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Don’t Buy An Old Car

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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)

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.

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?

{ 20 comments, please add your thoughts now! }

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20 Responses to “Don’t Buy An Old Car”

  1. Rich says:

    I went through that though process last year and decided to lease a new car rather than buy an old clunker.

  2. LAMoneyGuy says:

    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.

  3. 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 🙂

  4. Terry says:

    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.

  5. Martha says:

    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!

  6. 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.

  7. Matt says:

    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. 🙂

  8. frugal mama says:

    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.

  9. Debt Hater says:

    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?

  10. Nico says:

    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…

  11. kurt says:

    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.

  12. mbhunter says:

    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.

  13. james says:

    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.

  14. Usedfan says:

    It is a fault to think that a new vehicle is a perfect mint machine. I know for a fact (family member in the industry) that a major US manufacture of cars has to repair 25% of vehicles before they are sold due to poor line work. Do you want to end up with a clunker that smells brand new. There are no gurantees even with brand new. Of course you probably can get the repairs done under warranty but it still sucks to have a new car and be taking it in all the time when you are paying through the nose for what you thought would be problem free.

  15. Brad says:

    The best advice I can give you as a former new/used car salesman and finance manager is to take a look at your situation first. To purchase a decent car 3-5 years old your looking at paying $10,000-$20,000 depending on your tastes. Now…we are going to say you bought a 2007 Chevy Impala for $13,000. ADD sales tax…lets say 6%….now your up to $13,780 plus tag fees your now at $14,000. 95% of purchases are financed…anywhere from 4% – 21% interest depending on your credit history. If you take a 5 year loan at say around 12% you will actually pay close to $18,000 for the vehicle you originally only paid $13,000 for. Also the older the car the higher the interest…my local credit union cuts off their 4.9% financing @ 60 months on models 2004 and up, if older the rate is 7.9%.

    Did you buy an extended warranty for $1500? (also offered is GAP insurance, Tire, Etch, Etc. ALL ADD UP!)…if you did you will pay close to $2200 for the warranty over 5 years. So great…you don’t have to worry about paying for a major expense covered by the warranty. I bought a 2002 BMW 325i in August of 2007 and paid $700 so far in repairs (now remember i have a BMW not a Chevy, my warranty was $3000 not $1500)

    OK I’m covered! I have a 2007 car with a 3 yr/36,000 mile warranty and my payment is $350/mo for 5 years. I just paid a total of $20,000 for this vehicle and if I get sick of it in a week, a dealership will only give me $10,000 (or even less!) because they made $3,000 over what they traded it for (not profit they may have put brakes, etc.)

    I paid $8,000 cash for my previous vehicle, drove it for 6 years and put maybe $1000 in repairs (It was an Acura). If I want to trade it in a week I’ll probably get at least $6,000 for it.

    In my situation, I’m 25 years old and wanted to buy a flashy car like the BMW…if I was conservative I would have purchased a vehicle around the same year, but probably would have bought a Honda, Toyota, or Nissan for around $10,000.

  16. Hussain says:

    One question what is the oldest model car you can buy if you take advantage of the £2000 scrapage deal, if its all the latest e.g 2008/2009 models the £2000 is nothing no one will want 2 take finance out or loans as the credit crunch has effected alot. I like your self have a bmw e36 compact model a 1995 plated we have had it in the family for almost 8 years.

  17. dustin says:

    I bought a 1979 lincoln, now all of you are thinking, “oh man, gas, gas, gas” well it did hog gas but if you only took short trip and didnt go over to your grandmaws house in FL from oh, every other day. i believe driving those big 70’ds boat around to be both fun and not really so hard on gas, i owned the car for about… 3 years and i put on probably, 30,000 miles, thats not really alot, but then again i only whent around town. in the long run i would say i would buy another big boat to drive around again. now i got about.. 15 miles just about everywhere i whent “grandpaw driver” and im sure people hatted me when they got behind me, but i never did any work to it, and when i bough it, it had, 100k miles and it was only 500 dollars, needless to say i junked it for 650, after i found another big car to drive around. if your a classic car person, and want those big cars that your parents drove, id say look into it Heavily before making a wild guess if its worth a little more money to put into it. and if its worth 10mpg or just worth it to you, parts are cheap for them, id say go for it. but make sure that what your starting with is a good start and not some rust bucket.

  18. Rol says:

    This article is the worst advice ever…. because of this way of thinking is that so many Americans are penniless today. I hope that this last economic meltdown has make clear all the mistakes we made in the past especially about buying new stuff. What is the point of buying a new car than 5 years later is not worth half of what you pay for it. The media has made us think that buying a new car every 2-5 years is a normal thing…… this consumerism has to end if we want to become the nation we used to be. I have had a 1993 Jeep Cherokee for 7 years I pay for it $800 and I have spent on it less than $1000. My bankrupted neighbor has bought 4 new cars in that period of time, the last one was lost because he lost his job and the dealer took his car so now he have to take the bus…. all his money wasted in thin air.

    About the repairs and maintenance I advice that you stop watching American Idol and start learning how to fix your own car that way you don’t need to pay someone else to do it.

    Stick to old cars the new ones specially before 1995 are made to break in less than 5 years they are designed to break when the warranty expires and then you have to buy a new one. Face it the dealers and cars manufacturers do not like good cars they like cars that break so you can go back and buy another one from them. That is why I always buy cars older than 1995. Another problem with new cars is that you need to be an electronic engineer graduated in Harvard to fix it….. it has thousand of useless sensors and electronic components design for the only propose that you cant fix them yourself, once again they want you to go to the dealer or to the manufacturer to charge you tons of money. Cars older than 1995 few censors and you don’t need to be a NASA astronaut to fix them

  19. Denis says:

    its 2013, I just bought a 1989 ford aerostar xl with 70,000 miles for $750.00.rns great and a comfy ride.Its got a some faded paint on the egine hood,but I am laughing all the way to the bank.robably good for at least another 100,000 miles. Hell no, I am not paying $10k-30k or more for a new vehicle?!?! or $3-4=5k for a 4 year old car with 185,000 miles on it?! thats crazy.I would rather spend my money on other things. Oh, but wait what will the neighbors think.I forgot, I need to keep up with the jones!! my 1989 looks good, but might be an eye sore in the sense that it wont look like new model year cars. Sorry, but saps get hung up on the looks and keepin up with the jones (like the suv fad or the bobmer jacket craze of the 80’s and mullets hair cuts lol). There are plenty of nice cars for under a grand out there if you can bare not being a sheeple and keeping up with the jones.

  20. Neil says:

    I have always owned old vehicles right now i have a suzuki jimny 2002 model with original engine doing 300k burns a little oil but takes me everywhere i need to go I do my own maintenance and have been thinking of upgrading to a bmw a used one off course but now sure if its the right move I have never done any work on that king of vehicle but i guess its still just a car I should be able to figure it out but to me buying an old vehicle cash is better than a new vehicle on loan.

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