Friday, August 29, 2008
Why I bought a new car instead of a "gently used" one
Just about one year ago, I bought my first new car. My previous car was a 1995 Oldsmobile Achieva that I had since my junior year of high school. I drove it for 8 years, and in the end it developed multiple problems including needing an a/c compressor replacement and head gasket work that I just was not ready to pay to fix. I had been planning for awhile on looking for another vehicle and had a decent down payment already saved. I ended up driving my parents' spare car, a 1994 Dodge Caravan, for 5 months while I looked for another vehicle. I had already had my heart set on used Honda Civic or Accord or a Toyota Corolla or Corolla somewhere in the range of 2000-2004 model years. I really was not willing to look at much of anything else mainly based on all of these cars' reliability record and ability to hold value. I was definitely not in the mood for having my next car stall on I-80 again. I checked multiple websites such as Craigslist and other internet classifieds such as the one my employer sponsors, the local newspaper, and local dealers. I definitely found cars I liked and were worth buying, in my price range (less than $20k), and got pre-approval for a loan from my bank at something around 6% interest. After doing some calculations, it ended up costing me somewhere in the range of $25-40 more a month to buy a brand new car with a full warranty and interest rates are typically much better on new cars. Toyotas and Hondas hold their value extremely well and the sellers usually get their asking prices. On a similar note, Toyota and Honda dealers definitely do not feel the need to offer specials like 0% financing because they have no problem selling cars. I ended up with a 2008 Toyota Corolla at a better rate of 4.9% for 60 months. I am aiming to pay that in 3.5 to 4 years, but at the time I purchased my car, my income was lower so I played it safe and went with the 5 year plan. I am confident that if I take car of my car and fix any body damage that may occur it should still be worth $10k in 5 years. I generally agree that buying a used car that has already depreciated significantly is a better deal in the long run, but one should carefully evaluate one's unique situation to make a good decision about buying a new or used vehicle.