Buying a "new" car - Advice pls

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Topic Author
yuppiebogle
Posts: 28
Joined: Sat Apr 14, 2018 9:01 pm

Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 9:41 am

Hi fellow Bogleheads,

I will be potentially in the market for a "new" car (most likely a 4 door sedan) within the next 6 - 7 months and wanted your advice regarding questions such as:

- How much can I afford / How much should I look to spend on the car itself?
- What is considered a healthy/conservative % allocation toward total overall auto costs in one's budget? (taking into account insurance, maintenance, etc.)
- If I am looking at, say, Hondas/Toyotas, and am looking to drive the car for t least 10 years, then is it better to go new vs. used? (assuming I can afford it)
- Given my financial situation (briefly highlighted below), should I seek to pay for it with 100% cash? Or should I seek to finance some or all of it to preserve liquidity?

Just from browsing lately, I like the 2018 Honda Accord (sport trim) but wonder if spending ~$23-24k on a new/lightly used car is prudent vs. buying, say, a relatively higher mileage (between 60 - 100k 2015 or older - Accord/Camry for $10-12k and also driving that thing into the ground. :confused

Some background on me: Have always been blessed to drive parents vehicles growing up without ever having to purchase my own and currently drive my dad's car which he said he's thinking about needing back within the aforementioned time frame)

About me:
- Single
- 25 years old
- Currently paying for my auto insurance through my dad (car's are in his name and I'm covered under his policy; I reimburse him every month for my share)
- Make ~$73k gross salary/yr. with expected year-end bonus of ~$10k gross.
- Currently pay ~$400/mo. for rent/utilities (living situation subject to change within the next year; i.e. moving to a shared or my own apartment)
- Budgeted and on track to max out my 401k & HSA this year (Front loaded my Roth at the beginning of this year)

Assets:
-Cash: ~21k (6k of which I currently have allocated as "Emergency funds" but I don't see a high likelihood of it being needed given I don't have much in the way of expenses and am able to move back in with parents for free if need be)

-401k:$53.6k

- Roth IRA: $24.6k

- HSA: $5.6k

- Brokerage Account: $18.0k

Liabilities

- None

Apologies if my thoughts seem a bit scattered. Please let me know if there's anything I might not be considering or if there's anything I can provide that can help you give some better advice.

Many thanks,
YB

Jack FFR1846
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Re: Buying a "new" car - Advice pls

Post by Jack FFR1846 » Tue May 14, 2019 9:54 am

What I would do...... First look at both new and used car prices for the model you're looking at. Don't just look at Accords if you're thinking a sport.....look specifically at sports. Consider if the model holds its value "too well". If it does, go buy new. If not, consider used.

For quick used pricing, look at Car Max and subtract about 15% as they are always high. In the end, if you keep the thing for 10 years, unless you were buying something that dropped like a rock, like a Buick, you'll do well to get it new.
Bogle: Smart Beta is stupid

Greenman72
Posts: 325
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Re: Buying a "new" car - Advice pls

Post by Greenman72 » Tue May 14, 2019 10:03 am

Personally--in my experience, new cars cost a whole lot less than used cars, once you take into account all of the expenses associated with the car. I've owned many used cars that crapped out after 2-3 years, and usually had significant maintenance expenses associated with them. The only new car I've ever owned will turn 15 next month with 220,000 miles on it.

That said, I tend to drive cars as long as they are safe and reliable. If I can drive it another 15 years, I will. I don't generally care if it's beat up, tore up, and used up. And I don't care what the resale value is, or the book value, or the depreciation, or any of that kind of stuff. If you're into status symbols, then YMMV.

I don't know if I'm answering your questions or not. (Probably not)

Cycle
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Re: Buying a "new" car - Advice pls

Post by Cycle » Tue May 14, 2019 10:06 am

Congratulations on maxing out your 401k and roth at such a young age. I did the same at your age and am astounded at the size of my 401k after 13 years of contributions, 11 years of maxing.

My wife has a car, which comes in handy with an infant. The optimal number of cars is zero, but much of the US was designed to get as much money from your bank account into Standard Oils (or it's current embodiment), so in some areas you will need to bend the knee to the oil companies and buy one.

You should strive to spend as little on a car as possible, to make sure you are saving as much as possible. Our current car to net worth ratio at 35 is 1:250. You should never let the ratio go below 1:100, so I'd recommend getting something for $2300 or less. that means used, private party.

A bunch of people who watched too many car ads will probably advise you overspend on your living-room-on-wheels, but at the end of the day transportation is an expense and you should minimize that expense. Transportation by living room is also dangerous, and so the most impactful way to reduce your risk of becoming one of the 1.25 million dead car drivers per year is to reduce your miles driven, not spend $$$ on safety features.

Greenman72
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Re: Buying a "new" car - Advice pls

Post by Greenman72 » Tue May 14, 2019 10:08 am

Reminds me of my mom: She was debating getting a new (used) car. She asked the car salesman whether she should keep driving hers or buy a new one. (I told her never to ask a barber whether you need a haircut.) He told her, "It's better to sell a car for $1,000 than to wait until it's worthless. At least this way you can get $1,000 for it."

I told her, "If you drive a worthless car for 12 months, it costs you nothing. If you drive a $500/month car for 12 months, it costs you $6,000. So your worthless car is actually worth $6,000 a year. If you drive it for three years, it's worth $18,000." (You know, the whole "fungibility of money" thing.)

Topic Author
yuppiebogle
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Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 10:11 am

Greenman72 wrote:
Tue May 14, 2019 10:03 am
Personally--in my experience, new cars cost a whole lot less than used cars, once you take into account all of the expenses associated with the car. I've owned many used cars that crapped out after 2-3 years, and usually had significant maintenance expenses associated with them. The only new car I've ever owned will turn 15 next month with 220,000 miles on it.

That said, I tend to drive cars as long as they are safe and reliable. If I can drive it another 15 years, I will. I don't generally care if it's beat up, tore up, and used up. And I don't care what the resale value is, or the book value, or the depreciation, or any of that kind of stuff. If you're into status symbols, then YMMV.

I don't know if I'm answering your questions or not. (Probably not)
Were those "many used cars that crapped out after 2-3 years" typical "reliable" cars like Hondas/Toyotas? Cause I am leaning towards those brands due to their overall reliability/low maintenance.

Not into status symbols, just want a decent & comfortable car that I will be able to drive for hopefully the next 10+ years (thought it doesn't hurt if it looks aesthetically pleasing to me too :wink: .

So essentially what you're saying is, if I plan on driving it that long or "until the wheels come off", I don't need to take into account its resale/salvage value or depreciation, correct?

onourway
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Re: Buying a "new" car - Advice pls

Post by onourway » Tue May 14, 2019 10:13 am

I would buy something in the ~$10k range, paid for in cash. That will buy you an excellent vehicle that will last many years without putting you back much as your plans inevitably change over the next few years.

runner3081
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Re: Buying a "new" car - Advice pls

Post by runner3081 » Tue May 14, 2019 10:15 am

As others have mentioned, spend the smallest reasonable amount to buy a car.

The Craiglist saved search I have is for:
cars & trucks - by owner
title status: clean,
max odometer: 49999,
max price: 11999,
min odometer: 5000,
min model year: 2012,
min price: 3500

This nets a surprising amount of cars. Corolla, Altima, etc.

Don't let people scare you into buying new cars, people who bought a used car that breaks down in 2-3 years likely didn't have a pre purchase inspection.

bloom2708
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Re: Buying a "new" car - Advice pls

Post by bloom2708 » Tue May 14, 2019 10:19 am

I would buy the nicest/lowest mileage car you can get for the $15k (above your emergency fund).

How much of the $15k that you saved are you willing to spend on a car? That is the right amount to spend at 25.

You will be able to get a very nice car for ~$15k. Toyota and Honda are fine cars. You will pay a premium. I like Ford and Subaru. I tend to like AWD as we have long winters. Do you have winter driving to deal with?

If you open your options to more than Toyota and Honda, your budget will stretch further. An AWD Escape or Forester with low miles would fit in that budget.

I'm guessing you will buy new. Don't overspend and drive the car for a long time. That is easier said than done. Marriage, kids, lots of things change between 25 and 35. Your car might be in great shape, but it may not longer fit your lifestyle.

Good luck!
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

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FlyAF
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Re: Buying a "new" car - Advice pls

Post by FlyAF » Tue May 14, 2019 10:25 am

No comment on the car, but you're crushing it for your age. I wish I had had your head on my shoulders at 25 y/o.

Topic Author
yuppiebogle
Posts: 28
Joined: Sat Apr 14, 2018 9:01 pm

Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 10:37 am

bloom2708 wrote:
Tue May 14, 2019 10:19 am
I would buy the nicest/lowest mileage car you can get for the $15k (above your emergency fund).

How much of the $15k that you saved are you willing to spend on a car? That is the right amount to spend at 25.

- I guess all of it, if I want to.. The 15k (amount above my arbitrary 6k emergency fund) is currently split between savings (saved up for a car and also vacations) and my checking acc. I feel like I could replenish my emergency fund though fairly quickly if I were to use the 6k as well (I save at a rate of ~$1.3k a month currently, which is after contributing to my 401k and HSA at a monthly amount at which I max both out)

You will be able to get a very nice car for ~$15k. Toyota and Honda are fine cars. You will pay a premium. I like Ford and Subaru. I tend to like AWD as we have long winters. Do you have winter driving to deal with?

- No, not really much in the way of winter driving to deal with where I live. We get heavy rain from time to time here, but otherwise driving weather is fairly decent for most of the year.



If you open your options to more than Toyota and Honda, your budget will stretch further. An AWD Escape or Forester with low miles would fit in that budget.

Knowing me (coming from a family of Hondas & Toyotas(, I will probably majorly look at Toyotas / Hondas (and nothing European) :P for better or worse. Though I do acknowledge there are definitely other brands out there that do have pretty good reliability/value.

I'm guessing you will buy new. Don't overspend and drive the car for a long time. That is easier said than done. Marriage, kids, lots of things change between 25 and 35. Your car might be in great shape, but it may not longer fit your lifestyle.

Why do you say that? haha. Definitely though, always easier said than done. :annoyed

Good luck!

Topic Author
yuppiebogle
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Joined: Sat Apr 14, 2018 9:01 pm

Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 10:40 am

FlyAF wrote:
Tue May 14, 2019 10:25 am
No comment on the car, but you're crushing it for your age. I wish I had had your head on my shoulders at 25 y/o.
Thanks and appreciate the compliment. Though the funny thing is, you always still feel like you're not doing enough / can be doing incrementally better (at least I do). :|

Topic Author
yuppiebogle
Posts: 28
Joined: Sat Apr 14, 2018 9:01 pm

Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 10:42 am

runner3081 wrote:
Tue May 14, 2019 10:15 am
As others have mentioned, spend the smallest reasonable amount to buy a car.

The Craiglist saved search I have is for:
cars & trucks - by owner
title status: clean,
max odometer: 49999,
max price: 11999,
min odometer: 5000,
min model year: 2012,
min price: 3500

This nets a surprising amount of cars. Corolla, Altima, etc.

Don't let people scare you into buying new cars, people who bought a used car that breaks down in 2-3 years likely didn't have a pre purchase inspection.
By "pre-purchase inspection", do you mean the part where you test-drive the car and do a through self-inspection of the car and its parts?

MotoTrojan
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Re: Buying a "new" car - Advice pls

Post by MotoTrojan » Tue May 14, 2019 10:43 am

I'd suggest you take a look at 2018 Mazda 3's. The new 2019 model is completely redesigned and is driving prices down on the 2018s. I was able to grab a Touring model (2.5L) with Bose/Tech package for $19.6K OTD, taxes registration, everything (MSRP was >$22K).

If you just want the basic Sport model (2.0L but very nice driving car) you could shave off several thousand from that.

You'd be hard pressed to find a used one with less than 20K miles for cheaper.

Greenman72
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Re: Buying a "new" car - Advice pls

Post by Greenman72 » Tue May 14, 2019 10:44 am

yuppiebogle wrote:
Tue May 14, 2019 10:11 am
So essentially what you're saying is, if I plan on driving it that long or "until the wheels come off", I don't need to take into account its resale/salvage value or depreciation, correct?
If you plan to drive it forever and ever and ever amen, and never ever ever plan to sell it, why would you care how much it's worth?

Topic Author
yuppiebogle
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Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 10:53 am

MotoTrojan wrote:
Tue May 14, 2019 10:43 am
I'd suggest you take a look at 2018 Mazda 3's. The new 2019 model is completely redesigned and is driving prices down on the 2018s. I was able to grab a Touring model (2.5L) with Bose/Tech package for $19.6K OTD, taxes registration, everything (MSRP was >$22K).

If you just want the basic Sport model (2.0L but very nice driving car) you could shave off several thousand from that.

You'd be hard pressed to find a used one with less than 20K miles for cheaper.
Appreciate the suggestion. Unfortunately, the styling isn't my taste though :(

fittan
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Re: Buying a "new" car - Advice pls

Post by fittan » Tue May 14, 2019 10:59 am

If I am you....

1) I will avoid buying new due to the much higher expenses. You'll need to pay "destination fee" for about $1K, your insurance premium and excise tax will go up and of course you'll need to pay higher sales tax. Everything adds up.

2) I would buy a 3 year old Accord (or similar) that is under 45K miles. Here is one 2016 certified Accord for $16K. Of course there is risk in buying used, but it is all about "acceptable risk". Buying Japanese car greatly reduce this risk.

3) I would put a $6K downpayment and get a $10K loan. The reason for the loan is that you'll build up your credit history faster (you're probably in low 700 range, with a loan that you pay off in say 2 years, you may be closer to 800). You're 25 now, in a few years you'll probably be buying your own house, having a high credit score could mean getting the best mortgage rate or much higher rate.

ohai
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Re: Buying a "new" car - Advice pls

Post by ohai » Tue May 14, 2019 11:02 am

OP, you are young but poor. You're net worth is $100k or lower. If a $10k car works, be aware that anything above that is a luxury. If you want to pay $24k, you can certainly afford it, but for me, my money would be better spent elsewhere.

Topic Author
yuppiebogle
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Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 11:09 am

fittan wrote:
Tue May 14, 2019 10:59 am
If I am you....

1) I will avoid buying new due to the much higher expenses. You'll need to pay "destination fee" for about $1K, your insurance premium and excise tax will go up and of course you'll need to pay higher sales tax. Everything adds up.

Noted. I do acknowledge and will take into consideration that a more expensive car will likely = more expensive insurance premium and higher sales tax.

2) I would buy a 3 year old Accord (or similar) that is under 45K miles. Here is one 2016 certified Accord for $16K. Of course there is risk in buying used, but it is all about "acceptable risk". Buying Japanese car greatly reduce this risk.

Completely understand and agree on the "acceptable risk" aspect. I guess where I struggle is determining where I ultimately would want to land in terms of xx,xxx miles for a used, Japanese car (if i go the used route). What are reasons for not going out further to, say, 80k, 90k, or 100k, for an even older (older than 2016, in your example) model and pay < $10k (maybe somewhere between $4k - $8k) where you can reasonably assume that the engine will probably be fine lasting another 100-200k miles?

3) I would put a $6K downpayment and get a $10K loan. The reason for the loan is that you'll build up your credit history faster (you're probably in low 700 range, with a loan that you pay off in say 2 years, you may be closer to 800). You're 25 now, in a few years you'll probably be buying your own house, having a high credit score could mean getting the best mortgage rate or much higher rate.
My credit score is currently in the 770 - 780 range (from owning and paying in full and on time credit cards since I was 17 or 18). In that case, is the financing for purposes of building up my score/credit history still necessary?

flyphotoguy
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Re: Buying a "new" car - Advice pls

Post by flyphotoguy » Tue May 14, 2019 11:12 am

Congrats on having your savings/retirement on track. I'm just gonna post the 2 cars I bought used a while back and is still running . I'm actually buying a used car in a year to 2 too.

2008 Pontiac Vibe (actually a Toyota Matrix) - Goal - reliable commute car, got it for $9K IIRC at 90ish K now at 194ish K miles. Bought from a used car dealer and had the history checked (all standard maintenance were done and no issues).
Usual oil change and tire change when due.
Will be on 2nd tranny oil change and radiator fluid change too on the next oil change schedule.

2007 Honda Accord LX - Goal - fully loaded sedan for a relaxing drive and daily driver for DW, got it for $8K IIRC at 70ishK now at 150K miles.
Bought used from a family who was selling it for cheap to get a van for their growing family. I test drove it, checked the service and it was maintained well.
Usual oil change and tire change when due.
Will be on 2nd tranny oil change and radiator fluid change too on the next oil change schedule.
Had to change starter just this Dec 2018 when it was acting up but the cost was only $400 parts and labor.
Brakes were just changed this year coz of the squeaking for maybe $400 for rotors and pads.

Both still running great. Insurance is cheap for both, Maintenance cost is cheap too. Filters and wipers I just order online (yearly for wipers, 2yrs for filter) and replace myself since it's not hard to do.

I would suggest Toyota/Honda brands Camry/Accord models by default with no or not too much fancy gadgets that can fail. Search the common failure around for the specific ones you plan on getting and make sure you check the car before buying for issues like leaks. You can even hire a mechanic to do a pre-purchase check and it would be worth it too so you know what you're getting and possible cost to fix some stuff. It's great mentally and financially to have cars that just runs and runs that you don't have to worry about. Good Luck!!!

..oh just to add this too I got the consumer reports information on vehicles before buying to at least have more data on issues/reliability of cars. Then checked online reviews after when I got my options down to a few. As the poster below stated, get as much data as you can and test drive them.

For the commute car my list were civic, sentra, corolla (matrix/vibe is also a corolla).
For my DW my list were Camry, Accord, Fusion.
Last edited by flyphotoguy on Tue May 14, 2019 2:51 pm, edited 2 times in total.

User avatar
Taylor Larimore
Advisory Board
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Location: Miami FL

Re: Buying a "new" car - Advice pls

Post by Taylor Larimore » Tue May 14, 2019 11:20 am

yuppiebogle:

Congratulations for your considerable savings at an early age.

Anecdotal information is risky. In my opinion, the best source of information about buying (or leasing) new or used cars is the April Car Issue of Consumer Reports available at most libraries. They survey thousands of car owners and publish their results each year in this comprehensive Car Issue.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

mountain-lion
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Re: Buying a "new" car - Advice pls

Post by mountain-lion » Tue May 14, 2019 11:34 am

Cycle wrote:
Tue May 14, 2019 10:06 am
You should never let the ratio go below 1:100....
How did you arrive at this number?

From a purely financial standpoint, minimizing ones automobile expenses is a wise thing to do. But there must be a better basis for advising others to follow such a hard and fast rule than one's own personal financial comfort. Why 1:1000 and not 1:2000?
Cycle wrote:
Tue May 14, 2019 10:06 am
The most impactful way to reduce your risk of becoming one of the 1.25 million dead car drivers per year
The number of automotive deaths worldwide in 2016 was 1.35 million. However, that is very distorted by countries with comparatively poor driving conditions and safety standards. Driving in the US is reasonably safe. Not *perfectly* safe, of course, but millions of people collectively drive millions of miles without issues every year.

To put that risk in perspective, you have a greater chance of being poisoned (including drug poisoning such as opiod poisoning), than you do of dying in in a car accident. Those odds aren't zero, but good risk assessment means understanding rationally the risks one is taking.

The odds are also skewed based ones location and the drivers around one. Bogleheads are typically more well off than the average person, and therefore less likely to be involved in a car accident.

Just like finances, one should be rational about the risk one takes, and apply the best risk model available. The "1.35 million deaths" cited above is not relevant to the vast majority of bogleheads.

https://en.wikipedia.org/wiki/Motor_veh ... S._by_year
https://en.wikipedia.org/wiki/List_of_c ... death_rate
https://www.iii.org/fact-statistic/fact ... ality-risk

Afty
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Re: Buying a "new" car - Advice pls

Post by Afty » Tue May 14, 2019 11:41 am

Have you considered a Civic to save a little money? This generation is supposed to be excellent. You could get the Si trim if you want something a bit more fun.

runner3081
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Re: Buying a "new" car - Advice pls

Post by runner3081 » Tue May 14, 2019 11:47 am

yuppiebogle wrote:
Tue May 14, 2019 10:42 am
runner3081 wrote:
Tue May 14, 2019 10:15 am
As others have mentioned, spend the smallest reasonable amount to buy a car.

The Craiglist saved search I have is for:
cars & trucks - by owner
title status: clean,
max odometer: 49999,
max price: 11999,
min odometer: 5000,
min model year: 2012,
min price: 3500

This nets a surprising amount of cars. Corolla, Altima, etc.

Don't let people scare you into buying new cars, people who bought a used car that breaks down in 2-3 years likely didn't have a pre purchase inspection.
By "pre-purchase inspection", do you mean the part where you test-drive the car and do a through self-inspection of the car and its parts?
No, it means you take it to a trusted independent shop, pay their $150ish fee and receive a full inspection.

Also, keep in mind that licensing may be cheaper on older cars in your state and save additional money!

cbr shadow
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Re: Buying a "new" car - Advice pls

Post by cbr shadow » Tue May 14, 2019 12:01 pm

IMO the most Boglehead car you can buy is a used Toyota Prius.
- Low entry cost (10k is easily doable)
- Great reliability. Reports of 300,000 mile Prius' are easy to find
- Low overall maintenance costs (brakes last longer, engine is near indestructible, battery replacement fears are unfounded)
- Great gas mileage (I average 45 mpg)
- Super functional: The hatchback design and ability to put seats down makes this super functional. I can slip (2) bikes into the car without issue.

I think a used Toyota Prius is the lowest total cost car you can purchase.

California88
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Re: Buying a "new" car - Advice pls

Post by California88 » Tue May 14, 2019 12:04 pm

Take a look at the 2020 Corolla ... it's a big upgrade from the 2019 Corolla.

Thegame14
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Re: Buying a "new" car - Advice pls

Post by Thegame14 » Tue May 14, 2019 12:13 pm

you are in the best years of your life, making a good salary and living at home, you wont believe the costs associated with a home, you think mortgage and taxes are the big items, then cable TV is $200, gas is $100, electric $175, car insurance $150, water, sewer, cell phone, day care, home alarm, it all adds up.

First you are killing it at your age to be maxing 401K, I did the same at your age for a few years, but wish I did it longer

So my two pieces of advice are one stay at home as long as you can and bank as much as you can, meaning keep maxing your 401K and pay down any debts or loans that you have and the rest in cash. You will need it later for a downpayment on a house, and the sooner you max out your 401K the more time it has to keep compounding gains. Two for the car, I would be a certified pre owned carolla. You can prob get one that has around 40,000 miles for about 10K. not really a sports car, but safe, reliable and gets around 40MPG, so you will save on gas costs. Even now having a camry that gets around 30 MPG, I miss my carolla getting 40MPG, and then driving wife's SUV that gets 18-20MPG, really miss that carolla.....Gas goes up to $4 a gallon but you only use 10-12 gallons per week with that MPG, so it doesnt really bother you as much as those getting half the MPG, think of it like getting your gas half price.

fittan
Posts: 203
Joined: Wed Mar 30, 2016 1:58 pm

Re: Buying a "new" car - Advice pls

Post by fittan » Tue May 14, 2019 12:27 pm

yuppiebogle wrote:
Tue May 14, 2019 11:09 am
fittan wrote:
Tue May 14, 2019 10:59 am
If I am you....

1) I will avoid buying new due to the much higher expenses. You'll need to pay "destination fee" for about $1K, your insurance premium and excise tax will go up and of course you'll need to pay higher sales tax. Everything adds up.

Noted. I do acknowledge and will take into consideration that a more expensive car will likely = more expensive insurance premium and higher sales tax.

2) I would buy a 3 year old Accord (or similar) that is under 45K miles. Here is one 2016 certified Accord for $16K. Of course there is risk in buying used, but it is all about "acceptable risk". Buying Japanese car greatly reduce this risk.

Completely understand and agree on the "acceptable risk" aspect. I guess where I struggle is determining where I ultimately would want to land in terms of xx,xxx miles for a used, Japanese car (if i go the used route). What are reasons for not going out further to, say, 80k, 90k, or 100k, for an even older (older than 2016, in your example) model and pay < $10k (maybe somewhere between $4k - $8k) where you can reasonably assume that the engine will probably be fine lasting another 100-200k miles?

3) I would put a $6K downpayment and get a $10K loan. The reason for the loan is that you'll build up your credit history faster (you're probably in low 700 range, with a loan that you pay off in say 2 years, you may be closer to 800). You're 25 now, in a few years you'll probably be buying your own house, having a high credit score could mean getting the best mortgage rate or much higher rate.
My credit score is currently in the 770 - 780 range (from owning and paying in full and on time credit cards since I was 17 or 18). In that case, is the financing for purposes of building up my score/credit history still necessary?
Since your credit score is in the high range, I don't think it is necessary to get a loan. You should be able to pass 800 in a few years as your credit history increases.

As to why I suggest a 3 year old car is this thinking "You're most likely NOT buying someone else problem since it is just out of warranty". Meaning if there is some serious issue (say engine or transmission), the original owner would have repaired it since it is under warranty. Again back to acceptable risk...it is very low. Also a lot of car are coming off leases at 3 year old so your selections are many and prices dropped more (compared to 1 or 2 year old used).

Now I am not against buying a 6 year (under 100K miles) car. Actually I am leaning towards suggesting you to do so. And to be sure, we're talking Japanese which at 100K is still a "baby". A 100K BMW is another story. One advantage of a 6+ year old car is that you can (if you can stomach) dropped comprehensive and collision. Maybe not initially but when car is say worth only $5K (in a few years), drop and save yourself $200/year. Again it all depends on your "acceptable risk". With a 6+ year car, now you have this option.

If u get a 6+ year car, another thing I would suggest to you do...is to learn to repair and maintain it yourself. Get a Haynes manual and learn everything from changing spark plugs, brake pad, rotors, engine oil, filters, top up fluids etc. There'll also be plenty of youtube videos. Now I am not asking u to be auto mechanic, but these basic skill sets will save you and your family $$$ going forward.

rj342
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Re: Buying a "new" car - Advice pls

Post by rj342 » Tue May 14, 2019 12:32 pm

One thing I think you left out of the post was miles driven a year -- that affects calculation in likely life of both new and used cars, affecting your decision.

I also understand that as a single young (man?) you want a reasonable looking car for going out - but remember w used you might be able to move up market a bit vs new.

AND no point in going too fancy/expensive with a car (and too any years of payments if that) to only have to possibly sell sooner ifarried and wi kids

My bought-new way back when Ford F-150 just hit 20 years old a few months ago. Have recently had some nontrivial expenses (A/C work, brake cylinders, power steering) due to age, but engine and transmission in great shape with only 138k miles so I felt worth it to get a few more years. Interior and exterior are in quite good shape for a truck this old. Spent about $50 on new *clear* headlight assemblies last year and crazy how much that improved the appearance.

Still have my my wife's 2009 Honda Pilot, w 90k miles. That time we bought the extended Honda factory wty 98yrs/100k miles) and it did pay for itself and then a bit.

With my son (20yo in college) we've lucked out with used cars:
First he got late HS was my moms 2003 Accord that also had <90k miles. That got totaled in 2018 (teeboned, not hurt fortunately). Picked up a coworkers 2007 Lexus IS-350, 200k miles for $5k (what insurance paid for the Honda, and actually a couple K under book), and trusted mechanic gave a big thumbs up. Only considered it because has a replacement engine which only has 120k on it (I have the paperwork to prove it, had 20k when installed on car at 100k - catastrophic waterpump failure on interstate killed orig one).
Runs like a top. If it gets him through college and first couple years of early career its a win, any longer is gravy -- and its a nice, sporty enough car he is in no rush for aesthetics. Will just paint bumper for bug Florida bug damage in a few months.

Our philosophy was always buy new and keep it a long time (doable since blessed w short drives to work all these years), but my own next car will prob be a used car in a nice make & model.

inbox788
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Re: Buying a "new" car - Advice pls

Post by inbox788 » Tue May 14, 2019 12:41 pm

Great choice. Sedans are great cars, but no popular these days. Don't overpay! You can get tremendous discounts if you keep your eyes open and are patient. The top models are always going to cost more, but they're getting pricing pressure, so use that to your advantage.

https://cleantechnica.com/2019/01/05/ho ... -collapse/
https://techcrunch.com/2018/04/25/ford- ... us-active/
https://www.consumerreports.org/general ... me-sedans/

You can save a lot buying one of the less popular models or even one of the ones being discontinued, but be sure you get a big or huge discount because the resale value will drop like a rock.

Anyway, pay cash if you can, and invest the car payments, unless you can get a super low interest rate loan.

Used is going to cost less on average, but there's risk of repair and more maintenance expenses, so plan and account for them. If it doesn't cost much more, a new car may be worth the extra cost. Depends on what you will do when trouble strikes. So as long as you're prepared, the used car is probably the way to go. I was tempted by the $6,750 off 2017 Hyundai Sonata until 7/31/2017 https://forum.leasehackr.com/t/6-750-of ... 2017/17139, and if you can find this sized discounts, consider going with new. [Also, if you understand what you're doing, leasing may be a viable option. Just be fully informed and ignore those that would never lease under any conditions. It's all about the better deal, and each deal is different. Many leases are bad, but you can find some gems, and some folks are after those. Remember to invest the savings if you lease (you won't be using up your cash and you'll have a lower payment and won't be building up any equity.)]

BTW, doesn't sound like you drive a lot, but if you do, there's a case to make to get a Tesla 3.

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Re: Buying a "new" car - Advice pls

Post by tennisplyr » Tue May 14, 2019 12:51 pm

Check out leasing a car, as a relative of mine said, "why would you want to buy a depreciating asset?" You could get a brand new car (3 year warranty), no money down for $200-$300/month. I've been doing this since 1995. If you like the car after 3 years, you can buy/finance it. I know a lot of my brothers on here would disagree but it has worked for me. I did buy one of my cars when the lease expired.
Those who move forward with a happy spirit will find that things always work out.

NJdad6
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Re: Buying a "new" car - Advice pls

Post by NJdad6 » Tue May 14, 2019 1:15 pm

Lots of differing advice here. You can afford a new car. Get something you like because 10 years is a long time. Toyota and Honda are fine but expand your list. There are many brands more reliable than Honda. Maybe a Subaru crosstrek. They are very nice. Also good options from Mazda, Hyundai and Kia.

If looking for long term reliability maybe steer clear of turbo engines and untested CVT transmissions. However these are become much more common. Good luck

fittan
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Re: Buying a "new" car - Advice pls

Post by fittan » Tue May 14, 2019 2:22 pm

NJdad6 wrote:
Tue May 14, 2019 1:15 pm
Lots of differing advice here. You can afford a new car. Get something you like because 10 years is a long time. Toyota and Honda are fine but expand your list. There are many brands more reliable than Honda. Maybe a Subaru crosstrek. They are very nice. Also good options from Mazda, Hyundai and Kia.

If looking for long term reliability maybe steer clear of turbo engines and untested CVT transmissions. However these are become much more common. Good luck
I agree....stay clear of turbo.

Quirkz
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Re: Buying a "new" car - Advice pls

Post by Quirkz » Tue May 14, 2019 2:41 pm

tennisplyr wrote:
Tue May 14, 2019 12:51 pm
Check out leasing a car, as a relative of mine said, "why would you want to buy a depreciating asset?" You could get a brand new car (3 year warranty), no money down for $200-$300/month.
If you lease, you're still paying for the depreciation. And if you swap to a new vehicle every few years, you're always paying for depreciation at its steepest. I know there are some exceptions where a lease might make sense, but it's rare.

sk2101
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Re: Buying a "new" car - Advice pls

Post by sk2101 » Tue May 14, 2019 2:55 pm

Used Ford Fusions are an incredible value right now. Ford has essentially been building the same car without changes for the last 6 years, so the problems have been worked out and it is a pretty reliable car. You get a pretty discount for it being a domestic car, and you can find hybrids with low mileage, couple year old in the low $10s. Hard to beat that.

Hulu
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Re: Buying a "new" car - Advice pls

Post by Hulu » Tue May 14, 2019 3:06 pm

You’re so young that an extra $10k now could easily be worth $2M-$5M later in life. I’d expand the search to include the 2015+ Kia Forte and buy used. Whatever you buy please inspect it and drive it safely. Good luck!

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yuppiebogle
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Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 3:50 pm

Hulu wrote:
Tue May 14, 2019 3:06 pm
You’re so young that an extra $10k now could easily be worth $2M-$5M later in life. I’d expand the search to include the 2015+ Kia Forte and buy used. Whatever you buy please inspect it and drive it safely. Good luck!
You’re so young that an extra $10k now could easily be worth $2M-$5M later in life.
Can you explain how that is feasible? I used the simple compound interest calculator @ http://www.moneychimp.com/calculator/co ... ulator.htm and it says $10k, assuming no annual additions, grown at a 8% interest rate over 40 years becomes ~$217k, not millions :confused

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Re: Buying a "new" car - Advice pls

Post by Cycle » Tue May 14, 2019 3:51 pm

Deleting rants
Last edited by Cycle on Tue May 14, 2019 4:38 pm, edited 2 times in total.

emanuel_v19
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Re: Buying a "new" car - Advice pls

Post by emanuel_v19 » Tue May 14, 2019 3:56 pm

Unfortunately, you can't drive a Kia safely. However, if I were you, I would buy whatever model is rated top safety. In addition, I think 7months is wayyy too far from now to really know what you'll be doing. Anything can happen/change here on out.

I say wait about a month, weeks if possible, then consider purchasing.

Buy new if possible, but used is fine too. If anything, I would say buy a vehicle that was leased. Good luck!

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Re: Buying a "new" car - Advice pls

Post by Cycle » Tue May 14, 2019 3:59 pm

Deleting my rants
Last edited by Cycle on Tue May 14, 2019 4:38 pm, edited 1 time in total.

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yuppiebogle
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Re: Buying a "new" car - Advice pls

Post by yuppiebogle » Tue May 14, 2019 4:02 pm

emanuel_v19 wrote:
Tue May 14, 2019 3:56 pm
Unfortunately, you can't drive a Kia safely. However, if I were you, I would buy whatever model is rated top safety. In addition, I think 7months is wayyy too far from now to really know what you'll be doing. Anything can happen/change here on out.

I say wait about a month, weeks if possible, then consider purchasing.

Buy new if possible, but used is fine too. If anything, I would say buy a vehicle that was leased. Good luck!
Hi Emanuel, thanks for your input. Is there a specific reason you recommend buying a vehicle that was leased?

emanuel_v19
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Re: Buying a "new" car - Advice pls

Post by emanuel_v19 » Tue May 14, 2019 4:24 pm

yuppiebogle wrote:
Tue May 14, 2019 4:02 pm
emanuel_v19 wrote:
Tue May 14, 2019 3:56 pm
Unfortunately, you can't drive a Kia safely. However, if I were you, I would buy whatever model is rated top safety. In addition, I think 7months is wayyy too far from now to really know what you'll be doing. Anything can happen/change here on out.

I say wait about a month, weeks if possible, then consider purchasing.

Buy new if possible, but used is fine too. If anything, I would say buy a vehicle that was leased. Good luck!
Hi Emanuel, thanks for your input. Is there a specific reason you recommend buying a vehicle that was leased?
Think about it.

A leased vehicle is identical to a financed vehicle. The owner will need to take care of it the same way as if it was a purchase(at least it the beginning stages), do the recommended regular maintenance, no modifications to the car to make sure it looks the same way from the 1st day they drove it off the dealership. In addition, the owner could purchase pre-paid maintenance packages, paint protection, ding coverage, etc... And although they can choose 10k, 12k, 15k miles/year, it doesn't mean the owner will ever hit those miles.

I bought my 13 Jetta with 21k miles. The depreciation that it took being a 3yr old car was astonishing. I got that deal for a steal, I was surprised they didn't call the cops on me. It was robbery, and it felt like I had beaten a dealership for the first time. It was a bullet deal too so they only made a meager change on the interest they charged me. And it was a 5-speed manual with the convenience package, almost a unicorn.

My recommendation is to wait until you are committed to buying. Only then, you will find the right deal. Sounds weird, but it's worked for me.

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Re: Buying a "new" car - Advice pls

Post by tennisplyr » Tue May 14, 2019 5:51 pm

Quirkz wrote:
Tue May 14, 2019 2:41 pm
tennisplyr wrote:
Tue May 14, 2019 12:51 pm
Check out leasing a car, as a relative of mine said, "why would you want to buy a depreciating asset?" You could get a brand new car (3 year warranty), no money down for $200-$300/month.
If you lease, you're still paying for the depreciation. And if you swap to a new vehicle every few years, you're always paying for depreciation at its steepest. I know there are some exceptions where a lease might make sense, but it's rare.

Sometimes life isn't about money, many many Americans lease....because it just makes sense for them.
Last edited by tennisplyr on Thu May 30, 2019 7:23 am, edited 1 time in total.
Those who move forward with a happy spirit will find that things always work out.

prettybogle
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Re: Buying a "new" car - Advice pls

Post by prettybogle » Tue May 14, 2019 6:06 pm

NEW 2019 honda civic - 21k out the door

FI4LIFE
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Re: Buying a "new" car - Advice pls

Post by FI4LIFE » Tue May 14, 2019 8:20 pm

I've done well buying used. If I want something"new" feeling, I will buy something with low mileage, usually just coming off lease. Usually under 30k miles. I did this with a Toyota Tundra and with my wife's Lexus. I drove the Tundra for 5 years and it only lost $7k in value over that time. A new one would lose that when I drove it off the lot.

I currently drive a 14 year old Highlander. I now prefer to drive a "beater". I like not caring if someone hits my car with a shopping cart or if the kids spill something. If I don't wash my car for a month or two I don't care. I'm not a car guy.

For those who say they do better driving new, I think they are trying to justify it to themselves. It's fine to drive a new car but not usually the best financial decision, which is ok. You can spend your money on whatever you want.

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Watty
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Re: Buying a "new" car - Advice pls

Post by Watty » Tue May 14, 2019 8:47 pm

yuppiebogle wrote:
Tue May 14, 2019 9:41 am
- If I am looking at, say, Hondas/Toyotas, and am looking to drive the car for t least 10 years, then is it better to go new vs. used? (assuming I can afford it)
When I have looked at them Hondas and Toyotas don't depreciate fast enough to make buying a used one that is just a few years old a better choice than buying a new one. Even when they are five or more years old they are still pretty expensive.

Less popular but still good cars that depreciate faster(Ford, Hyundai, etc) may be a better deal when you are shopping for a not too old used car.
yuppiebogle wrote:
Tue May 14, 2019 9:41 am
Just from browsing lately, I like the 2018 Honda Accord (sport trim) but wonder if spending ~$23-24k on a new/lightly used car is prudent vs. buying, say, a relatively higher mileage (between 60 - 100k 2015 or older - Accord/Camry for $10-12k and also driving that thing into the ground.
The Accord or Camry may be more car than you need. They tend to gradually make cars bigger over the year and and last year I bought a 2018 Corolla that is about the same size as a 2002 Camry I had. A Corolla or Civic may be big enough for what you need.

One thing to watch out for is that Toyota made a lot of advanced safety features standard equipment in 2018. With some other brands they may be options that you can only get on higher trim models. Be sure to carefully compare the details since something like a used 2016 Corolla may have very different features than a 2019 Corolla. It is not critical (to me at least) but older cars may not interface well, or at all, with your cell phone

It was a bit over a year ago but I was able to buy the new 2018 Corolla for just over $17,000 including local sales tax and registration fees. I would see no problem with you paying that much for a new car that will last you for many years.

Here is a post that I did where I outlined my experience with buying a new car through the internet. This was the third new car that I have bought this way.


viewtopic.php?f=11&t=239526&p=3746230

There is also an old very long ongoing thread about how to buy a new car that you might skim over.

viewtopic.php?t=124638

Be sure to get insurance quotes on the cars you are looking at since they may vary a lot more than you might think. A "sport" trim level may be a lot more expensive to insure so be sure to watch out for that.

If for some reason you decide to look at a much older car then some things to watch out for are;

1) There are massive ongoing airbag recalls for many brands. This is a problem since they do not have enough parts to replace the airbags. Avoid buying a car with an airbag recall that has not had the work done.

2) ESC is a very good safety feature to have. It became standard for cars in 2012 so be sure to check to see if any car you are looking at has ESC. I would avoid buying a car without ESC. (I am not sure about trucks.)

3) When looking at used cars pay attention to the condition of the tires since you might have to spend the better part of a thousand dollars to replace them soon after you buy it.
Last edited by Watty on Tue May 14, 2019 9:02 pm, edited 1 time in total.

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Watty
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Re: Buying a "new" car - Advice pls

Post by Watty » Tue May 14, 2019 8:58 pm

One more thing,

When you are looking at the cost of the car be sure to look at the total cost of car ownership over the next 5 or 10 years, not just the purchase price. There are a number of websites that will give you information on this and you can also do your own calculations.

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Re: Buying a "new" car - Advice pls

Post by Jack FFR1846 » Tue May 14, 2019 9:15 pm

FI4LIFE wrote:
Tue May 14, 2019 8:20 pm

For those who say they do better driving new, I think they are trying to justify it to themselves. It's fine to drive a new car but not usually the best financial decision, which is ok. You can spend your money on whatever you want.
Depends on the model. I spent 6 months looking for a Wrangler before buying mine new. Cheapest used 2 year old one I could find was $29k looking in 2 states. I paid $28k ordering exactly what I wanted.

Currently looking for a replacement Crosstrek soon. One dealer I watch is offering $2k off factory orders right now. The cheapest used Crosstrek they currently have is $23,400. What that exact vehicle will cost me to order right now....$22k.

So sometimes, yes, new can be cheaper than used. But again, the model matters a lot.
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Re: Buying a "new" car - Advice pls

Post by Traveler » Tue May 14, 2019 9:25 pm

Cycle wrote:
Tue May 14, 2019 10:06 am
Congratulations on maxing out your 401k and roth at such a young age. I did the same at your age and am astounded at the size of my 401k after 13 years of contributions, 11 years of maxing.

My wife has a car, which comes in handy with an infant. The optimal number of cars is zero, but much of the US was designed to get as much money from your bank account into Standard Oils (or it's current embodiment), so in some areas you will need to bend the knee to the oil companies and buy one.

You should strive to spend as little on a car as possible, to make sure you are saving as much as possible. Our current car to net worth ratio at 35 is 1:250. You should never let the ratio go below 1:100, so I'd recommend getting something for $2300 or less. that means used, private party.

A bunch of people who watched too many car ads will probably advise you overspend on your living-room-on-wheels, but at the end of the day transportation is an expense and you should minimize that expense. Transportation by living room is also dangerous, and so the most impactful way to reduce your risk of becoming one of the 1.25 million dead car drivers per year is to reduce your miles driven, not spend $$$ on safety features.
This ratio advice is ridiculous even for boglehead standards. Omg, I have a 2014 Maxima worth about $12,000 so I am below the 1:100 ratio so oh no, I've overspent. Better go sell it and buy something a little cheaper that I can actually afford.

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bottlecap
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Re: Buying a "new" car - Advice pls

Post by bottlecap » Tue May 14, 2019 9:27 pm

Lots of people are wrong about cars. Most of us just don’t buy enough of them in our lifetime to have an idea as to whether our experience is typical.

I have come to believe we worry too much about getting the best deal on a particular model of vehicle.

There is this crazy little thing called the "car market." Arguably, it’s pretty efficient, so the difference between new an used probably isn't that much. So the difference is a lot of worry about nothing.

That said, the same used car model can be treated differently. They can also be priced differently. If you are willing to do the legwork, you can probably find a well treated used vehicle for a good bit under market. That's ideal, but can be time consuming. How much is your time worth?

No matter what you do, so long as you keep doing what you're doing financially, the difference between new and used doesn’t matter. My wife and I will probably buy no more than 8 cars in our lifetime, and that assumes we will drive until our 90's. Thus far we have bought new and used. If, after all the calculations, we overpaid by $1,000 each time, it wouldn’t amount to much in the grand scheme of things.

I’d find a car you like for a decent price within your budget and go for it.

Good luck,

JT

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