Consider total costs of ownership
Make sure that when you shop for a car you consider not only the price (negotiated as low as possible, using this recommended service), but also financing (loan interest), maintenance, gas mileage, how long the car will last, what it will cost you to insure it and headaches (i.e.: things that will annoy you about your vehicle because it breaks down, doesn’t attract enough chicks, etc.)
Buy a used car (and try to pay cash for it if you can)
A new car loses about 15% of its value the minute you drive it off the lot, and much more after the next couple years. Since that’s the case, it makes better financial sense to buy a used car, even if it’s relatively new (say, 2-3 years old.) I also recommend saving up and paying cash for your car. This forces you to care more about the price, since it’s painful to pay that much money at once. In addition, you save a bunch by eliminating the costs of financing. For example, a 10 year loan for $10,000 at 7% would cost you about $4,000 in interest over the life of the loan. That’s 40% tacked on to the price of the car!
For new or used car buying info, check out the Motley Fool’s guide, and also prices on Edmunds or Kelley’s Blue Book (although I find that the blue book values tend to run a little high.) If buying used just isn’t for you (Ramit Sethi makes a good case for new cars here), at least follow the next rule:
Drive your car until it has at least 200,000 miles on it before getting another one.
Consumer Reports estimates that you’ll save the price of a new car by driving your car into the ground. Implicit in this rule is that you must have a reliable car that will last you this long. Toyota and Honda* both make moderately-price vehicles known to reliably last this long (although the American companies have narrowed the gap in the last 10 years or so.)
Read the owner’s manual and keep up with maintenance to keep your vehicle running well. (Washing & waxing your car, plus keeping the inside clean, will make it look nicer too. This may encourage you to avoid ditching it just to have the latest model.)
* From Consumer Reports:
Consumer Reports’ “Good bets” for making 200,000 miles: Honda Civic, Honda CR-V, Honda Element, Lexus ES, Lexus LS, Toyota 4Runner, Toyota Highlander, Toyota Land Cruiser, Toyota Prius, Toyota RAV4
Consumer Reports’ “Bad bets” for making 200,000 miles: BMW 7-series, Infiniti QX56, Jaguar X-type, V8-powered Mercedes-Benz M-class, Mercedes-Benz SL, Nissan Armada, Nissan Titan, Volkswagen Touareg, V6-powered Volvo XC90.
4 thoughts on “Guide to buying and owning a car”
Hey Ward – just checking. What kind of car do you drive? When did you buy? How many miles on it? Just checking if the good doctor follows his own advice!?! I just passed 100,000 on my 99 Taurus and am planning to drive it in to the ground despite my strong desires to upgrade!
2002 Toyota Corolla, ~116K miles and running strong! I got it used about 3 years ago after my 1985 Toyota Corolla finally died on me… 🙂