like such an upgrade. There was some good-natured teasing along the way, of course, but I wouldn’t trade my financial situation with that of any of my colleagues.
Very interesting post and comments. However, I try not to get bogged down in the details. Once you are debt free, Just save (invest) a large proportion of your income (50% gives financial independent in around 15 years), and spend the rest of your money on anything you want. $30k cars, $5K vacations, and $250 meals are all extravagant but real possibilities as long as you adhere to the above formula.
Its amazing how fast resale value drops on new cars. I currently drive a 5 year old Camry with 114,000 miles. I bought it new for around 32K. Its still in great shape. I just looked into trading it in and the trade in value is about $7200!
Very true so why not keep it another 5 years and save yourself the cash. You know all the maintenance and accidents (or lack there of). That’s what we try to do, we have a 10 year old prius 180k+ miles and we will keep it as long as possible… it’s still incredibly reliable and fuel efficient.
Wow! You consumed $5K+ a year in automobile depreciation. Painful! I’d hate to calculate what it is on my boat. Perhaps worse. Somewhere between $2-13K in a couple of seasons probably.
Something doesn’t seem right for your figures? I have a 2009 Camry SE V6 bought 27.5k new with 130k miles and I just recently inquired about trade in not long ago and was offered $6200 before even starting to haggle. KBB is showing private sale estimate to be around $8200. I’ve owned my Camry longer, with cheaper purchase price but somehow my trade seems too close to yours for comfort.
I think you got salesmanned.
I drive a 43 year old car: I bought it new when I was getting out of the
Army. (back when they were still drafting). I’d saved money in the good Military savings plan as I had an overseas assignment. It’s a Mercedes, and when I bought it in 1972, the American cars weren’t made well. I bought it planning on not buying another car in my life, and I was right. It has a little over 100K on it as I was able to walk to work. I’m now retired. Lesson: Buy a well-made car (used or new), keep it maintained, walk when you can, and it’ll pay dividends in saved transportation expenses.
That is amazing. Seriously. That might be the most amazing frugal car story I’ve ever seen. That’s less than 3K miles a year.
I love and hate this article. It tells me what I know is already a bad decision with depreciating assets. As a semi-car person, I want to ignore it completely and compensate being frugal in other areas. Never had income till I started residency and currently in the midst of PGY2 in EM. Never got to enjoy a sporty car or a car I particularly desired because of the lack of income till now.
My debts include my 100k in student loans. Getting closer to 28 and about to have kids probably in the next 2-3 years. I wanna give one last hoo-rah and purchase a car I’d enjoy before then. I have a 2009 Camry that has had no issues but really want a new Subaru Forester. I keep justifying the purchase with all my financial targets having been met of maximizing both my Wife and I’s Roth IRA for the past 2 years and the 403b that my residency hospital provides.
Even when I budget in for a car payment, I’d still be on target to maximizing my Roth IRAs and 403b till the end of residency.
Being the deal seeker I am, I also joined the Subaru Ambassador program prophylactically to further negotiate better pricing on a new purchase. As well as Subaru giving me $150 quarterly to purchase gear such as jackets etc. (stamped with Subaru logo of course).
I’m still on the fence about the purchase but I might pull the strings when I start my PGY3 year and have the ability to do the pay as you learn program that EMCARe provides or moonlight once every month. I’m also on target for getting my student loans less then 6figures by the end of my PGY2 year. Initially started with I believe 160k of student loans :). Sold my old house to purchase a condo and pay down all my high interest student loans.
The good news is your student loan debt is only 50% of average. And if you’re maxing out a Roth IRA and a 403(b) as a resident….do whatever the heck you like. You’re WAY ahead of your peers.
I would, however, give serious thought before signing up with EMCARE.
Oops, just re-read what I posted. I need to clarify the 403b portion. I contributed the max needed to get the hospital match not that I fully funded the 403b. That equates to about 6% + 4.5% that the hospital matches of total gross income for contributing that 6%. No way can I afford the full 18k.
I realize this is a total thread resurrection, but here goes. After spending far too much money for the ongoing repairs for my 14 year old BMW 540i (purchased when it was 4 years old for $25K), I sold that albatross two weeks ago for $3K and bought a 2007 Mazda 3 with 72,000 miles for $5,000 on KSL.com. A couple of my partners gave me grief for buying a “chick car”.
The owners had graduated from college and had a baby and bought a bigger car. The Mazda sat in their garage, unloved and unused for the last year. Clean title, low miles (for a 10 year old car) and it’s even a stick like my 540 was.
Now I just need to focus on the $14K left on my wife’s Acadia. But you inspired me to stop spending stupid money and I bought a literal $5,000 car. I’ll drive it for a few years, teach the kids to drive a stick and perhaps let one of them take it to college.
Let us know how it goes!
When I got out of the Army in the early 70s, I was in the car market. Since the American cars at that time weren’t very well made (IMHO), I bought a new Mercedes (paying cash I’d saved in the military’s generous savings plan), thinking if I kept it maintained it’d be the last car I ever bought. That car is 45 years old now, I still drive it, and is in excellent condition. Lesson: Buy a well-made car, keep it maintained.
Wow! If you can keep it for 45 years, you can buy anything you want and have it work out well financially.
I continue to live like a resident after all these years. I’ve only had one house, never married, and walked to work or rode my bike. As a result, my net worth is over $5m, and only worked part time most of time except when I was in the Army. I was one of the last Vietnam-era draftees. I follow most of the WCI suggestions even before I knew about WCI. I’m an example that the WCI ideas work, and work well.
To be clear, living like a resident for your entire career is not something I’ve ever advocated. 2-5 years after residency, that’s my recommendation.
Another option: Buy a great car, take good care of it, and you’ll never have to buy another car again. I’m driving the same car I bought new for cash 46 years ago and it’s still going great. Except for a paint job and regular maintenance, it’s been cheep transportation. This method worked for me.
Uhhhh….yea. If you can make a car last 46 years, you should be writing the posts, not reading them. Given what we average mileage-wise, if we could get a car to last 46 years it would have a million miles on it. Not sure you can expect that out of any car.
“drive less, don’t drink and drive, don’t drive at times people are going to be drinking and driving, obey most traffic laws and speeds, avoid poor conditions, don’t drive in New Jersey, and you will more than account for this lack of new fangled safety equipment”
False dilemma.
There is no reason one cannot drive little, carefully, avoid late nights and poor conditions AND drive a very safe car. The combination of strategies will be safer than attempting to optimize driving habits or car safety alone.
But it is not trivial to know which is “the” safest car. In the real world you have other factors at work. You can get data and presume the large sample size corrects for variations in driver behavior, but the people who buy sports cars are not a random sample of Volvo station wagon owners. The latter group is likely less aggressive on the road.
New cars have unproven safety records. They may have new features that one hopes will enhance safety. Some of these features actually work. Some do not.
When I do buy a new (used) car I look up the current state of knowledge about what matters for safety and get a car that meets those standards. Brand new features have no real world data, so I pass until the results of the studies come out.
My only car is 46 years old. I bought it new when I was getting out of the Army (back when there was still the draft) in 1972 w/ cash I had in a generous military savings plan, as I was deployed overseas. I said it was to be the last car I’d ever get, and it is. I walked or biked to work, kept it well maintained and garaged, and only has 110000 miles on it. It stills purrs like a kitten.
Nice way to get rich…
this is all very much personal opinion and choice. I understand if you drew out the comparative value of a cheaper car vs a new expensive car on a graph…but certain features might be necessary….
do you think a “creep feature” is worth it on a few car for someone who sits in bumper to bumper traffic for 10-30 min/day?
do you think auto-lane assist is important to someone that works shift work back and forth with a 30min commute?
do you think auto-opening doors or additional storage is important for someone who has multiple children/dogs?
are you a car enthusiast? would owning a more exciting car create more joy in your life? is it something you have always wanted to experience?
in the end, a car is much like a house….utilitarian, functional, and aspirational. The only difference is there is a chance of appreciation with housing, but there is only depreciation on vehicles. i think each person needs to analyze rationally their needs and wants and choose accordingly.
Spend your money on what you value. But when you’re borrowing to fulfill a basic transportation need, you should probably realize there is a lot of wealth evaporating in your driveway.
absolutely agreed! i typically only purchase used vehicles if possible…and typically 3-5 years after initial purchase. this is all after all retirement plans have been funded. its what i lecture all my residents as well. thanks for getting me more organized and interested in this material…takes a while to take it all in.
i think you should write an article about avoiding the anxiety and pressures of FOMO. this whole thing is relative imo. i’ve spoken with people who get all overwhelmed and become more disorganized in trying to catch up, etc. its important to know some progress is better than none.
Agreed. Not sure what I’d say about FOMO, but I bet you could write a good guest post on it!
https://www.whitecoatinvestor.com/contact/guest-post-policy/
The Sentra factor cracks me up. I bought a 1-year old Nissan Sentra at age 16 and drove that thing through high school, college, med school, residency, fellowship, and one year into attending-hood before it wouldn’t pass inspection anymore. 17 years. I sold it to a graduating fellow who was moving out of state and wanted it for his 16 year-old son. So yeah, the Sentra is a good example of what a small investment can get you.
I did not read all the comments, but Consumer’s Report recently published a cautionary article:
“The Hidden Risks of Used Cars.
CR Investigates: Dealers are selling used cars with open recalls to unsuspecting consumers. Here’s how to protect yourself.” (April 30, 2019)
Agree with the sentiment of the article but I would not go as far as a $5,000 beater. I want a safe car. That means up to date, proven, safety features. One might get those on a 10 year old car, but I would worry about the condition of the car and its safety features.
I would not bike to work. Cheap but way too dangerous for my commute. Have had my bike for 25 years, bought used. Works well but no protection from crazy drivers.
I want a reliable car. Many people abuse their cars. Drive too fast, accelerate too rapidly, neglect maintenance and so forth. The older the car and the more miles the more the second owner pays for those bad habits. I also don’t want to devote any extra time to repairs. An abused car with more miles invites more time in the shop.
I don’t believe that having a mechanic “check it out” identifies enough of the lurking problems to make that reassuring.
On the rare occasion that I buy a car, I get low mileage coming off a 3-5 year lease. This gets me past the big depreciation. A car that maxes out on proven safety features, great real world data on low rates of injuries, at least decent gas mileage will be considerably more than $5,000 but worth it given my priorities.
Not a car person. Don’t care at all what other people think of my car (perhaps I would care if they were to pay for the fancy car they like). Drive slowly and safely. Don’t ever accelerate rapidly. Every car I have ever driven handles fine. Don’t go fast enough to notice whether a different car could carve out high speed turns.
This gets me a car that lasts long enough to justify the higher initial price. Safer and more reliable than a beater.
Buying an expensive car as a toy is doing just that- blowing good money on a toy. I would rather buy more shares of VTI.
Not a “car person” but I suppose I am a “money person”. I would rather have more of it than the adult toys I could get.
You’re talking out of both sides of your mouth. You say you must have the latest and greatest in safety features and maximal reliability, then you talk about getting a 5 year old car. You’re making compromises just like everyone else.
I have no problem whatsoever with you buying a 5 year old car or a brand new car, so long as you can afford it. If you can’t, you may find that driving an inexpensive car may help get you to where you can in a year or five.
Not really. Perhaps try reading more carefully.
I said I wanted the best PROVEN safety features. Those take time to prove. The newest features do not have the millions of miles of real world application to determine whether they actually improve safety. That is why “one might get those in a 10 year old car”. The problem is not that a car that age would lack proven safety features – it takes a long time to prove- but that the same maintenance concerns about the car overall would apply to safety as well. Features that have a big impact may be proven in as little as 3-5 years. Weaker effects may take a lot longer to prove. More importantly, those safety features will probably be reliable since the car is not that old and may not have suffered too much from neglect and abuse.
Remember daytime running lights? Greatest safety thing ever? So important that some municipalities mandated them. When there were enough such cars on the road to compare their safety to those without it turned out they did nothing. I would not buy a new car to get a new feature unless that feature had been proven, which is never the case with the latest features.
Some of the various driver assist technologies now common have shown ability to reduce crashes but, as far as I know, there is little evidence on reducing injuries. When/if some driver assist tech is shown to reduce injuries I would put that proven tech on the list of desirable features to seek when next I get a car. Given the difference in the data required, it may take a long time to determine which features reduce injury. By the time those data come through I suspect my current car will be at least 15 years from manufacture, although I would have owned it for less time. At that point I would consider replacing it early if the evidence of improved safety were strong enough. Otherwise I would keep it until it became too troublesome or expensive to keep it on the road.
I do want high reliability. That is why I go for low mileage cars in the 3-5 year old range. Not enough time and miles for bad maintenance to have damaged them too much. By avoiding frequent repairs I don’t lose time dealing with taking the car to the shop, waiting for them to get parts and so forth.
I KEEP the car for a long time. My car before the current one lasted 20 years. Buying several years old saves the great bulk of the depreciation.
My friend and I are both CPA’s, not physicians, and have had the “buy used vs. buy new” argument since we met in 1988. I would buy 3-4 year old used cars with about 40-60k miles either from corporate fleets or from my brother’s dealership. My friend would buy a new Toyota Camry (the size of a current Corolla) or a Kia Optima. I was buying a car roughly every seven years as I had a decent commute to work. He would buy a car every 14 years when the odometer approached 200k.
My upfront acquisition costs were far lower than his. We both paid cash for the purchases. However, over time, I was paying a lot more in repair costs. He rarely called his auto club more than once a year; I was calling AAA twice a year. I was never late for work as I always had a friend at Enterprise who would rent me a vehicle cheap when I needed one.
After years of tracking costs, we discovered that the “cost per mile” was very similar whether we bought new or used as long as I could reliably select vehicles that were not lemons.
In 2007, when the engine blew in my 1995 Oldsmobile, I purchased a new Toyota Corolla as it was the best deal available. I am scheduled to replace the vehicle in 2021 with 180k miles but may delay that until 2023.
If you hold it for 14 years, buying new isn’t dramatically different from buying used. It’s the churning of new cars that really eats up the dollars.
The 2008 Land Rover with 100K mileage we bought three years ago is my favorite vehicle of all-time.
Things that have not bothered me in the slightest: going off-roading two weeks after getting it and ending up with tree branch scrapes down both sides (finally buffed them out a year later), having kids and dogs vomiting in the back three times, endless dust and mud in the cargo space, cracking the glass roof while installing a roof rack (oops, but it doesn’t leak!), discovering that kayaks on the roof do a nice job of scraping paint off the rear hatch, dog hair, dog hair and more dog hair.
It does clean up pretty well though. I can’t even count how many friends have gotten in for the first time and start oohing and ahhing over a vehicle that’s worth something like $6K – $8K nowadays according to Kelly Blue Book.