I am writing this post to help me not to be tempted to buy a new car because it is, indeed, tempting. Our family is growing, and we are expecting a new baby girl within two months. With the new baby, we will have three kids and will need a bigger car. Currently, we own a 2007 Honda Civic and would like to buy a minivan to accommodate our growing family comfortably.
After researching, we like the Toyota Sienna because of its smooth ride, reliability, and cargo space. My sister has one, and even after ten years, it is a pleasure to drive, unlike the Dodge Caravan. The 2018 Toyota Sienna comes with new safety features, and the powertrain and engine have not changed since 2017. The 2017 model has an eight-speed transmission compared with the six-speed transmission of the 2016 model. This makes a ride even smoother and improves fuel economy.
Benefits of buying a new car
- The car is undamaged by a previous owner.
- The car has all new features.
- A full warranty comes with the car.
- There is a “new interior” smell.
- The color shines.
Drawbacks of buying a new car
- Initial high cost
- High cost of borrowing money to buy a car
- Leaving the dealership reduces the car price by a few grands
If you pay attention at all to drawbacks related to money, you will know you lose money when you buy a new car.
A new 2018 Toyota Sienna LE has a tag price of over $40,000, including taxes. This amount itself scares me. I have to work 5×9 more than a half of a year to earn $40,000. The same model from 2015 can be found at a price less than $30,000, thus saving more than $10,000. Invested, that $10,000 will pay at least $400 a year with a return on the investment of 4 percent. An investment of the same $10,000 in a car will disappear within three years. From a financial point of view, there is no advantage in buying a new car.
Toyota cars will last on the road for much more than ten years, so a three-year- old car bought today will still drive for ten years.
It is more important for me to invest in the following rather than in a new car that becomes a used car when you leave the dealership:
- My kids’ education
- Retirement savings
- Family vacation
- Owning a home (We have investment properties, but we do not live in our own home)
To be honest, if we had all four items above secured already for us, I would buy a new car. However, although we are still budgeting for all of them, I prefer to buy a used car and invest the saved money. It is still not an easy decision, considering the new safety features that the new Toyota Sienna has and the long period of time we aim to keep the new car. It is much easier for me to spend money on equities such as dividend-paying stocks, private mortgage and lending loop that may reward me more than throwing money away on a new car knowing that it will burn very quickly.
How do you resolve this puzzle of buying a new car?
You can take lease with 0% interest the same car + 0 downpayment (but putting some downpayment you’ll get better price + discount).
Finally after 4-5 years you’re able to purchase it or replace to another one, and having calculated it you’d see that you get the loan for 0%, while your money maybe invested and not put down to car.
Not bad, but how often you get to find 0% interest???? Unfortunately, not happening that often, especially on hot sale vehicles. But totally supporting the idea.
At the end of year they always do the promotions as brew models are coming, and if you find the dealer ship located little far from central areas, for sure they want to empty their stock and give you extra discount.
The best way to find that type of a deal is to use Unhaggle. They compare prices in the broader area , asking at least 10 dealerships, and get you the best deal for only $100. Let’s see what the search will come up with ….
Slava, thank you for your comment. I have not done a detailed analysis what is the cheaper option, but now it seems to me that leasing is not the one.
Unless you’re going to prohibit food and dirty shoes in your car buy a second hand. After 3 months use the only thing differentiating new minivan from a 3 year old one is mileage.
Ed thank you for stopping by. You nailed it. As working parents to three kids, we will not be able to prohibit food and dirty shoes in our car.
I purchased my first car (Honda Civic) brand new in 2004 and I still drive it. It’s very exciting when the car is brand new. Nobody have abused it in the past. There are no repairs to do and everything is under warranty. It’s very rare that Japanese cars break withing the first 5 years, but it’s still nice to have a warranty. But it comes with a price tag. Will I do it again? Probably not. I can buy a car that is 3 to 4 years old, that lost almost half in value and will serve me for at least 10 years.
I would say get a new car if you plan to drive it for at least 12-15 years. If you only want to keep it for 5 years then get a used car. You won’t loose a lot of depreciation.
Good luck!
Dividend Income Stock, thank you for your advice. Currently, I am verifying the best price thru http://www.unhaggle.com for outgoing Toyota Sienna 2017 model.The decision will come after the results. Considering your and others comments, I lean towards the idea of 3-4 years old car.
I always buy a car that has around 15K to 20K on it and is about a year old or so. I save tons of $, still has warranty and new car smell. ONLY downside, it takes me a few months to find. BUT shopping for the second car has its advantages.