NEVER BUY A NEW CAR!
WHY YOU SHOULD NEVER BUY A NEW CAR!
For the average American, owning and operating a vehicle costs about $9500 per year according to Investopedia. That is a TON of money. The reality is for some people, owning a car is a necessity. If you have a family, use a car for work, or live in an area without sufficient public transit, you need one.
The ultimate goal to save money on transportation costs is to use alternatives other than owning a car, such as public transit, biking, or carpooling services. For those who fall into the categories listed above, there still is a more affordable option.
The answer is BUYING A USED CAR.
SO WHY SHOULD I BUY A USED CAR?
Buying a used car can definitely be very scary. You could end up with a great deal or with an endless problem that sucks money from your pocket. If you follow the right steps you could greatly benefit financially.
Whenever you take a brand new car off the showroom floor its value goes down IMMEDIATELY. That's how vehicles are. Vehicles, in general, are assets that lose value over time (depreciate) as well as cost a lot to maintain. Buying a used car can greatly lessen the burden of the cost of your vehicle.
Let's get the number straight:
The average car will lose about 24% of its value after the first year of ownership. It will then lose about 15% of that value each year after that.
Below you can see an example of a car that costs $30,000.
You can see that after the fourth year of ownership the value of the vehicle has gone down in value by over 50%.
Buying a used car will help you save on this dramatic drop in value.
LET'S TAKE A LOOK A A REAL LIFE EXAMPLE!
In this example, we will take a look at the Toyota Corolla. This model is the best selling compact car in the U.S. and is known for its strong reliability.
All the prices are in CANADIAN dollars. I will provide a conversion but keep in mind the prices of vehicles may slightly alter in the U.S.
BRAND NEW
That's $26,629 CAD or $20,406 US for a brand new Toyota Corolla LE.
1 YEAR OLD
Now we will take a look at a 2019 model, that is one year old. It was found on Autotrader.ca.
This 2019 Toyota costs $17,988 CAD ($13,782 US). It is accident-free (report provided) and the same trim as the brand new Toyota. It also only has 25,000km (15,000 miles) which makes it practically brand new.
This represents a difference of $8631 CAD in one year! It's like being offered a 35% discount for having a car that is one year older.
8 YEARS OLD
For my last comparison, I will look at a Corolla that is 8 years old.
This 2009 Corolla has 98,000kms (61,000miles) on it, which is still very reasonable. Of course, buying an older vehicle can be risky. If the seller agrees, you could take it to your mechanic so you can get confirmation of the condition of the vehicle.
This represents a difference of $17,629 CAD in one year! You may need to sacrifice on not having all the modern amenities of a new car but with a 65% discount, it is well worth it.
I hope that after reading this post you can see how much room there is to save in vehicle costs. Don't get caught in the trap of buying a vehicle that will drain your pocket from paying off other debts and investing.
Most importantly, PLEASE DO NOT BUY A NEW CAR!
Of course, if you make a ton of money, buy all means, do whatever the hell you want.
Thank you for reading this post! If you have any questions leave a comment or dm me on Twitter @money_sleeping.
For the average American, owning and operating a vehicle costs about $9500 per year according to Investopedia. That is a TON of money. The reality is for some people, owning a car is a necessity. If you have a family, use a car for work, or live in an area without sufficient public transit, you need one.
The ultimate goal to save money on transportation costs is to use alternatives other than owning a car, such as public transit, biking, or carpooling services. For those who fall into the categories listed above, there still is a more affordable option.
The answer is BUYING A USED CAR.
SO WHY SHOULD I BUY A USED CAR?
Buying a used car can definitely be very scary. You could end up with a great deal or with an endless problem that sucks money from your pocket. If you follow the right steps you could greatly benefit financially.
Whenever you take a brand new car off the showroom floor its value goes down IMMEDIATELY. That's how vehicles are. Vehicles, in general, are assets that lose value over time (depreciate) as well as cost a lot to maintain. Buying a used car can greatly lessen the burden of the cost of your vehicle.
Let's get the number straight:
The average car will lose about 24% of its value after the first year of ownership. It will then lose about 15% of that value each year after that.
Below you can see an example of a car that costs $30,000.
You can see that after the fourth year of ownership the value of the vehicle has gone down in value by over 50%.
Buying a used car will help you save on this dramatic drop in value.
LET'S TAKE A LOOK A A REAL LIFE EXAMPLE!
In this example, we will take a look at the Toyota Corolla. This model is the best selling compact car in the U.S. and is known for its strong reliability.
All the prices are in CANADIAN dollars. I will provide a conversion but keep in mind the prices of vehicles may slightly alter in the U.S.
BRAND NEW
That's $26,629 CAD or $20,406 US for a brand new Toyota Corolla LE.
1 YEAR OLD
Now we will take a look at a 2019 model, that is one year old. It was found on Autotrader.ca.
This 2019 Toyota costs $17,988 CAD ($13,782 US). It is accident-free (report provided) and the same trim as the brand new Toyota. It also only has 25,000km (15,000 miles) which makes it practically brand new.
This represents a difference of $8631 CAD in one year! It's like being offered a 35% discount for having a car that is one year older.
8 YEARS OLD
For my last comparison, I will look at a Corolla that is 8 years old.
This 2009 Corolla has 98,000kms (61,000miles) on it, which is still very reasonable. Of course, buying an older vehicle can be risky. If the seller agrees, you could take it to your mechanic so you can get confirmation of the condition of the vehicle.
This represents a difference of $17,629 CAD in one year! You may need to sacrifice on not having all the modern amenities of a new car but with a 65% discount, it is well worth it.
I hope that after reading this post you can see how much room there is to save in vehicle costs. Don't get caught in the trap of buying a vehicle that will drain your pocket from paying off other debts and investing.
Most importantly, PLEASE DO NOT BUY A NEW CAR!
Of course, if you make a ton of money, buy all means, do whatever the hell you want.
Thank you for reading this post! If you have any questions leave a comment or dm me on Twitter @money_sleeping.
I found a great article by 'Dont Work Another Day' that mentions some of the mistakes that people make when buying a car and definitely think it is worth a read!
https://www.dontworkanotherday.com/8-mistakes-people-make-when-buying-a-car
That depreciation curve is pretty scary. I bought a used Honda Odyssey a few years back (a bit under market price) from someone at my work. Great deal and no major problems yet.
ReplyDeleteAre you Canadian? My wife is Canadian but we live in the states.
Hey Max, thanks for reading! Honda generally builds reliable cars so you definitely got a great deal. What was the mileage when you purchased the vehicle? Also, I am Canadian and I live in Toronto. I noticed that about half of my readers are American so I'm trying to include American conversions. Have a great day and amazing 2020:)
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