I bought a new car this week. Not just any new car but a crossover SUV. Today I want to discuss why I still buy new cars and whether that makes me financially wasteful.
The Personal Finance Community Tends to Take a Negative View on Buying a New Car
I have been part of the personal finance community for years. In the community topics tend to go in cycles, resurfacing every few years for a spate of different blogger takes. Each one has a different perspective, which makes them worth reading. But I digress. There is one particular one that comes up every year that really kind of irks me.
You know the one. The holier then thou sell your car and drive a bike everywhere post. The, “you are wasting your money on cars” while I’ve saved tens of thousands while riding my bike. Workout and money savings in one package.
Not Everyone Can Ride a Bike to Work
Now, this is the most extreme variation and frankly the most annoying in my opinion. That’s great that someone can ride a bike to work. I’m sure if I lived somewhere that was possible I would. But let’s be honest. Very few people can afford to live close to work. Even less have work, home, and shops all within biking distance. The reality is being able to bike or use public transportation everywhere is a privilege not all of us have. As such waving it in our faces like it’s some sort of metric just comes off as a bit tone deaf.
Northern Delaware Public Transportation Sucks
Take our situation. I live in Northern Delaware on the edge of a rural and suburban area. There is no public transportation where I am to speak of. Could I move somewhere that has public transportation? Perhaps, but that would result in me having to find a different employer. Yes, you read that right. My work is fairly inaccessible by public transportation.
Biking and Walking Won’t Work
Well, what about walking or biking? Well, frankly the road I live on has no shoulders and blind corners. People who ride bikes on it die about once every few years. Not the type of place you’d want to commute from.
Moving Closer to Work is Not an Option
I could, of course, move to a place accessible by bike to work. The only such buildings are McMansions in the neighborhood across the street from work costing about double my own. But at some point, the extra price of the home exceeds the cost of a car. That is especially true when you still need the car to do things like getting groceries as that is not accessible from work.
So my point is a car is the only option for those who don’t live in walkable/bikable/public transportation areas with nearby work. From my experience, those folks are not the average. I personally live a short 5-minute drive from work despite not being in a bikable area. I realize that even makes me privileged.
Moving Solely to be Closer to Work is Probably Not a Good Idea
I actually wouldn’t recommend someone moving just to be nearer work even it was possible. You never know when you may have to change companies. It would get expensive pretty quick to sell your house every time you change employers.
Used Car Versus a New Car
Anyway, slightly less snarky but occurring at the same time are all the posts on how you should buy used cars. This one is a bit less privileged. Frankly, we don’t need new cars. Buying used in certain circumstances can save you money. I get it.
The Average Car Buyer Should Buy Used Cars
But also I don’t follow buying used cars. Frankly, to most of society cars are like washing machines. Most just want one that can get them from point A to point B. For these folks, the best car is the cheapest reliable car they can afford.
Cars as Status Symbols are a Waste of Money
There is also the car shopper looking for a status symbol. Hey look at me I drove X. Frankly I do agree with the PF community that buying a car as a status symbol is just throwing your money out the window. It’s keeping up with the jones of the worst degree.
Cars as a Value or Hobby
So why do I still buy new cars? Because I fall into a different category of car shopper. Someone who’s hobby is cars. Someone who loves to drive them, work on them, and use them for various tasks. So buying the cheapest reliable car is not going to cut it. I need a car with a soul.
Slowly Depreciating Enthusiast Cars
Now a car that can be fun to drive may be new or used. Honestly though, if you are truly looking for special criteria then what your buying is probably not of the type of vehicle that depreciates quickly. The used vehicles are still in demand so the difference used to new is minimal. Take my Corvette for example. I sold the car for more than half of what I bought it for new 12 years ago. There are very few vehicles you can say that about.
This slow depreciation really opens the door to a different option on car buying. Essentially you can buy used more frequently, or buy new and hold for long periods of time. The shortest holding period for the last 3 cars I sold was 11 years. In some ways, I felt like 11 years was not long enough, but sometimes changing life circumstances forces your hand. It is unlikely I could have bought a used car, held it for 11 years, and then expected it to have another 5 years of life in it for the next owner. Why?
No Price Discount for a 2-Year Old Low Depreciation Vehicle
Because frankly the 2-year old model nearly cost as much as the brand new one. When we cared about such things it was also noteworthy that the finance rates were higher for a used car. In essence, it was close to a wash between buying a used car for the next 12 years and a new car that might last 16. I choose a new car every time. I will admit being able to do so is a privilege of being largely financial independent so I can afford the down payment. But I’d also like to point out the difference used to new for certain cars just is not that much.
What New Car Did We Buy?
So what did we buy? Well in light of the foster child process we needed a larger car. Quite frankly three kids in the back of our existing Nissan Versa or Mazda 3 was like driving around in a clown car. The oldest child had to get in without undoing his seatbelt. So we had to get something that could seat 5 or more comfortably. So, in this case, we bought a 7 seat Toyota Highlander. Not exactly a sporty car, but again something that depreciates very slowly. Buying a 2-year old Highlander would have saved me less than $4k based on the results of my new car negotiation strategy.
Why a Highlander?
Why a Highlander and not something slightly cheaper? Well in our case we still are heading towards a plan for a travel trailer. The Highlander we purchased can tow a travel trailer up to 5000 lbs. It’s also getting ready to have a model change, which made the negotiation leverage heavy in our favor. The car came loaded with safety gadgets for my family. Lastly, the ride was the most composed and car-like of those that could tow a trailer, making it the best fit for a family whose largest car before was a Mazda 3. In more direct words, its what I found that ticked all the requirements I needed at the lowest price. That’s also my goal when purchasing a car, meeting my requirements (including when it comes to a sports car enjoyment) for the lowest price.
Selling The Corvette to Buy The Highlander
Now a final note lest you think I’ve opened the wallet and abandoned all fiscal sense. To pay for said Highlander I sold the Corvette and the Nissan. That funding made the total outlay for the new car about $8,000. Not exactly a rounding error, but a nominal amount for a car for the next decade. Which brings me to my final point.
You can have almost anything you want in life, but not everything.
I had to choose between a comfortable family hauler that can also accommodate a travel trailer down the road and having my Corvette as a play car. I chose the family hauler, which reflects my current values. That answer differs for every person. Really the key to buying a car (or any large purchase) needs to involve understanding where the vehicle you are looking at, and the car in general, fits into your needs and wants. Do those needs and wants top other things you would spend your money on? Only if it tops the list should you spend your money on it.
I do feel like a bit of a sell out finally driving an SUV though… Also the first automatic we’ve owned in 6 years… I’ve joined the hive…