Personal Finance Sin: Bought a New Car

I have committed possibly the worse personal finance crime you could ever ever make.

And these are my confessions.

I bought a new car.

Here is my Explanation:

I had the best intention to buy a used car but the problem with looking for a used car was that there were not many used cars with the colour and make that I wanted.  Believe me when I say that I had tried to look for a used car.  I scoured Craigslist, Autotrader, and other used car buying websites on an almost daily basis for a few months.  I did find one in the colour and make that I wanted but it had already sold when I called the dealership.

Related: Buying My First Car 

Personal Finance SinIn addition, when I did call the dealership, the sale price of the used car that I was interested in was the same price as a new car (maybe give or take $300-$400 or so).  There were some incentives for purchasing with a cash sale (note: no financing, no leasing) that yielded the same price as the used car in a newer model.

I test drove a few cars, including the Toyota Prius C.  However, the Prius C is ridiculously expensive, a new car is almost $30,000 when you factor in all the taxes and the freight and PDI and everything.  I did see a Prius C that was used however, the seller did not seem interested in budging much, and in British Columbia now, you have to pay full taxes on a used car purchase (since 2009) so it did not seem like that much better of a deal.

So like typical young and thrifty fashion, here is my list for pros of buying new versus pros of buying used.

Pros of Buying New

  • The new car smell (I know it is terribly bad for you and is basically a concoction of chemicals, but that new car small is just so intoxicating)
  • Full warranty
  • Often there are deals such as low cost financing, money off incentives, low cost leasing
  • New tires and brakes
  • Fresh history, you know the car hasn't been into a ditch, or in an accident, or rebuilt
  • More selection
  • Usually, slimy sales people make less many selling a new car than they do selling a used car

Pros of Buying Used

  • You're not paying for the depreciation (which is cited by Rob Carrick in the Globe and Mail as 27% off when you drive off the lot
  • You won't have to deal with slimy car salespeople as much because you might be dealing with a previous owner directly
  • You're reducing, re-using, and recycling!
  • You can negotiate and skip the middle man (the slimy cars salespeople)

So basically, my justification (and yes, when you read a lot of personal finance blogs, you tend to note that a lot of people justify their decisions) is that I am probably going to drive this car to the ground and I will keep it around for the next 10 years, so instead of settling for a colour that I'm not fond of, I want to make sure it's something I will be really happy with.  Besides, I can afford this car, I'm paying outright for it (though you could argue that I am losing a lot of opportunity cost because I could invest that money instead).

In summary, I believe cars are a huge waste of money (even though it is the second most important financial purchase you make secondary to a home with a mortgage) and I can't fathom why anyone would ever want to spend more than $30,000 on a car.  I guess everyone has different values though, and some people would never ever fathom spending $5000 on a one month international trip.  Which goes back to one of my favourite posts (if I do say so myself), if you had a million dollars

Here are some tips if you are interested in buying a used car from BCAA.

Here are some tips if you are interested in buying a new car from Popular Mechanics.

Readers, do you usually buy used or do you usually buy new?

16 Comments

  1. BeachBoy on July 6, 2014 at 10:53 pm

    Bought the truck new because we wanted to drive it for 30 years (our friend still has had drove regularly his ’81). We now are close to 100k kms and absolutely love it. we have changed the car three times since but will always keep the truck.
    For cars we won’t buy new as our needs and wants change too often. We’ve had an old $1000 car, an almost new Volvo wagon and now we have an old Porsche toy car.

    I am an avid car fan so for me my car budget is nowhere close to being related to any financial wisdom, but I don’t care. There is no way in hell I will drive a Prius;)



  2. Michelle on July 7, 2014 at 12:56 am

    We are big personal finance sinners – we have new cars. We really like cars though because we like to have fun in them (such as off roading in our Jeep), or taking a road trip. So for us, it’s worth it!



  3. Phil on July 7, 2014 at 7:17 am

    For me there are too many question marks for used cars of the type I’m interested in. We just bought a new car this past Thursday and hope to receive it later this week. Our last car was 2003 Subaru Impreza, which we bought new at the time. It owes us nothing as we have put 385K km on it over the 11 years we have owned it. It still runs fine and we are passing it along to my nephew who would not be able to own a car otherwise. Our reason for liking to purchase new, well, first off we don’t like inheriting other peoples problems, and past used cars we owned always seemed to have maintenance lapses that caused longer-term issues for us. So with that in mind, and that we drive standard shift vehicles, we purchase new cars. So onto our next new car, a 2014 Subaru XV Crosstrek… all said and done price $31,500 on the road… If it works out like past new cars, it will average out to costing about $320 over the life of the car (10 yrs), including maintenance… Not bad, IMHO. As too the interest in the Prius, why? Environmental reasons? If, so you may wan to look into PZEV rated vehicles… They are cheaper and much more environmentally friendly – Cheers.



  4. My Own Advisor on July 7, 2014 at 7:51 pm

    My wife and I bought a new KIA, a couple of years ago. I also bought a new Mazda, but that was 14-years ago 🙂

    If you get 0% financing, full warranty, upgrades and intend to keep the car >10 years, buying new isn’t all bad…it’s actually a decent deal.

    Mark



  5. Kyle on July 7, 2014 at 9:26 pm

    I agree completely Mark.



  6. Cassie on July 7, 2014 at 9:31 pm

    In all fairness, it will only be a major personal finance sin if you trade it in for another new car in a year or two…



  7. Marie @ Gen Y Finances on July 8, 2014 at 8:26 am

    I haven’t had a car yet. But when I buy one, it will definitely be used. There are used cars that has good engines, no damage at all and etc and at the cheaper price. So, it would be a convenient for me.



  8. Kyle on July 8, 2014 at 10:25 am

    Just out of curiosity Marie, are you sure you know how to tell a good engine from a bad one? I sure don’t.



  9. Kyle on July 8, 2014 at 10:25 am

    Agreed Cassie!



  10. Young on July 9, 2014 at 1:40 am

    @MOA- Thanks for all the validation guys!! I don’t feel so bad now 🙂



  11. Phil on July 9, 2014 at 8:03 am

    Things are always clearer when you think long-term… picked up our NEW car yesterday… 🙂 – Cheers, and never forget to enjoy the fruits of your labours.



  12. Karissa on July 9, 2014 at 1:29 pm

    I just bought a new car in April, for the same reasons as you!



  13. Raza on July 13, 2014 at 2:10 pm

    Over the past 11 years I have owned 4 cars and here’s my conclusion. If you opt for a decently well-kept import car, then it could potentially save you thousands. I had own a two dodge models (Neon and Caravan), and they tend to break quite a bit. So definitely stay away from domestic used.
    But I have definitely enjoyed my previous used Camry and now drive 06 Accord and love it.



  14. Kyle on July 13, 2014 at 3:00 pm

    I drive a Hyundai Elantra Raza and no worries after the first 85K.



  15. Raza on July 18, 2014 at 2:03 am

    No doubt Kyle, Hyandai Elantra is a solid car and Koreans have done good job. I think it’s as good as Japanese made.



  16. Kyle on July 18, 2014 at 7:38 pm

    That’s my hope Raza! It’s possible to get a “lemon” from any make I guess, but so far so good!



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