Is buying a new car a waste of money? I get it–they’re pretty, and sparkly and new. They have all these features and leather seats that cool your back in the summer and an automated navigation system that talks to you even when you don’t want it to. Who wouldn’t want that? But if you can negate the idea that social status is tied to the car you drive (which is a myth, really), you’ll save yourself a lot of money that you can instead put towards things that will truly increase your happiness and well-being.
A new vehicle is an expense, not an investment.
Just by driving it off the lot, a vehicle depreciates by 11%. Wow! After one year of driving that new vehicle it will have depreciated by 25%, after three years 46% and after five years that vehicle will be worth 63% less. It is also true that newer vehicles depreciate faster than older vehicles. Further more, considering maintenance and repairs, the expenses have only just begun after the initial purchase of the vehicle.
The average vehicle costs about $.20/mile to drive, in maintenance (calculated by us at the shop). This is due to normal wear and tear on all the components that keep a vehicle functioning. Let’s say you drive the average 12,000 miles in a year. That means you should be saving ~$1200/year for maintenance. Does this surprise you? Remember, at ~100k on most vehicles, the timing belt is due for replacement (this is typically at least $1000 repair). Avoid the surprise of a big repair bill and save for it instead. Keep in mind that newer vehicles are more expensive to drive, maintain and repair. They have more cute electric components that break. They oftentimes require specialized tools and repairs. And, don’t even get me started on the monthly payments. Buying a new vehicle puts you in debt! No one likes being in debt; it’s bad for your overall well-being. It creates more to manage in your life and less freedom. No thank you.
The other option: buy a used car with cash and put the saved money towards something more valuable like retirement! It’s economical commonsense. No car payment, money towards more valuable things, reliable transportation, problem solved. I’m not going to get too into needs vs wants at this time but think about it: you could put those dollars in your pocket instead and use them for more important things, like food, healthcare, and shelter. Or, even dates with the person you’d like to call yours.
So let me ask you, why are you really driving your car?
Ask yourself: Is it worth it?