What is better financially... buying an older model car for cash or getting a new car financed?
I was considering buying an older model cash car so I won't have a car note every month but a co-worker advised that it would be better to get a new car and have a car note because an older one will have monthly repairs that may run more than a car note. I just want to get a few opinions on which is a better option... thanks
- mccoybluesLv 79 years agoFavorite Answer
I hate to be rude but your friend is a moron. The math just doesn't add up when you compare the long term costs of a good quality used car over a brand new vehicle.
Here's an example. Let's say you go out and buy a quality used Honda and you pay $10,000 cash for it. The car is yours. You own it. The only expenses after that initial purchase are for maintenance and repairs. The daily expenses like gas and insurance (which you'll spend no matter what you drive) are a constant. Even if this car turned out to be a complete POS you'll probably only spend $800 or $900 two or three times a year to pay for repairs. So $2400 a year for maintenance and repairs. That's incredibly high even for a POS but let's keep going. Over a 3 year period you'll have $10,000 invested in the car and $7200 in maintenance costs for a total cost of ownership of around $17,000-$18,000.
If you buy a brand new car and spend around $18,000 for the car. Relatively cheap in today's world for a brand new car. But you can find Civics and KIAs and Chevy's in that price range. Your monthly payment on an $18,000 loan will be around $350 a month. So your out of pocket expenses per year will be $4200 compared to $2400 on the used car. And that is assuming the used car you buy is a piece of crap that breaks down all the time.
The math works out more in your favor if you are lucky enough to get a reliable used car, then your yearly maintenance expenses drop considerably for the used car while those high monthly payments keep coming in for two more years on the new car.
- GailLv 44 years ago
Buy it outright. "what if it breaks? " Then you'll need to mend it, using some of the money you're not shelling out every month on finance. "what if I get a nice, 5 year old car?" What makes you think a 5 year old car won't break? Difference is you'll have less available cash for repairs if you're paying HP on it. And don't think a warranty will help you much either. At 5 years old the bills will be for wear & tear items like clutches, exhausts, cambelt replacement etc which aren't covered by a warranty. Most of which ironically will probably already have been done on the 7-8 year old £1500 banger. If you're on a tight budget, finance is fine for a new car or one only a few months old, but buying a 5 year old car on finance isn't clever.
- 9 years ago
In my experience it has been much cheaper to get an older model car. You can get a nice 2000 Volvo S70 with 74,000 miles for $5,300. My S70 has 200,000 miles on it I have only had very minor repairs (no more than a couple hundred dollars a year for the past couple of years). So go for a less than 10 year old car and you will get a great deal. Volvos are great but if they don't fit your fancy and used Lexus, Toyota, or Honda would also be great. Just browse www.autotrader.com and find something you like. Of course I'm assuming your in the U.S.
- Nicholas JLv 79 years ago
Older car undoubtedly. If you buy the older car for 5 thousand - unless you got suckered then the resale value stays the same. While a new car drops 20% value the same day you drive it off the lot.
Newer car is more reliable. Therefore used car shopping is much more difficult.
But if financial is your concern - forget what your friend said.
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- OM0110Lv 49 years ago
all i ever hear from people that buy cheap junkers is that they usualy get their money back like 5 times over. my dad made and i share a leased car for 200 a month but i just never see the savings. theres litereally millions of cars out there that just sit because no one wants to buy a car from the 90's anymore which i feel is extremely wasteful. think of all those foreign countries where a car will last a family for 15 years with proper maintainence. americans unfortunately just want newer and better which isnt necessarily a bad habbit, because afterall we can, but its just wasteful.
- caLv 59 years ago
A GOOD used car is the better buy. So doing a car inspection before you buy a used car is very important. If you don't know what to do, spend the money to have a trusted, competent mechanic do the inspection for you.
- NicholasLv 49 years ago
It depends on the condition of the older model car. If its in excellent condition i would get the older one. if anything happens it would be cheaper to fix the older one than it would with the newer model car
- 9 years ago
Buying with cash, you OWN the car, and it can always be repaired and prettied up. But finance, they can repossess your car, and credit companies always screw ya over.
- 9 years ago
We've always purchased new cars but one year my husband decided to buy me a used, year old executive car (one that the companys executive drives personally). I'll never buy another used car again. Nuff said!
- Anonymous9 years ago
buy an old car for £500 if you crash it and it's a write off no harm no foul, buy a new car on finance if you crash it and it's a write of you are still paying for it
so what makes more sense to you ?