Debt Help | Buy New or Used Car?

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Faced with a broken down vehicle and long commute – should Jeff go into debt for a new car or buy another used car with his meager savings?

Today I received an email from DFA reader Jeff of Sustainable Life Blog asking for advice regarding his ongoing automobile troubles – troubles that have just become a bit more troublesome!

Let’s help Jeff best decide his auto purchase

Here’s the format we’ll follow:

  1. I’ll give Jeff’s email.
  2. I’ll throw a few question back at Jeff.
  3. Then give my reaction to his email, along with a few action items he can get started with.
  4. Open this baby up for discussion in the comments where you all share your wisdom and experience with Jeff.

Here is Jeff’s original email from yesterday.


I’ve been dealing with my vehicle for quite a while now, and this last cold snap finally caused it to give up the ghost.

Because I’ve been spending most of my disposable income on paying down credit card debt, I really don’t have much saved for a new vehicle aside from about the 1,200 that I had previously slated to kill the balance on CC # 2.  Thankfully, I didn’t send this off right away, and now have at least a bit of money available for a car purchase.

My problem really boils down to this:  I have to commute of ~50 miles to work everyday, so going without a vehicle is not an option.  Due to the low amount of money I have saved, I’m going to need to take out a loan, Because I bought my last car for 1k, and I don’t really want to deal with the problems that I am now (which have taught me, and cost me, a lot)

I’m wondering if I should just get a bare bones new car, (they run about 12-15k around here) and just keep that until I pay it off.  I wouldn’t have any recurring repair expenses like I did with my old one, and I’d be in a safer vehicle, but I’d also be in debt.  I’m not really sure what exactly to do.

I’ve been thinking about blogging this as well, but I haven’t quite found the appropriate voice for the story, and Would like to turn this into a post (or possibly 2 or 3) about my experience vehicle shopping.  Do you have any advice for me?


Wow… this is a great reminder of the manifold importance of saving at least $1,000 for emergencies… like when vehicles breakdown!  Way to go Jeff.  Look at the bright side… at least you have your $1,200.  🙂

A few questions back to Jeff

  1. You seem to have your mind made up about a loan – Why? This is not the only answer.  And when properly analyzed is not the best answer either.  There are a ton of solid reliable cars out there for $1,200, you just have to take a day or to go find one.
  2. How much credit card debt do you still have? Since you are still in debt… it may be wise to focus on one thing and one thing only – getting out of debt.
  3. Do you keep a budget? If not… start.  Now.  If you are “kind of” keeping a budget, start writing it down and make it a “real budget” that you are accountable to by record each month.  You will be amazed at how much you can still squeeze out of your income.
  4. Do you have a plan? Something scheduled and laid out that shows how and when you will be rid of your debt and able to have more financial security?  Having a financial plan is crucial, peaceful, and sustainable.

New or used car – my advice to Jeff

Jeff, reign me in if I’m wrong here… but your goal is to get out of debt right?  If so, then tread very carefully with this decision.  Otherwise I’m afraid you’ll end up as yet another statistic on Brian’s financial fouls ups page.  I have no interest in watching another one bite the dust… I want better for you man!

If it were me, and I was in debt, without a car, and up against the wall with money… I would do the following.

  1. Stop acquiring new debt. Hunt for a SOLID, reliable used car with your $1,200.  Especially in this market, that amount will get you a very decent and reliable vehicle.  Check around the web for the best used cars from the late 90’s.  Toyota Camry’s from around that time are both durable and well within your budgeted amounts.
  2. Establish and maintain an Emergency Fund. In your email you mention that you were going to use your $1,200 to pay off your 2nd credit card.  A better option is to always maintain AT LEAST $1,000 for emergencies just like this one.  As you (and many others have experienced)  sometimes $1,000 is not enough.  In that case, do what I do – the balanced 75/25 method of debt reduction and emergency fund savings.
  3. Implement a debt snowball. After you find your “new” used 1998 Toyota Camry for $1,200 out the door – and after you have created and funded a designated emergency fund with your first $1,000 – begin implemented the 75/25 method, stick to your guns, and watch the debt dwindle away.

Remember our financial philosophy – “sacrifice now to benefit later!”

New or used car – What is Your advice to Jeff

Just as we were able to successfully offer debt help to Wendi in NJ, let’s band together again togther again to help Jeff reach a wise decision he can be happy with for years to come.

What is your advice to Jeff?

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1 Olivia

To Jeff regarding his car purchase,

I’d go with a used car. Even though it’s been a real hassle sometimes to coddle our vehicle, it’s always been cheaper overall for us to buy used. Can you squeeze anything more out of your budget to add to your car money? (Eat rice and beans for a couple of weeks? Sell something? Take on a pizza delivery job after work?) As Matt mentioned, do you have a written budget? If it’s on paper you may be able to find little bits of extra cash here and there.

Perhaps thinking outside the box, since you just need basic transportation, would a pick up truck be cheaper?

In addition to upfront expenses, interest on a car loan costs you, and the lender may well force you to take out full replacement insurance until it’s paid off. (Instead of a high deductable one you can get on a paid in full beater.) Because you still owe on previous credit card debts, you may not be able to get a really good loan rate either. So the hidden costs could kill you. You’d have to crunch actual numbers before putting yourself deeper into debt.

Really hope it goes well for you.

2 R S

Consider asking friends/co-workers if they have an old car they wouldn’t mind getting rid of. I recently purchased a co-worker’s ’99 Corolla. While I’m not 100% certain about it’s history, I bought it from someone who seems to keep their vehicles, but of course, I can’t be too certain.

The car cost $2k + $120 sales tax + $89 state inspection + $300 new tires (needed to pass state inspection) + $20 temp reg (to get tires installed) + $50 tags +$128 2 yr registration +$679 1 yr car insurance = $3,386 to get the car on the road.

The car insurance is $679/yr is because I chose to get Comprehensive & Collision, but I could have gotten Liability only for $415/yr.

I was considering a $12k-$15k car as well; while that would’ve saved me in the cost of new tires, but but sales tax alone would be more than the cost of registering etc. Also, with a new car, you don’t really have the option to not get C&C coverage to lower your costs.. Technically, you might be able to, but C&C coverage to me, seems to be a protection of that $12k investment..

I know it’s a hard decision to make, esp after finally letting go of a troublesome car, it almost seems like a gamble. For me, however, taking $3.3k out of my savings, and keeping another 1k on hand for repairs is much more manageable than squeezing $250/month for the next 5 years.

Good luck!

3 Amy

This is exactly what I was going to say – ask around. My dad has always purchased dependable, older vehicles from friends and neighbors for 3 reasons: #1 – he already knows whether or not they have been taken care of and #2 – he already know whether or not they have been wrecked, flooded, lemons, etc. and #3 – he can get them cheap!

I was 15 the first time he purchased a car that had less then 100,000 mile on it, and I don’t ever remember a time that he had breakdown problems.

4 Ann

Definitely used. I have been checking out Craigslist for a used get around town second car for the family. Toyota, Honda, VW. From personal experience and experiences of friends & family, those three groups of cars keep going & going even with high mileage on them. Also great on gas mileage (depending on the model), which in turn will save you money.

As Olivia points out, insurance costs & interest need to be taken into consideration, as they will add to the overall cost of the new vehicle. In addition, the pickup idea is worth looking into. Our one & only vehicle at this point is a pickup (2002 Ford F250 bought used in 2003) and beyond serving its purpose of towing & work needs, it comes in handy to move things around (furniture for friends, hauling wood pellets, mulch, building supplies, etc). You might even be able to earn a few dollars transporting such items as a side job, which in turn will help you pay off your debt quicker!

5 Financial Samurai

It really doesn’t matter whether you buy a new or used car Jeff.

What matters is if you follow the Financial Samurai 1/10th rule of car buying! The rule simply states that one should spend no more than 1/10th your annual gross income on a car.

If you make a healthy $200,000 a year, go ahead and treat yourself to a nice Honda Civic for $18,000, and $19,800 after tax and fees.

If you make only $70,000/yr, then a $7,000 second hand Honda Civic will do.

The rule protects you and keeps you on the path to financial freedom! Multi-millionaires follow our rule, why don’t you?



6 Amy

10% of your annual income is still a lot if A) you’re still in debt and B) if you lose your job in this economy

If you’re not in debt and your job is secure, then that would be fine advice!

7 Financial Samurai

That’s true Amy. For Jeff, with his debt, he should probably just ride a bike, take a muni, or walk.

8 Craig

I recently bought a new car when my old one died. I figured I had a lot of problems with my old used car and put a lot of money into it. Used cars could have problems and still are not cheap. So I opted to spend more one something brand new and reliable that I shouldn’t have issues with and I know can last me years.

9 Matt Jabs

But did you have debt and only $1,200 saved?

10 Kevin@OutOfYourRut

OK, I’m going to part company with the pack here.

Without knowing what Jeff’s income is we’re all shooting in the dark here, including me. The advice any of us would give would be different if he were making $75,000 vs. $25,000. Matt’s question about his level of credit card debt is also critical and we don’t know that either. We also don’t know if his commute is 50 miles one way or 50 miles total, that’s no small issue as well. My answer here will assume he’s at the lower end of the income range, that he’s commuting 50 each way, and that he has under $10,000 in cc debt…

I think that he should go with a higher priced vehicle, maybe not $12-15k, but more like in the 7-8k range. That means he’ll have to take a loan of 6-7k, Given that Jeff commutes 100 miles a day and lives in a cold weather region, buying a beater for $1000-$1200 may improve his cash flow situation short term, but it probably won’t solve his longer term problem. He may find the same issues with the new beater as he has with the current one. He needs something more reliable so he isn’t merely delaying the crisis for a few months.

He has three dragons he’s fighting here, credit card debt, a car replacement issue and a soon to be empty bank account as a result of the car issue.. Right now the car is the most important because he needs it for work. The CCs should be the lowest priority and will have to wait for later. We can’t be fighting too many battles simultaneously or we risk losing them all.

My order of priority would be 1) replace the car – Financial Samurai’s 10% of gross income rule is an excellent metric here, 2) rebuild his emergency fund, and only then, 3) resume paying his credit cards.

11 Matt Jabs

I’m with Kevin on the CC priority thing. Take care of your business first, and pay them 2nd.

Do not stop paying, just pay the minimums for awhile… until you get your situation resolved, then ensue w/your debt destruction plan.

12 thisisbeth

Living in a cold-weather climate, I agree with Kevin. While it’s possible to get a reasonably decent car for $1200, he drives 100 miles each day. He doesn’t want to be stranded in sub-zero temperatures.

Getting a little more expensive used car (i.e., probably not as old and a bit more reliable) and taking out a small loan may be worthwhile in the long run.

Check around with family and friends sounds like a great idea, too; someone might have a car they’d let you borrow/buy for cheap.

13 MLR

I’m with Kevin, the car is a tool used to make money to pay off debt. No car, no job. I was recently faced with this situation, as well.

Looking at Autotrader in my area for any style of Toyota for less than $2,000 brings up 15-20 year old cars… all with more than 200,000 miles. Not for me.

American manufacturers are giving quite a lot of rebates. I opted to go for a 2010 Ford Focus SEL. It MSRP’d at 20,790. They knocked the price down to $19,070 ($600 below invoice). Then I got another $3,500 in rebates to bring the price down to $15,570. It has a lot of safety features, it is comfortable (I drive 30 miles each way to work), I like the Ford Sync, good gas mileage, and a warranty. I rely on my car too much to not have a warranty.

Of course, I have no debt and had $9,000 to put down… so that swayed my options a bit.

For you, I would suggest looking at some certified used cars if you don’t want to go the route I went. At least if they are certified you have some warranty of condition.

In my area on Autotrader:
-Certified Used 2007 Chevrolet Cobalt LS Sedan – 50k miles – $10k
-Certified Used 2007 Ford Focus ZX4 – 67k miles – $10k
-Certified Used 2005 Chevrolet Malibu – 50k miles – $10k
-Certified Used 2004 Toyota Corolla CE – 13k miles – $10k
-Certified Used 2006 Nissan Sentra 1.8 S – 45k miles – $9k

And of course, prices are negotiable.

Hope this helps.

14 BG

You’d have to be insane to purchase a 2007 model with 67k miles on it! That thing has been averaging 28k miles a year (or so).

I’d be more apt to buy that 04 that only has 13k miles…

15 Kevin@OutOfYourRut

MLR (11)–The used car list is excellent. No matter what option he goes with, since he has debt and very little savings, a new car should be out of the question.

16 Credit Card Chaser

I strongly agree with you here. I would just go ahead and rule any new car out – but then again I never buy new cars no matter what anyway because I just can’t justify it when I can buy a great 1-3 year old used car for a much better value. I would definitely buy a used car no matter what.

17 Matt SF

Solid advice and options all around. Since going carless isn’t an option, I would suggest buying a reliable used car that you will actually enjoy driving.

This way, you are not losing half your investment within the first two years thanks to the high depreciation rate of owning a new car, but you’re not hating it and can’t wait to buy a new one 3-5 years later.

I would also suggest you pull a free copy of your credit report so you know what you’re working with. This way, you can call up a bank, let them know what kind of borrower you are, and boldly ask what is the best financing deal they can give you with XYZ credit score. Calling around and doing some research will save you lots of dough over the course of the loan.

Hope that helps.

18 Matt Jabs

Matt brings up a GREAT point that I think everyone else assumed but didn’t mention… buying new vehicles puts you in a position to lose a majority of the monetary value over just a few short years.

The loss of equity with a used car purchase is much lower.

19 MLR

Very solid point, but doesn’t have to be the case.

If you can negotiate a good deal on a new car, you can offset the expected depreciation.

Before I bought my car I looked at depreciation rates for the Focus. The expected depreciation over the first 2 years is $5,154. I got the car for $5,220 under MSRP.

So IF I were to sell this car after 2 years, the new owner would think they are getting a great deal because I ate the depreciation, when in reality I didn’t have any.

20 Matt Jabs

I love how you talk about REALLY working to get a good deal! This is something many of us do not always pursue, but something we should ALWAYS do.

While it is not the norm, it IS possible.

That said, it is MUCH more likely to happen when the buyer is paying CASH! 🙂

21 MLR

On a car, it’s actually reverse. They were willing to sell me the car at $600 less than invoice (thus giving up their holdback in part) because I told them I was financing.

Then they gave me a few options for the 36 month loan I wanted:
A) 6.25% Ford Financing with $3,500 in rebates
B) 4.74% Chase Financing with $3,000 in rebates

They heavily hinted at Option B, but I computed the total cost of the loans and A was in fact cheaper by a few hundred bucks…. IF I were to carry the loans out to term.

I made sure there were no early payment penalties on Ford Financing because I plan to pay it off within a year… thus making my total cost of financing about $400 (I think).

Had I told them I was paying in cash, I would have lost about $1,500 in rebates… making the car more expensive, in actuality!

22 Elle

I would try to get the word out that I’m looking for a $1,000 or less car. I found two cars this way. The previous owners hadn’t put up the cars in the classifieds yet. The Nissan Sentra lasted a year or so and the Geo lasted almost 3 years. It is harder to find a decent deal, but it’s very possible.

If you decide to go on a car loan, look for the cheapest you can go with. Just remember that this is a temporary situation, so don’t be tempted to buy a car and get a loan if you could hold off and get a decent beater.

23 Robert Espe

If you want out of debt, you can’t get there by borrowing.

I lived most of my life in Duluth, MN (-50 winters) and have driven $1000 cars most of my life, I’ve also never been stranded. The key is you have to take care of your vehicle. My last car was a ’95 ford escort. Retired at 320k not because the mechanic couldn’t fix it, but because all those years of road salt were finally rusting out the frame (as evidenced by the doors sticking from slight sagging).

Jeff, you said a new vehicle, “wouldn’t have any recurring repair expenses” with a new vehicle. That just isn’t true if you don’t want it to break down. Cars have a maintenance schedule in the back of their manual (or in a separate booklet). It says how often you should take the car in for maintenance, and it doesn’t wait until 100k miles to get started, it starts at 3-5K, and it costs money to fix things before they break.

What gets people is they don’t take cars in unless something is broken, and then blame it on being an old car when all it really needs is a little TLC. Buy a car with the money you have (I like craigslist), get a good battery (go to batteries plus, get the one for cold weather, will cost at least $80) put fresh oil ($20) and coolant ($60) in it, take it in and have a mechanic (or mechanic friend if you are really lucky) check everything the maintenance schedule says it is due (probably $600) for (and you may have to go back a few steps from the current mileage if it wasn’t kept up).

You may have to prioritize a few repairs while you get the dollars, and it may cost an extra $1000. But then the car will run, and still for a lot less than the cost of a new, or expensive used car. Keep taking it in for checkups at the recommended intervals, and it will keep running (and budget no less than $1000 a year for auto maintenance, no matter how new the car is).

As a final thought, has great resources for researching any vehicles you are considering.

24 Matt Jabs

This is a great perspective Jeff… be sure to consider it before going further into debt.

You cannot get out of debt by borrowing. The goal should be: “The search for the reliable $1,200 car”

Reliable used cars, properly maintained will get you out of debt MUCH faster than the financing of new. Period.

25 Brian


I went through a similar situation and i opted for a new vehicle. There is more reasons as to why i did that when i posted about it, but my primary thing to you would be to look for that USED car first. I spent three months looking for a used vehicle i felt comfortable with for the money. After i didn’t find one, i went NEW. However, as much as i enjoy my car, i would definitely have preferred a used car for $1500 than a new car with 0% financing for close to $20,000.

26 Matt Jabs

Smart people learn from their mistakes… REALLY smart people learn from other peoples mistakes.

27 Financial Samurai

Brian – There’s nothing wrong with buying a $20,000 car with 0% financing if you are making $200,000 a year (to comply with our 1/10th rule). Buying a $1,500 car is a little too living it down.

It’s good you’re living it up within means!

28 Andrew @ Earn Give Save

Jeff, thanks for your willingness to share you story. I’m sure you’ll get a game plan and it will fall into place for you really soon! In the meantime, you might be inspired by this video from Dave Ramsey; he’s got a fresh take on the subject!

29 Bruce

You can do a lot of repairs for the additional $350 to $500 a month in payments and insurance premiums.
My advice would be to split the difference, look for a $3000 to $5000 vehicle. That would get you a reliable vehicle, lower payments, and less insurance. And forget the 4×4, fuel costs alone would increase the monthly expenses. As for winter driving, steering and stopping (why most winter accidents take place) are the same or worse with a 4×4 than with a good front wheel drive car. Spend the difference on 4 snow and ice tires instead.
As a mechanic in Canada, I have to agree with Robert. I see many new vehicles in poorer shape than older ones due to lack of proper maintenance. The nice part about buying a car in this price range is that usually the owner has done that maintenance and that is why it is worth more. Not always, but mostly.

Just my two bits worth

30 Silver Eagle

I’m 57 years old and have raised 6 kids. I’ve been in and out of debt more than once. Vehicle wise one of the best things I ever did was I got out of the beater. Once done I was out of the headache of wondering if my car was going to breakdown or not. It made a financial and emotional difference in our lives. I think buying a 4 year old good used truck is the best option. There is no depreciation, insurance is reasonable, loan payment is manageable, providing you negotiate the buying price, and you can depend on it. Obviously you have your finances under control, so figure out what you can pay a month, and shop for something you can afford. Trucks are usually made with heavier duty parts, and last longer. Mine have all lasted 250k miles with reasonable care. Well past full payment of the loan. And i was able to sell them to someone looking for a beater! Personally, I like my current 4 wheel drive and with a 6 cylinder engine, I don’t find it costs more in gas. I live i the mountains, so I like the additional safety and “get through” drive. Plus, I get the fun of taking it off roading. Remember that luxury gadgets break down and have to be repaired, so go for less of them. Quality of life as much as transportation is a consideration to buying a vehicle. Consider carefully what you can afford, and don’t go beyond that. Afford is the key word. To sum up, get a 4 year old truck.

31 Peter

I’ve been in your situation – where i had a car die on me – the engine blew out and it would have been a $4000 repair bill. Like you it wasn’t worth it to get it fixed and i had to find a new reliable vehicle.

At the time i had school loan debt and credit card debt. I chose to buy a $1500 car that I could pay cash for instead of buying a more expensive car that I would have enjoyed more. The reason? You can’t get out of debt by creating new debt. You’ll just end up treading water – or going under.

Did i have more repair bills than with a new or slightly used car? Yes. Did I still pay less than I would have? you bet. I probably spent an additional 1000 dollars on the car in repair bills over a couple years – but the car lasted me for about 3-4 years of good use. In the meantime i was able to pay off our debts, and put us in a better financial position. Now i still pay a car payment – to myself – and just last year I paid cash for a $10,000 car that I really enjoy. No car payments – except to myself once again!

If I were in your position (which I was to a degree), I would search around to find a good deal on a cheap car, and then save up an emergency fund in case you do have issues.

Good sources for good old used cars? Friends, family, co-workers, friends at church, craigslist, any of a bunch of used car websites. Search to find ones that are known to be more reliable – and find yourself a good cheap neighborhood mechanic – they can make all the difference!

32 Kevin@OutOfYourRut

Peter, you put the case for the cheapest car beautifully!

No matter what Jeff does he’ll have to pay. With a newer car it’ll be payments, with a bottom line car it’ll be repairs.

If he takes on car payments, the advantage will be that he’ll know what his expenses will be and can budget for them. With the beater, he may go some months without paying for repairs, but then get wacked with a big one that he’ll need to be prepared for. The fact that he was able to save up $1200 in a few months shows he has the ability and discipline to do this. If there are no major repair bills, he’ll come out ahead.

What ever he does it’ll be a gamble, there’s no perfect plan when you have limited resources. But that’s the world we live in.

33 pastortwjackson

Stick with it! Don’t waver! Matt is on target, buy a used car. I may be late on the counsel but learn from this challenge after all the best lessons are the ones we remember. I will pray for your follow through Galatians 6:2 Bear ye one another’s burdens, and so fulfill the law of Christ.

34 BG

Fix the one you got, otherwise find another used & low-mileage (for age) vehicle to replace the one you got.

I specifically say “low mileage for it’s age”, since this will reduce your search down to ‘little-old lady / gently driven cars’. Never buy a high-mileage (for it’s age) vehicle, as those tend to be rentals and other more abusive driven type of cars.

Have a trusted mechanic check out the used car you are thinking about, and also look for private seller deals since you might be able to find a bargain there. Good luck.

35 Jason @ One Money Design

Jeff, if you’re serious about getting out of debt, don’t go get a car loan! I was faced with fixing an issue with a paid off car for several thousand or financing a used car. I was stupid and took out another loan. The maintenance would have been a cheaper route. I’m convinced I would have been in a better long term situation if I would have just paid to have my car fixed. Instead, I’m still making payments today.

Jeff, I want you to write out a list of 20 options. Don’t self filter your list yet. Just write it out to get your creative juices flowing. Here are some to get started.

Do you know someone with an extra car that would allow you to use it for several months to buy more time?
Do you belong to a church? Perhaps someone wants to donate a car?
Do you have flexiblity in your job? Can you work from home?
Anyone in your family willing to help?
Shop around – civics are still good cars, even when they cost $1200.
Anyone you work with live close? Can you ride share so that your new $1200 car isn’t driven that far everyday?

Best of luck!

36 Matt Jabs

Great points Jason! You brought up some very creative and “outside the box” advice that Jeff would really benefit from heeding.

Jeff… where are you at on all this man? Don’t leave us hanging! 😉

37 Olivia

Over the course of one and half years Jeff spent $3000 (repairs plus the original cost of the vehicle.) That means the car cost $2000 a year. $166.67 a month. Can Jeff find a new vehicle for that price? (Repair free, including interest and increased insurance costs.) Or can he find another used car needing fewer repairs than the current one for less than $166.67 a month total?

If he were to purchase a new Honda Civic for $19,000 (someone’s example), he’d have to run it nine and a half years trouble free to match that cost, and only if he paid cash up front. The larger new car insurance premium is also a factor. With $1,200 down, Jeff’s loan would be $17,800. According to Bankrate, the average new car loan rate is currently 6.83%. For a five year loan that comes to $351.04 a month.

Yes it its a hassle babying your older car. I sense that’s the real issue, and Jeff has my sympathy really, but if it’s a strictly monetary decision, dance with the one that brung ya.

38 Matt Jabs

Beautifully yet analytically put Olivia… thank you!

Jeff… what do you think man? Quit keeping us in suspense… 😉

39 MLR

I wanted to post another resource for your readers, Matt.

The conventional wisdom seems to get misconstrued to the point where even some commentators here think buying used is ALWAYS better. The situations brought up usually show how buying used is better by comparing a $1,500 junker to a $20,000 brand new car.

I use Edmunds TCO (true cost to own) calculator because I think it gives pretty comprehensive results. The numbers factor in the depreciation, taxes and fees, fuel, maintenance, repairs, tax credits, financing, and insurance.

My situation: I got in a car accident and didn’t have a long time to shop before having to pay for a rental car (insurance company would only pay for 5 days after letting me know my car was totaled). They gave me $4,500. I fully intended to buy a used car circa 2006.

TCO for the first 5 years of ownership for:
2006 Honda Civic EX – $27,469
2006 Ford Focus ZX4 SES – $26,050
2006 Hyundai Sonata LX – $32,616
2006 Hyundai Elantra Limited – $28,739
2006 Mazda 3 s – $29,073
2006 Volkswagen Golf GL – $28,336
2006 Toyota Corolla LE – $28,065

Then I looked at some new cars to see what the rebates were like.

The 2010 Ford Focus SEL was actually $3,000 less than the price listed in Edmunds calculations because of all of the rebates I qualified for and the fact that I got the car for $600 under invoice. My 5 year TCO is **$28,590**

The new models of all of the other cars above were higher, especially when compared on a features-to-features basis.

Even comparing the New Focus to the 4 Year Old Focus… the features (safety AND comfort wise), the full warranty, the value of knowing the maintenance is getting done, etc is WELL worth the extra $2,500 over 5 years… That’s just $500/year.

In a bunch of cases above, the difference between a 4 year old (Corolla/Golf/etc) and new Focus is a few hundred bucks.

If you want to argue that people should purchase cars that are more than 4 years old, that is another argument entirely. I just wanted to show an example where a new car is financially a better decision than some 4 year old cars.

40 lansing_auto_repair

I would contact some of your local auto repair shops. Many of them either know someone who may be ready to part with an older vehicle and looking to upgrade to something newer or may have a vehicle sitting around that may need some work.
Have them go through the vehicle for you so you know what to expect down the road for potential repairs. This will help you budget for the repairs when the time comes.

You could also ask them to take down your name and number to contact you should a vehicle become available.
Don’t forget to follow up with them every week or two so they don’t forget about you. We are all very busy people and do not always remember things like this.

41 Steve in W MA

@ “Thanks for the detailed comment. I see the reliability issue as a huge long term problem that I dont think will be solved by getting a used car.”

Dude, my car is 18 years old and going strong. I’ve never been stranded by it except the one time I let the battery run down. You need to buy a Honda, a Toyota, or a Geo. Then you’re golden. You can easily get a car for $1000 that will run fine and get you to and from your job.

What’s wrong with your car anyways that $1200 can’t fix?

42 Matt Jabs

I disagree with Jeff’s decision to buy a new car and will continue to discourage the borrowing of money for the purchase of automobiles, new or used. That said, I wish Jeff all the best in his decision.

43 Steve in W MA

$500 in tools will get you far. It’s really not that hard. Stop paying $80 an hour to mechanics and watch your repair costs plummet for the rest of your life. Buy the Haynes manual for your car or, even better, the one from Helm Corp, which makes the factory service manuals for most brands.

44 Matthew Denos


I think your advice is the soundest that Jeff could ever receive on the topic of buying a new or used car. You made a very good analysis of the matter. I am about to buy a car, too. Although I am totally debt-free, I still find your advice pertinent. I hope Jeff took the right decision.

45 Matthew Denos

So, what did Jeff decide?

46 immobilier

Salut chers lecteurs comment trouvez-vous de mon nouveau site sur l’ immobilier ?

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