The question, as the title says, is: Can You Afford to Drive a Used Car?
In Part 1, we learned how expensive it is to buy a new car. Depreciation Sucks!
You may or may not have ever thought about it in this way, so I’ll walk through the thought process slowly.
Let me establish my position: I do not believe in buying new cars. Most people (like me) simply cannot afford to buy a new car “just because”. The new car smell is simply not in the budget of people like me.
Take for example the car I’m currently driving. I purchased my 2011 Toyota Camry (probably the most popular car that year too) USED in 2011. I was spending up to two hours each day sitting in traffic and I just couldn’t justify the fuel expense for the 1994 Chevy Silverado 1500 Z71 I was driving at the time. I heard an advertisement on the radio that a local dealership had a shipment of 2011 Camrys in stock, so I went to investigate.
I ended up trading my 2004 Z71 with 90,000+ miles and $6000 in cash for a Certified Pre-owned 2011 Camry with 32,000 miles. Granted, I had traded a car and some cash for a car that I traded for a car and some cash for the Z71 – over a couple years, but I owned the truck free and clear.
When I drove into the dealership, I had a printout (from NADA.com) of what my truck was worth. I handed that printout and the keys to the truck to my salesman and said, Here’s what I want for my truck. I’ll give you what you’re asking for the car. Can we make a deal?
The salesman took me to the lot where I had my pick of several colors of 2011 Toyota Camry. I chose the one with the least mileage (color didn’t mean much to me). After test driving that one (it reeked of cigarette smoke), I asked for the one with the next lowest mileage. After driving a couple, I decided on one. I said, If I get what I want for my truck, we have a deal.
They made the deal, I wrote a check for $6,000 and I drove my “new” car off the lot.
The year was 2011.
That’s right. In 2011, I bought a 2011 Certified Pre-owned Toyota Camry with 32,000 miles. It still had a little bit (4,000 miles) of the factory warranty left, and even with my [very clean] trade-in I saved more than $6,000 off the sticker price of a new one. Here’s the best part: The drive train (i.e. the most expensive part of the car) is still covered under the CPO warranty for another 9,000 miles. (As of 6/2016)
Even better than that, I’ve never had a major mechanical problem. I’ve replaced the tires twice, and that’s it. I may need to charge the A/C this year, but that shouldn’t cost more than a couple hundred bucks. AND I have that much in my car repair fund – after all, it can’t cost more than a couple hundred bucks to fix the air conditioner.
On the other hand, I know several people who have told me that they “… can’t afford to drive a used car.” That is, they don’t have sufficient funds set aside to cover warranty items – AND they want to drive vehicles that are “nicer” than a Toyota Camry.
Let me address that last part first.
In my opinion, there is nothing – and I mean NOTHING – nicer than a car that you own. I don’t mean a car that has you name on the title… with a bank as lienholder. No. I mean a car that has your name on the title and NO ONE as lienholder. In other words, a car that you OWN.
“… Condo paid for. No car payment.” – Notorious BIG, Hypnotize
Parked next to each other, my 2011 Camry may not look as nice as someone else’s 2014, 2015 or 2016 Whatever. However, when I’m not making a monthly payment and the other person is, you’ve got to wonder what your definition of “nice” is. To me, it is SUPER NICE not to make a payment.
So, why am I trying to compare a five-year-old car with a brand new one?
The two have more in common than you might think. They also have some BIG differences, which we will cover in the next installment.