Why Newer Cars Don’t Save You Money

2001 Honda CivicA friend of mine, whom I generally agree with on all matters financial, does have one belief that I have to disagree with. He thinks that once a car surpasses 100,000 miles or so, the costs of having to repeatedly fix the vehicle aren’t worth it, and that it makes more sense to trade in the old car and buy an almost new one. I don’t think this is the best strategy for saving money.

Some years, if not most years, older cars will require $600 to $2000 (or more) on repairs like rebuilding the transmission, replacing worn suspension parts or replacing the timing belt. With a new car, you’ll still have to pay for the occasional repair that isn’t covered by the warranty, and after just a couple of years, the warranty will run out and you’ll be responsible for everything. On top of that, you’ve got a monthly car payment plus interest, or a gaping hole in your bank account from a new car that you bought with cash (cash that could have been earning interest). Assuming a modest car payment of $350 per month, that’s $4200 a year before you’ve even fixed anything. Also, insurance premiums are much higher for newer vehicles than for older vehicles, in part because you’ll want collision coverage, which isn’t necessary for an old car with little monetary value (since it will almost surely be totaled in the event of an accident).

This argument doesn’t work for all vehicles. Sadly, some brands just aren’t built to last. The case for buying an old car is much more valid when it comes to reliable cars like Hondas, Toyotas, Mazdas, Volvos, and Nissans (if you look around, you’ll notice that almost every very old car on the road is one of these brands).

Also, the costs of owning a new car versus an old car can’t take intangibles into consideration. Important things to consider in this category include:

  • How comfortable do you feel driving an older car?
  • Will other people who ride in your car frequently be comfortable and safe in an older car? (If you choose a Volvo, the answer is probably yes.)
  • Does your career require a certain type of vehicle? In certain professions, driving a luxury vehicle is considered part of the job description.
  • How much pride do you take in the type of vehicle you drive?

I was originally planning to purchase a newer vehicle because I feared the high repair costs and unreliability of an older vehicle. It was a fluke that I ended up purchasing a twenty-year-old Honda, and it was meant to be a temporary solution at the time. However, two years later, my fears haven’t been justified–driving an older car has provided me with a surprising peace of mind. I feel very comfortable driving an older car because my car is smaller than almost anything they make today, which makes it easy to maneuver and park, and I feel like criminal types probably won’t mess with me if I don’t look like I have anything for them to take. I also don’t worry as much about getting into an accident, because my car is worth so little, and I’ve long accepted that any accident would result in my car being totaled by my insurance company. I don’t do much freeway driving or stray very far from home, so the reduced safety of my older, smaller car and the possibility of breakdowns aren’t major concerns for me. Also, I’m not very image conscious, so it doesn’t bother me that 90% of cars on the road are nicer than mine. For all of these reasons, I would actually feel much less comfortable driving $15k down the street.

Just because driving an older car can save lots of money doesn’t mean it’s the right choice for you. If an older car isn’t for you, I’d like to point out one thing my friend definitely has right: purchasing a pre-owned car. Brand-new cars lose a significant percentage of their value the minute you drive them off the lot. By purchasing a car that’s about a year old, you retain many of the benefits of new car ownership, such as excellent physical condition, warranty coverage, and low repair costs, while achieving significant savings. If you do want to own a new car, buying a year-old car is really the way to go. There are bargains to be found on cars like this by purchasing through a rental agency that sells their cars, such as Hertz. Since car renters expect excellent reliability and cleanliness in a rental car, these cars tend to be very well-maintained.

My stance is generally that the whole point of having disposable income is to enjoy it. If you’re paying your bills on time, providing for those who depend on you, making regular contributions to your retirement fund, and have a comfortable emergency fund, there’s nothing wrong with buying a newer, more expensive car. You work hard for your money, and you should enjoy it in whatever way is most pleasurable for you, whether that’s hoarding it in the bank or buying a new toy.

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17 Responses to Why Newer Cars Don’t Save You Money

  1. gwen says:

    Not to mention much cheaper car insurance payments. You don’t even need collision with a car like that.

  2. george says:

    So when does an older car start being more expensive than a newer car? I know it depends on the model and make, but generally after how amny miles. Or is older always better?

  3. alan says:

    hi, do you have any advice about auto auctions, such as police and the like? also, do you know of any place where you can get a vehicle history report for free?
    thanks! – great, informative post btw.

  4. Teri says:

    I just traded in my $1k Saturn for a $15k car. This is the first time I have ever owned a car over $5k and I am very uncomfortable, so worried about a scratch, accident, theft, etc.

    I generally shop for older cars that have been garaged and NEVER driven, but older models. There are great deals to be had – cars like new – a lot in the $5k range.

    However, the 2 best cars I have ever owned by far were the Toyota I paid $1500 for and the Saturn I paid $1000 for (both well ober 100k miles). The cars were ecellent, very safe, and no one was going to steal them. Repairs averaged $200/year – maybe an occassional $1k repair year.

  5. Clever Dude says:

    We have 3 cars (I recently posted about this predicament). A 2006 Honda Ridgeline, a 2005 Chevy Malibu and a 1997 Pontiac Grand Am. The Grand Am has 125,000 miles on it, and costs us around $1000 a year in random repairs and upkeep. However, we only put about 6000 miles on it each year.

    Regarding safety, I definitely feel exposed driving it since I know there’s no side-impact airbags, and I’m so close to the door compared to in the Malibu and definitely in the Ridgeline. However, I don’t worry about scratches or dent with this car, and it’s just relaxing to drive, once I get around the rattles, squeaks, bangs and clangs.

  6. samerwriter says:

    I’m not convinced that rental cars are well maintained. In fact I’m pretty sure I would _never_ buy a rental car. Here’s why:

    1) The rental company doesn’t really need to maintain the cars. They’re new. You could drive a new car 20,000 miles without changing the oil and customers would likely not notice. About all the rental car companies really need to do to keep customers happy is to wash the exterior and vacuum the interior. (Note : I’m not saying that rental car companies don’t perform routine maintenance, but if they’re looking to save a buck, I’m pretty sure the temptation is there).

    2) I’m sure everyone here drives rental cars responsibly ( *ahem* ), but I know plenty of people who don’t. Let’s face it, everyone treats their own stuff better than something they’re renting. Many expensive long-term maintenance items are the result of this type of prolonged abuse.

    3) Because you’re buying from a rental car company, you’re likely going to pay a premium over what you’d pay elsewhere. At least if you buy someone’s used car, you can assume they treated it as if they owned it, rather than rented it. And you’ll pay less.

    4) Who wants to buy a rental-car white car?

  7. tim says:

    knowing how I am when I drive rental vehicles, I would definitely not buy a car from an auction selling rental vehicles. People just don’t treat things well that aren’t their responsibility in the end.

    I personally like new cars. Does it make sense? maybe not, but hey, everyone has something they buy that doesn’t make sense. if it fits your budget, then why not?

    there are too many factors to make buying a new/newer car versus an old car a black and white analysis. cars are mechanical things and as such vary from owner to owner and car to car, regardless of overall reliability statistics.

    The fact is, with older cars we think that since they are old, they can take a ding or two and/or do not feel that it is worth dumping money to maintain it properly when maint cost exceeds the car’s value. There are way too many old cars on the road that should not be on the road, because they are not safe because people do not want to pay maint over the value of the car. Really, who wants to pay $1000 for good tires for a car worth $1k now?

  8. Amber says:

    I definately see your point overall but the one thing I slightly dissagree with is this statement: ‘I feel like criminal types probably won’t mess with me if I don’t look like I have anything for them to take. ‘

    I felt that way too. Until this morning when I went to leave for the gym and my car was gone. I have a 14 year old Honda Accord. It’s not the prettiest out there, it’s not tricked out, it does have nicer than stock rims but even those are pretty beat up from me mis-judging the curb when paralell parking. I had nothing of valuable in the car period, the only thing visible was my gym shoes and a local area coupon book.

    When I get it back, yes I still expect to do so, I am investing in The Club. I love my Honda, it’s got a million miles on it (ok just over 200k) and it just keeps on going. I want it back so I can run it to the ground. It’s all paid for too, I haven’t had to make car payments in 1.5 years. *sigh*

  9. livingplanet says:

    a car’s troubles shouldn’t stress you, your spouse, or children first thing in the morning. that’s the bottomline requirement. it should get you ‘there’ safely and comfortably. a pre-owned car driven far from the coast and protected from the seasons, preferrably with minimal electronics (think MBenz of the 70s and 80s restored), with service records are best and cheapest. the best advice i read, never finance your car!

  10. Amy L. Fontinelle says:

    You raise a good question. I’d say there really isn’t a definitive answer here, though. While there are certain things (like a timing belt) that definitely need to be replaced at certain mileage milestones, mileage isn’t really the best indicator of how worn out the car is. The climate the car has lived in, how well it’s been maintained, and how it’s been driven are better indicators of a car’s condition and value.

    I am not sure how to get a vehicle history report for free, but I know a way you may be able to save money on it. Carfax allows you to purchase either a single report for $19.99 or unlimited reports for 30 days for $24.99. If you can find someone who has already purchased the second option, you may be able to convince them to run a VIN check for you for free or for a reduced fee. Try Craigslist.

    Also, I don’t know much about auto auctions. I have looked into them before, and I’ve found lots of websites promising deals that are way too good to be true (and if they are true, they’re probably getting snatched up by dealers anyway). I’ve also found that many auctions take place at times and locations that I can’t get to because of my work schedule. Personally, I wouldn’t feel comfortable buying a car that I couldn’t have inspected by a mechanic first.

    You make good points about the possible drawbacks of purchasing a rental car. Personally, I tend to take excellent care of rental cars for fear of getting stuck with some kind of damage fee when I return the car. I think the problems with purchasing a formal rental car can probably be avoided by running a Carfax report and having the car checked by a mechanic before you buy it.

    Amber, you’re right. None of us are immune to theft, unfortunately, and I have heard that Hondas are commonly stolen (I think it’s the common, popular cars that are most targeted). I hope you get your car back soon.

  11. Amber says:

    Actually, I did. I got a call about it this morning, there was no damage and they took a few items that would really have no value to anyone but me. Of course. I’m just glad to get it back. I picked up The Club. Yes, I know that doesn’t do much than deterr but if it gives them pause then I’m ok with that. The insurance guy I talked to said even with The Club, 15 seconds and a hacksaw and he’d still be able to steal my car by cutting into the steering wheel (as opposed to cutting into The Club).

  12. Great points here. I tend to think the used vs new car decision is very personal. I know some people don’t mind paying the extra money for a new car for the peace of mind it brings them, and others to whom $5k would be WAY too much to spend on a car.

  13. Hon says:

    I only buy used Toyota or Honda due to excellent results and drive them 10 yrs. I buy privately if possible and examine the service book on the test drive. I have purchased rental cars as a second options without problem and carry on routine servicing based on service book suggestions. After driving my 1982 Tercel for 10 yrs., I gave it to my teenage son who drove it through HS and university. By then the body was hideously rusted but it ran without problem. He did his own oil changes as it was too embarrassing to take it to Quick Lub.

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  15. alan says:

    ok, so, after careful consideration and a lot of good things to think about from this post, i have bought a used car!
    now, it may not be the most practical, or economical, but it certainly isn’t the least practical either.
    ok, so it is a 1981 mercedes benz 300sd with 129000 original miles.
    a diesel behemoth, but it gets 22mpg and up to 30mpg (if well maintained). i got it for $3550, and have no regrets what so ever. the body and interior have extensive sun damage, but the engine is as stout as they come. it came with *complete* service records, receipts for filters and all parts, carfax (though i had my own), original documentation and manuals, and it is running great! all inspection receipts matched the carfax perfectly.
    the other choice i was weighing was a honda civic with 89000 miles. he was asking for 5900. my budget was $6000 so this way, i have a couple thousand left over for spare parts, engine work, and cosmetics. i may even do the mod to run it on waste veggie oil.
    while it may end up costing much more than owning a civic, i am super happy with it, and that is what is important to me. it seems to be a good alternative to your regular used car choices. i have always wanted a cool old car, but never wanted to get such a gas guzzler.
    it is brown.

  16. livingplanet says:


    till it became a marriage issue :-), i worked on 3 MBs from college onwards. two of them were ’74-75 116-118 bodies, the third was like yours, although a 200 MB Gas 123-body. the 123-models (yours) are roomy, safe, powerful, and yes can run on biodiesel. once restored, they are a sight to behold. classic, timeless lines ( i love the sound of how the door closes!). scour the junk shops and MB clubs in your town, you should be able to get some cheap and in-very-good shape spare and replacement parts. good luck!

  17. Erin says:

    Great advice, just don’t forget about the great, reliable, and extremely safe older BMWs. I drive a 1993 BMW 325i. It has 188K miles and these cars are known to go 250K+ so I trust this car will last a long time. At last check (6 mos ago) my mechanic said all was in good shape. I’ve had a couple of expensive years ($2000) with this car. (Still a whole lot less than an average car payment.) But most years I spend less than $500 on maintenance. Not bad for $6100 purchase 7 years ago. Plus I love it! It is a luxury car and I don’t feel like I’m driving an old beater!

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