Car Guys: Keep, Sell, or Trade

Getting a new car is never a smart financial decision

Pay off current vehical and keep it for 10yrs. Then pay cash for your new one.

What makes you say you got a good deal on it? I bought a brand new 2012 fx2 for less than $3000 more than you paid for your truck over a year ago. Good luck getting someone to give you $21500 for it too.

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I have no real reason or desire to sell it other than making a good financial decision.

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Drive it until wheels fall off. Trading up every 3 to 4 years drives your cost to operate up, up, up.

I recommend that you stop thinking of your note as a utility bill and start thinking of it as debt you have to repay, albeit with a fairly modest interest rate.

These new cars actually cost millions of dollars over time.

Drive free, retire rich

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Assuming you buy your first new car out of college at age 22 and carry a $500 note the rest of your life (let's say 85), that's $378,000 per person.

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Principal over 63 years. You're assuming 0% interest?

Even at 3% average rate of return, that's well over $1 million.

5% is over $2 1/2 million

8% is over $11 million

10% is $31 million

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Kind of unfair to assume that your investment will always make you money though.

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Kind of unfair to assume that your money will get stuffed in a mattress somewhere.

What am I missing?


ETA: Wealth is a mindset. The difference between upper middle class and wealthy is that the upper middle class family has nicer cars, houses, vacations, still live paycheck to paycheck, working for money to pay for their stuff.

Wealthy people work to increase their stash of money, so they continually have more and more of their money working for them.

Ergo, a wealthy person can have a lower income and less things than an upper middle class professional who still has to bust his hump to pay his bills.

Well than let's also factor in all the savings on gas and maintenance. What's a reasonable number per month on that? $150? I'd say that's conservative given that your plan is to drive a car into the ground, which means high dollar repairs or a new vehicle. What about the costs of the car you buy every 10 or however many years? Gotta take that out too.

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Where does that kick in? 100k, 200k? I never said don't buy a new car when you need to - just don't borrow money to do it.

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I dunno, whenever stuff breaks. A lot of brands offer no cost maintenance for the first few years, so that's a direct savings compared to keeping the older vehicle. Plus getting a new car every 5 years should keep you from having to do any major repairs out of pocket due to both warranty and low miles.

New cars get much better MPGs than older cars, so that can save you a lot depending on how much you drive.

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At a certain point, the money you saved by not borrowing money will yield enough to pay a new (or, at least, new to you) car - rather than you having to borrow money. This is a savings model, not a spending model.

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At a certain point, the money you saved by not borrowing money will yield enough to pay a new (or, at least, new to you) car - rather than you having to borrow money. This is a savings model, not a spending model.

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How long? If you have to do one major repair each year, after factoring in rental car, repair costs, etc as any other savings the newer car provides you, it may take a very long time to get there. And if you can get 0% money or close to it, it makes the decision not anywhere near as black and white as Dave Ramsey tries to paint it. None of this even takes into consideration that maybe some people get enjoyment out of having a nice vehicle, and may still be saving plenty for the future.

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Less than $5 million over a person's lifetime.

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This makes no sense. Bottom line is, you're not really spending "millions" by having a new car every few years, unless you don't look at the whole picture.

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You have a point - if you're going to spend it on other stuff, and not invest it, sure. But this is the money board.

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You don't have an option of not maintaining your vehicle and expecting it to run. You can't just ignore that to try to make a point.

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Modern cars are engineered to last, if properly maintained, for 200k miles or more before you have to really start doing A/B analysis for repair/replace.

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right, trans rebuilds, A/C repairs, etc never happen before 200k miles. What fantasy world do you live in?

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But what do people do? They start to trade when they go positive in equity, and get a new car - perhaps with an even smaller note (of course with a new 60 or 72 month term) - if they ever get one paid off - look out world - because they miss that car note. So many people barely get out of warranty before they trade in (and often up, because they can "afford" more car, now).

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Not sure why you even mention this? Considering we're talking about having a payment your entire life, I would imagine this was understood.

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Again - I'm not going to revisit that discussion last month where you sought vindication to buy more house they you could really afford. At least that was not for a depreciating asset.

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I didn't seek vindication first off. Second, you still didn't give me any numbers to tell me why it was a better idea to pay rent for 5+ years just to avoid PMI.

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The math is just not on your side here - it can be the right decision to buy a new/newer car. It is just very, very rarely the right money decision - particularly if your existing car is serviceable (and most are out to 18, 20 years, 200k to 225k miles).

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I never said buying a new car every 5 years was a better deal financially, but it is intellectually dishonest to keep saying millions when it isn't after you factor in everything. It's just like the PMI thing from my thread you brought up. Sure, $30-50k sounds like a lot to pay for PMI, until you factor in the $60k plus I didn't pay in rent those 5 years.

You're MO appears to be to only tell half the story to try to make a point.

If you live in South LA...you will never ever get what KBB says. KBB is out of Cali and lives in dream land...