Don’t Buy An Old Car
It’s classic personal finance advice: Buy used and let some other sucker pay the new car premium. So if buying a two year old car, used/certified preowned/whatever, will save you money then buying a four year old car should save you more, right? True. Then, buying an eight year old car will save you even more right? Umm… true. Then why not buy a sixteen year old car? My advice is to never purchase a car that’s long been out of its manufacturer’s warranty period (usually 36k, 3 years or 60k, 5 years) unless it’s from someone you know - say a friend or member of the family. Here’s why…
Diminishing Returns:
It’s common fact that a large percentage of a car’s value is lost when the car drives off the lot (it’s not 50% like the old adage goes, but it’s significant), that’s why they suggest you buy a used car. As the car drives along and experiences the wear and tear of driving, the car loses more and more value according to actuarial tables regardless of how badly or how nicely you operate it. There comes a point where the savings you reap from buying used are outweighed by the age of the car and the investment you’ll need to make to keep the vehicle on the road. I believe that trade off period is somewhere in the 3-5 year range. (remember that a 2003 Civic was definitely manufactured and likely sold in 2002)
Maintenance:
The first few mileage milestone checkups just have you tugging on hoses and flushing out a few fluids, it’s when you get up in mileage do things need to be replaced. Do you really want to be spending all this maintenance money so quickly after buying a car? Just past 60k, did the original owner do all the recommended work and replace all the recommended parts or did he/she skimp on it because they knew they were selling it? What about the maintenance throughout the life of the vehicle? At 15k you only need to be concerned about a handful of oil changes, at 60k you’re talking a whole different story.
Mileage:
They say 12k to 15k a year is a safe range to be in terms of mileage on a car but I would tighten that range significantly the farther out you go. How much would you pay for a five year old car with 75k miles? That’s a lot of miles. At 15k/yr, that’s less than seven years to 100,000 miles. All those miles do start to add up… do you really want to be buying a car that has all that wear and tear on it?
It’s Old:
Owning a jalopy when you have no financial choice is one thing, that’s just reality. But if you have a steady job and can afford it, why go the direction of buying another beater? Why risk the chance that you go out in the morning and your car doesn’t start? As your car ages, things break. Rubber hardens and cracks, little dings and dents on your car start to rust, the car gets a little rattle when you turn left, all things that are minor inconveniences that you can’t really spend money on to fix. Don’t fall into the trap of buying a car that’s old just to save a few bucks.
What do you all think? What’s the oldest car you’ve bought and do you have any advice for someone looking to purchase a jalopy instead of something a little less old?
13 responses to “Don’t Buy An Old Car”
Rich responds:
Posted: April 25th, 2006 at 7:02 pm
I went through that though process last year and decided to lease a new car rather than buy an old clunker.
LAMoneyGuy responds:
Posted: April 25th, 2006 at 7:07 pm
In 2000, I bought a 1994 BMW with 51,000 miles. The mileage was low, and the car was in good condition, but the fact remained that it was a six year old car. I began to have recurring problems last year, and was forced to replace it. I drive quite a bit, and had over 160k miles on it when I sold it. I was hoping for another couple of years, and to reach 200k.
MyFinancialJourney responds:
Posted: April 25th, 2006 at 8:26 pm
I’m on the other end of the spectrum, I love buying old beaters. Granted I’ve probably been lucky because I know nothing about cars and do nothing in terms of maintenance, even oil changes are rare for me and I’ve had very good luck with my car not breaking down on me and not having to spend any money on maintenance. I think if you do your homework and don’t mind driving a beater it makes much more financial sense to buy beaters. I’ve seen a couple posts lately on this subject and pretty soon I’ll get off my lazy butt and finish my post about why beaters are the best….err well at least some advantages to buying a beater
Terry responds:
Posted: April 26th, 2006 at 12:05 am
You get lucky, sometimes, and get a deal. I’m driving a 1989 Buick Century that now has 177,000-plus miles on it, and it’s a dream. I bought the car from my boss’s father for $1200. I knew the car was regularly serviced and generally well cared for. The body was perfect when I bought it, and the interior had very little wear. Unfortunately, my son backed into the right fender, busting out the turn signal and generally crunching the entire area, and it’s just too old to fix. As long as it runs, though, I’ll drive it the 75-plus miles or so a day I’ve been driving for the past three years I’ve had it.
Martha responds:
Posted: April 26th, 2006 at 12:25 am
I bought my Uncle’s 1990 Toyota Celica with ~55k miles in 2003. It was a perfect car for me because i could pay for it in cash and not worry about car payments while in college. The only downside was that after 30k miles and 1.5yrs I cracked a head gasket
That plus a cracked radiator, the need for new brakes and a clutch made me decide to replace my baby instead of fixing it. However I did donate my old car and got a (whopping) $1200 deduction for my taxes!
Inchoate Random Abstractions responds:
Posted: April 26th, 2006 at 4:22 am
I bought a 1999 BMW 323i from Carmax in April of 2003, with approx. 60k miles on it. My mechanic checked it out for me, but because BMWs are expensive to maintain, he encouraged me to buy an extended warranty. Thus far, the car has been trouble free. No major repairs, other than replacing a sensor 2 days after I bought it (under the free 30 day warranty) and a tire. Admittedly, I only drive 6k miles a year. So, that probably has a lot to do with it. And I’m what you call a ‘gentle’ driver. No jack rabbit starts or stops. My dad, on the other hand, drives as if he’s flying (used to be a fighter pilot). So, not surprisingly, he’s constantly replacing his tires and brakes. Anyway, I think Carmax does a decent job of refurbishing gently used cars. If you can stomach the price differential, I definitely think it’s worth taking a look at their ValueMax cars (usually older and with higher mileage), which is what mine was.
Matt responds:
Posted: April 26th, 2006 at 6:15 am
The very first car I ever owned was a 1987 Dodge Aries that I bought in 1995 for $800. It lasted me a year and a half, and did me the best favor a car can ever do for its owner…it died all at once, conclusively, in a fashion which made it abundantly clear that any attempt to repair it was stupid. My little Aries definitely earned her way into Car Heaven.
I spent most of the following 10 years being tortured by used cars that died one lousy stinking part at a time. Until last year, when I bought my 2000 Hyundai Elantra. Which has given me no trouble at all, until it recently started to have transmission issues. I’m hoping this is a fluke, and not the opening round of yet another game of diminishing returns.
My fiancee just bought a new Chevy Cobalt last week. Must be nice to have a pile of cash to spend.
frugal mama responds:
Posted: April 26th, 2006 at 11:24 am
My car is a 1998 Mercedes Benz station wagon. I’ve only owned it for three years having purchased it from a gentleman who had a stable of Benzes and this was just one too many for him. It had 30,000 miles on it when I purchased it. In the three years I’ve owned it, I have changed the oil. Nothing else. I will need tires soon but the car is solid, comfortable, great hauling capability (you can actually put a recliner in the back without lowering the back seats), and it looks and drives amazing, too. The biggest feature is safety though. I am a stay at home mom and this car is so safe that if I get hit by a giant SUV whose driver is on the phone, drinking coffee, putting on lipstick and oh yea, driving too, my kids will be protected. I get 23 mpg which isn’t awesome but I can’t get much better without sacrificing the room I need. There are many people who cringe when they hear what I drive…ohh… you must be loaded. Must be nice not to worry about money. Wrong. We squeeze our pennies and live frugally. I’m going to drive this car into the ground and given the longevity of many M-Bs, it could last me another 20 years. I say this because a man living near me has an M-B wagon from 1980. It still has the original engine and transmission - and has 423,000 miles on it. We’ve had old beater M-B’s and have taken them up to 250k before selling them. Sometimes, paying extra for quality is a really good idea long term. Buyer beware of course, because all cars age irregardless of brand, and not all owners take care of them.
~FM
Debt Hater responds:
Posted: April 26th, 2006 at 1:57 pm
Thanks for the post. My 2003 Altima is a great car, bought it new, but it’s got 59K on it already (drove cross country twice among other things) but it’s starting to act up already. The problems are minor and I planned to drive it until the wheels fall off (I hoped that had been later rather than sooner… but now I wonder). I pledged to only buy used after this because this would be the second time I can out upside down on my loan. But after reading this and everyone’s comments, I’m not so sure. I reall feel like a sucker when I buy new, but I don’t know enough about cards thoroughly inspect old cars. I’m thinking of sticking to certified used cars no older than 3 years. What do you think?
Nico responds:
Posted: April 26th, 2006 at 3:03 pm
I’ll chip in my 2c for an alternative where buying new *might* make sense. I think it all depends on how long you own your vehicles.
I’m still driving a Toyota that I purchased new in 1998. I have religiously maintained this vehicle, and to date it has had zero major repairs. Shortly before the orginal warranty was going to expire I took it into the dealer to have a handful of minor things fixed, other than that it has only had to have routine maintainance.
I think that there might be a case for buying new if you knew you would be driving the car for many years, and if you weren’t paying an excessive premium for being the first owner (most luxury cars). I think I am being rewarded today with a reliable vehicle that I know the complete history of.
Just one view…
kurt responds:
Posted: April 26th, 2006 at 6:35 pm
Never buy a car from someone you know. Stuff breaks, and even if it is completely random, as it always is, the temptation to blame the seller can only strain your relationship.
mbhunter responds:
Posted: April 27th, 2006 at 1:18 pm
I bought a 12-year-old car after I totaled one in an accident. It was a 1989 Honda Accord with 151k miles. I sold it a couple of years later with 171k.
I was in a bit of a pinch but the guy let me use it for almost a week rather than rent a car. That was worth a couple hundred right there, so I paid him very close to what he was asking for it when I bought it.
james responds:
Posted: July 24th, 2006 at 11:00 pm
buying new vs used is a subject that needs a lot of research and can’t be answered in a couple of paragraphs. A used Japanese car thats a few years old will stay reliable for years.
In general, Honda, Toyota, Nissan are fine to buy used.
A used Euro or American can may need more costly work. The only time its really economically better to buy another car is when the cost of repairs averaged out over a year exceed the value of the car. Thats seldom the case when you combine new car payment, insurance and reg costs and subtract depreciation. A car is completly depreciated after 10 years. leasing is almost always a losing situation economically.
My advice, stay away from any VW’s.