Sorry for the essay, I’m writing this to solidify my decision to NOT plan on getting a new car in two years as I’d planned. I’ve spent the past year being bummed that I wasn’t going to get a new car until 2018 at the soonest, and all these awesome machines would be passing me by. One recent morning as I sat in furiously deranged gridlock I accepted a truth - buying a new $36,000 car would be a moronic decision.
Let me preface this by saying for me in particular, and likely for most people, spending $36,000 on a brand new performance oriented car is not a great financial decision. I don’t think there’s a financial advisor on the planet who would argue that buying a brand new car is a good idea unless you have serious bank in the bank.
To start, let’s consider the average transaction price for new cars.
“If you buy a car today, expect to pay $31,252 on average, according to August 2014 data from TrueCar.com, a car dealership.” Unless you’re clearing a net income in the six figures annually, that’s a solid chunk of your pay. Even if you are a 2-percenter, committing to spend $31,000+ interest on a rapidly depreciating asset is sorta dumb. But I’m no Dave Freaking Ramsey.
This is an old infographic but I believe the 60% loss over 5 years still holds in 2015. That’s a crapload of depreciation. You’ve paid $30,000 plus interest - probably around $6,000 - to lose more than half of that to depreciation. Will you get around $20,000 of use, additionally factoring in fuel, insurance, and maintenance, from your car in that amount of time? Again just making generalizations I’d say for most that would be a fairly solid No. You got to work, you made an epic road trip or two, you hung out with friends, impressed someone on a date, etc. And let’s just toss the, “But I enjoyed driving it and that’s the most important thing,” argument for a second, and from a purely utilitarian perspective using most offensive car I can think of, you could have done those things except for impressing your date in a 15-year old $2,500 Corolla you bought from that retired teacher down the street. And if your date is more impressed with your baseball stitched Recaros than your financial acumen... well fine then, they’d be pretty rad. I digress.
“So then what, you pretentious twat? Do I ride a bike?” you ask. After spending many months studying the used car market for something to replace my loathsome 2008 CRV LX, I decided $15,000 was the sweet spot to get just about anything I’d want. I found at least five cars on that list I’d be happy to drive, and looking farther from home I found a good many more. In fact, I found a bunch of $10,000 cars I’d love to have. Man I wanted that 2005 IS300 SportCross... Again, I digress.
Why is that? Why not get something Jalopnik Brand Enthusiast Approved? I spend roughly two hours a day in the ninth worst traffic in the United States. You probably have it better, but I bet you still spend most of your seat time going to work and running errands. My worthwhile vehicle criteria are: comfortable seats, good environmental controls, quality sound, relatively quiet, reliable, generally fuel efficient, and decent to drive. To illustrate, I sat in traffic next to a brand new BMW M4, complete with carbon ceramic brakes and who knows what else checked on the options list for $3,800 a pop, averaging about 6 MPH for roughly 25 minutes. There was finally a break in traffic and the guy floored it. For exactly four seconds. The he was forced to haul it back down to 15 MPH as we crawled to the traffic light where we waited side by side for three minutes before continuing on at 15 MPH. THRILLING! Don’t get me wrong, I’d so much rather have the BMW than my CRV, but I think I’d also feel incredibly frustrated and more than a little cheated.
Of course there’s the weekend when you can finally get out on a lonely hill country road and flog the M4 like it was meant to be, at least until you find yourself trailing a peloton of cyclists or a tractor. The question you have to ask yourself is “Is that hour or so of driving each week worth the hours, days, weeks, and months of my life spent to purchase it?” And, “What would I have rather spent that money on, instead?” Let me ask, have you ever spent three weeks in Tuscany? You could do that about three times for what you lost on your car. Oh, and well, yeah, of course... if you’re one of THOSE people there are investments and retirement plans and property. Bah.
This argument is purely based on financial responsibility, quality of life, and long range goals. According to some hardliners, spending any more on personal transportation than the bare minimum is an egregious and ridiculous luxury, and you are thus part of The Problem. I’m not a hardliner. I’d still drive a 2007 WRX wagon five days a week. Happily.
So back to the thesis - there’s no compelling reason for most people to spend more than $15,000 on a car. I stand by it. Not saying you can’t. It’s your money. And I say that with no judgment or snark. I just feel I can get more than enough car for those two hours a day I’ll be using it, and with that $15,000 cap as the starting AND ending point of my car search. It’s not hard for a middle-class family to save that amount in four or five years if you’re reasonably disciplined, and especially if you don’t already have a car payment, and ESPECIALLY if you have a car to sell or trade. It’s also reasonable to expect the car you choose will be 3-5 years old and have well under 100,000 miles, possibly certified, and if you’re nervous easily eligible for a Doug Demuro authorized extended warranty. Just do your research and take your time shopping, test driving, and inspecting. It’ll still depreciate, but likely not 60% over your time of ownership. Further, in three or four years after you’ve saved up $8,000-10,000, you can sell it for $8,000-10,000 and buy a new used $15,000 car, pocket the remainder, buy a warranty, get some sticky tires, or...
Finally, I learned the hard way that using your daily driver as a weekend warrior is NOT the best idea. Ask me about my beloved 1994 Acura Integra GSR. So you get a boring but competent sedan or hatchback. And it kills you. It’s not a fun car. Your rep as an enthusiast is in shambles. Easy. Spend $13,000 on your new used daily driver and use the other $2,000 to get a project car. Get a Jeep or a truck or a Fox Body or a Panther or a Miata or do like me and get a basket case Alfa Romeo. You ‘ll hate it, but it will complete you in ways you didn’t know were possible. Forget soul mates, you want an Alfa.
Talk amongst yourselves...