I recently came across an Automotive News column that I never thought I would see — a reporter who argued against buying a new car.
Richard Truett (2024) explained that in recent years he has only bought low-mileage, recent-vintage cars because new-car prices have risen so high. What’s more, he’s not sure if he will ever buy a new car again.
Truett noted that the average new-car transaction price almost hit $48,000 in August. This has resulted in the average new-car loan stretching to 68.4 months at $730 per-month payments. In addition, the average car-insurance rate has reached $2,543 per year — up a whopping 26 percent over 2023.
“If we bought a new car based on the above numbers, the monthly payment including insurance would be roughly equal to having another mortgage payment,” wrote Truett (2024). “And while we could afford such a large outlay for a new car, we would not be able to contribute to our 401(k) retirement account in a meaningful way. And cutbacks would have to be made elsewhere, such as vacations, dining out and saving for emergencies. . . .”
This thinking is what led Truett to recently buy a 2012 Mini Cooper for $13,000 in cash. After subtracting the money he will make by selling the car the Mini replaces, total acquisition costs may not be higher than $5,000. That’s pretty good for a car he hopes will help him avoid making car payments for five years.
Truitt’s strategy is in the same ballpark as mine
I have never bought a new car and doubt I ever will. Where I’m a little different than Truitt is that I have often been more willing to buy an older car and run it into the ground. For example, for 19 years my daily driver was a 1989 Civic — and it might still be if my family hadn’t inherited a 2010 Kia Rio.
Recently we replaced our second car, a 2001 Honda Civic, with a 2017 Toyota Prius V. The goal was to get a vehicle that was reliable and roomy enough for lengthy trips but was fairly fuel-efficient — preferably a hybrid. Fortunately, the used-car market in our neck of the woods finds the Prius V wagon far less appealing than bigger sport-utility vehicles. So win-win.
Also see ‘You know things are bad when an Automotive News reporter swears off new cars’
One curious part of Truett’s column is when he noted that the average age of America’s car fleet is 12.6 years. “So, people are driving their cars until they are basically worn out.” Things may be different in the snowy parts of the country, but on the west coast you can keep cars far longer if you take care of them.
I also wonder whether Truett may end up regretting his purchase of a 2012 Mini Cooper given its less-than-stellar reliability record, at least according to Consumer Reports (2024). The price we pay for fun-to-drive cars. . . .
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Consumer Reports; 2024. “2024 Mini Cooper: Reliability History.” Subscription required. Accessed Oct. 9.
- Truett, Richard; 2024. “Column: How I beat the high cost of new cars.” Automotive News (subscription required). Posted Sept. 23.
There are a lot of trade-offs involved, and what makes the most economic sense will generally depend on how the vehicle is used.
As a general rule, I think that 20 years is about the practical maximum age for a vehicle to be used as a daily driver. On the one hand that’s because the rubber parts dry out and the plastic parts crack, and replacing all those is cost prohibitive. On the other hand that’s because parts become unobtainable. So unless the vehicle has collector value, at around 20 years the value is just scrap. This means that the older the vehicle you buy, the fewer the years over which the expected depreciation (here the difference between the purchase price and the scrap value) can be amortized.
Next, there is the differential in maintenance and repair costs between older and newer vehicles. Depending on how much use the vehicle gets, and what kind of use (short urban cycles vs highway), on a periodic basis the cost of running an older vehicle can be quite material compared to the depreciation on a relatively newer vehicle.
Third, there is a difference in product value because of technological progress. Newer vehicles are a lot safer, for example, than older ones. The added safety has some economic value, though it’s probably a question of consumer surplus rather than anything that can be consistently quantified.
Fourthly there’s some option value in leasing versus purchasing. Most directly that relates to whether or not the end of lease value will exceed the buyout price. But also, leasing immunizes you from value destruction if the vehicle is involved in an accident and requires a major repair resulting in accelerated depreciation.
On the other hand, financing the purchase of a vehicle whether new or used is almost always economically a bad idea since you are incurring interest cost on a depreciating asset. So if you are buying instead of leasing, and you can’t afford to buy new for cash, it will generally make more sense to buy used.
I have alternated between leasing entry level luxury vehicles (which is generally the best value play in vehicle leases) and buying used vehicles depending on interest rates. Currently I have a 5 year lease on a 2021 Genesis G70. Given the warranty, the monthly cost is quite comparable to depreciation, maintenance and repair on an older vehicle. It was involved in a significant collision, so it won’t be worth the buyout. Unless interests rates come down, I’ll replace it with a used vehicle. But if they do, I may lease again.
My step grandfather, who was the most financially astute person I’ve known, always purchased ex rental vehicles and then kept them for around 5 years. Since he was retired and didn’t drive high mileage, he got the benefit of the extra depreciation on the purchase price from the high mileage, didn’t have to do much maintenance or repair, and sold what was by then a low mileage vehicle for its year.
Agreed. I was able to keep my Civic so long because I used it as a daily commuter and went relatively short distances in a relatively benign climaate.
The best car I ever owned was a 1989 blue Mercury Sable GSL with a bench seat and front cornering lights. The second-best car owned was a 1995 Ford Taurus LX, also with bench seats and cornering lights. The only flaw with both cars were the Ford alternators that failed after 110,000-miles. I remember when “Click and Clack, the Tappet Brothers” (Tom and Ray Magliozzi) of N.P.R.’s “Car Talk” were both alive and were the greatest advocates for the Honda Fit. Given the number of recalls of cars and trucks (albeit including the Takata air-bag inflator debacle) manufactured in the 21st century, what is the on-average most reliable (older) “previously-owned” car / truck ? Last weekend, watching the Mecum Indianapolis Fall Auction, I was amazed at how many 21st Century 45,000-mile W-12 and Turbo V-8 Bentleys were crossing the auction block going for much less than half of their “as-new” price. (Please note that Indianapolis has a long-time authorized Rolls-Royce and Bentley dealer in suburban downtown Zionsville, so factory service and parts are not an issue.) Bentleys of this century are aspirational vehicles for me, but there must be a problem other than their terrible gas mileage. (Yes, I W.O.!)
Funny how the dice rolls. l have bought over 30 “daily” cars during my driving career so far and the biggest disappointment was a new Ford.
l purchased 8 used GM’s over close to 3 decades of decades and loved them all and had very few problems! These cars were supposed to be problematic, but thru good maintenance and choosing the right models, it worked out! None were terribly high mileage but all were high enough/old enough that major problems certainly could have occurred.
My Dad had a ’50s Chrysler product that gave him grief and he sold it to buy his first of 3 Studebakers (which never caused any problems). Because of that troublesome Dodge, my Dad never bought another Mopar – and l never bought one!
Almost weird how the purchase history turned out!
In December, 1963, in the local newspapers’ reporting surrounding the shutdown of Studebaker’s South Bend operations, much was made of the fact that Studebaker would make certain (and was obligated) that replacement parts for existing car and trucks would be available in the U.S. for a ten-year period. (O.E.M. New Old Stock ?) Was this a federal law or something required by state dealer franchise laws ?
l’ve seen a previous discussion on this and the conclusion seemed to be that there was no law to require 10 year parts availability after closing. Studebaker did operate their parts warehouses into the early ’70s and then sold them to entrepreneurs who kept them running – and some are still in business today with 20,000 part numbers in stock!!!
If this is now an existing law (and l don’t know), l can tell you of at least one EXISTING big U.S. manufacturers who can’t even keep parts available for 10 years!
Studebaker International (and Nate Altman of Avanti II fame) bought the majority of new-old-stock parts from the Studebaker Corporation. Newman & Altman ran the Studebaker company store in downtown South Bend. I don’t believe that Pontiac, Oldsmobile, Saturn or Saab made any arrangements with Steve Rattner in the structured bankruptcy to produce a supply of N.O.S. parts. This may not be a problem with Mercury or Plymouth mechanical parts as Ford and MoPar are pretty standard. but sheet metal and trim are going to be difficult to find unless they are 3-D-printed.
I also run cars until they basically stop and when my Prius batteries gave up the ghost just coming out of COVID, I replaced it with a Hyundai Ionic hybrid for £10.5k, which was then a fair price. Prices then went North and have remained there. Just checked Auto Trader and my Ionic with current mileage being widely offered at c£10k. Since it’s been completely trouble fee and returns 600m a tank, why would I pay around £40k for an EV lucky to run 300m before recharging?
The best approach is to buy a three to five year old used car in excellent shape, not that hard to do with a modern car. Get one with around 35-50,000 miles. Engines will easily last between 150 to 200,000 miles. Transmissions a bit less, but figure around 100 to 150,000 miles with good care. If an engine has a fatal manufacturing flaw it will usually present itself by 15-20,000 miles and it will be repaired for the original owner under warranty. I often buy hobby cars with higher mileages of between 120-150,000 miles and have had good luck. The depreciation brings cars down to a comfortable price level, and they still have years of life left in them before they need a lot of repair. I will never buy a brand new car again, though I’m aiming for cars less than ten years old.
In my household, I’ve almost always bought used cars for me and the “good” car was for my wife and children. This was a either a leased car or a new car with a loan. After the impacts of the Great Recession of 2008-2009 we didn’t buy a new car until just last year. That was only because the “good” car was getting very rusty, but still mechanically excellent. We still drive the old good car, and only have been using the new good car for long trips. Utlimately, I will have to do something with one of my older cars, as keeping three cars for two people is not really a good idea, financially.
The car we bought is meant to be our last (new) car, as we both approach retirement. Due to COVID, my wife works from home and I have a short commute to my job. None of our cars will end up with astronomical driven miles on them, at least as far as I can fathom. We went with a gasoline fueled car as I don’t expect them to disappear anytime soon. Also, I cannot predict where we may be living in 10-15 years. We’re in good health now, but as we all know, situations change. 10-15 years is the length of time we had our last new car and due to changing situations, we may or may not have access to charging at that time.
However, the AN reporter is just elucidating knowledge that is fairly common, and in these inflated times, good advice for everyone. (I dislike using that phrase “inflated times” as it seems that EVERY era has it’s difficulties.) This was advice that was given to me by my father and I have passed down to my kids. The advantage we have in this time is that cars are generally more reliable than in any time in motorized history. With a little care in selection and upkeep, you can get very good service out of a used car.
No one has mentioned safety ratings as a criteria for choice.
If my wife was killed in an accident, and I had not chosen a car that was highly rated, how could I forgive myself? My daily cars (since the info has been on line) have all been on the high end of the safety rating scale. My current driver is a “5-star+”.
Having said that, of course we do occasionally drive in older classic cars with stock equipment. But l try to do it as safely as l know how, as they were designed to be driven, using as many “friendly” roads as possible and only in the best of weather.
Actually, most all cars from 2014 onwards are rated pretty high because of having to comply with the new “front small offset” crash test implemented at that time. Did you notice the Mazda 3 growing a longer nose for the occasion? Toyota admitted that they increased the number of welds in their bodies at the time.
l always had good luck with low mileage Buicks – often owned by older folks who had a garage plus the money to maintain the car well – to the point where l’d comb the used car lots at Buick or Cadillac dealers (and Lexus dealers) close to retirement communities. Then l’d try to buy a car from the used car department BEFORE they spent any money on a car l found that had just been traded in. The deals were very good!
It used to be that rental cars directly from the rental company were considered to be the best as they were well-maintained, and mechanical problems were addressed quickly. In the 1980s and 1990s, they were called “program cars”. Further, the accumulated mileage was kept to 25,000-miles or less before the cars or trucks were put in the dealer lots. In Indianapolis, Budget, National and Enterprise all sold their former rentals next-door to the rental offices near the airport. Thank God, the laws against odometer tampering and the newer speedometers tend to preclude it.