Can I afford it? (new car that is)

[bjl584]

Here is my 2 cents - DON'T BUY A NEW CAR, UNLESS YOU ARE INDEPENDENTLY WEALTHY.

Cars are horrible investments, and most cars have pretty steep depreciating values. IMO, you are much better off looking into a pre-owned car, perhaps from a dealer, where you have a warranty option. Much more cost effective, again IMO.

Also, try to pay cash for your car, and not saddle yourself with additional debt.

This is usually good advice. But, I bought a new truck about a year and a half ago. The payment is more than manageable (in fact, I could pay off the loan right now if I wanted.)

My point is, if you are disciplined about money and buy right, you can do it and not have it effect your finances in a negative way.

[kaleida]

Here is my 2 cents - DON'T BUY A NEW CAR, UNLESS YOU ARE INDEPENDENTLY WEALTHY.

Cars are horrible investments, and most cars have pretty steep depreciating values. IMO, you are much better off looking into a pre-owned car, perhaps from a dealer, where you have a warranty option. Much more cost effective, again IMO.

Also, try to pay cash for your car, and not saddle yourself with additional debt.

I think the part in caps is unnecessarily restrictive. I am not independently wealthy. I bought a brand-new Honda in 2007. That purchase has not prevented me from saving $200,000 for retirement so far, which I think is pretty good considering I'm only 31.

[snafu]

MKKShah, could you explain your thinking for GAP Ins.?

Auto repair for older, 2nd cars: It helps to understand the particular car. Lemon Aid lists the weak points of specific year makes and models as well as recalls. You can look for less expensive ways to cope with anticipated repairs. Having to have repairs in an emergency situation can be more expensive as they have you over a barrel! There are several sites where posters discuss car issues. It can be cost effective to spend a major amount if it keeps the car operational and trouble free for another 8-12 months but it depends on your family's particular needs.

In my experience following the manual's recommendations for servicing extends trouble free operations significantly. If you can keep it garaged and out of the elements it helps particularly if you live in a sleet climate.

[UnknownXV]

I think the part in caps is unnecessarily restrictive. I am not independently wealthy. I bought a brand-new Honda in 2007. That purchase has not prevented me from saving $200,000 for retirement so far, which I think is pretty good considering I'm only 31.

It would depend on your mindset and how good your income is though. I mean, if you're saving $30,000 a year, buying a new car wouldn't even surpass that savings for one year. So it doesn't set you back that much at all. Versus me, I'm not even saving $10,000 a year yet, so it would set me back much further.

But it's all relative. Even if you save a lot, if you get back into the routine of always buying a lot of new stuff that depreciates in value, it will hurt you in the long run.

It's almost like buying an expensive new toy is a gateway action that could lead to more intensive purchases and mindsets like it.

[MKKShah]

MKKShah, could you explain your thinking for GAP Ins.?

I will be paying off the loan in less than 12 months. I put $0 down on the loan. So in the event the vehicle is totaled, GAP will pay the difference between the cost of the vehicle and the loan amount.

One way to calculate will be as follows:
Vehicle purchase price: $26,000
Wholesale price: $22,000
Taxes: $2000
Insurance company payout in the event of total loss: $22,000. I am on the hook for the remaining $6000. I can either self insure this $6000, or spend around $70 (that is the value of GAP if I payoff the loan in under 12 months) to insure it.

[MKKShah]

Here is my 2 cents - DON'T BUY A NEW CAR, UNLESS YOU ARE INDEPENDENTLY WEALTHY.

Cars are horrible investments, and most cars have pretty steep depreciating values. IMO, you are much better off looking into a pre-owned car, perhaps from a dealer, where you have a warranty option. Much more cost effective, again IMO.

Also, try to pay cash for your car, and not saddle yourself with additional debt.

I think this is a bit extreme. Many new cars including Hondas and Toyotas simply don't depreciate nearly as much as they used to before. This is particularly true after the great recession of 2008-09. So I think there are definitely scenarios where a new car can make sense.

A Toyota corolla is one such case. Right now, you are better off buying a brand new Corolla than a used one (if you can afford it).

[MKKShah]

This is usually good advice. But, I bought a new truck about a year and a half ago. The payment is more than manageable (in fact, I could pay off the loan right now if I wanted.)

My point is, if you are disciplined about money and buy right, you can do it and not have it effect your finances in a negative way.

Agreed. I generally buy cars to keep them for 10 years or so. In this case, my thinking is as follows:

- How much lower is the used car compared to a new car?
- Is the difference significant enough?
- Maintenance costs on a new car, and an old car will almost be the same over a 10 year (or similar) period of time. You will be changing nearly as many tires, belts, hoses etc in both.
- Is the savings in purchase price for the new car significant enough when compared to maintenance costs?


In my case, I save almost $10,000. The used car and new car are almost the same for the model I looked at. And this savings is enough to take care of maintenance expenses over the expected lifetime of the car. So for the purchase price of a new car, I am able to own the used car for it's expected lifetime.

[siggy_freud]

Insurance companies should be covering you for the replacement value of the car. If you can't replace the car for 22k, and the retail price is 26k, that is what they should cut a check for. GAP insurance is mainly suited for new car purchases, where people put 0 down, and take a 10% depreciation driving it off the lot.

[MKKShah]

Insurance companies should be covering you for the replacement value of the car. If you can't replace the car for 22k, and the retail price is 26k, that is what they should cut a check for. GAP insurance is mainly suited for new car purchases, where people put 0 down, and take a 10% depreciation driving it off the lot.

That's a good point. I have this doubt too. If my car is totaled, what am I supposed to get?

Dealer retail price of the car? or KBB private party value?