Boldly Transforming Men Into Fathers

Never buy a new car

Sweet 1998 Camry that was bought in 2006 and lasted until we sold it in 2017

For some reason, Americans love buying new cars.  I’m glad they do, because if they didn’t, there wouldn’t be any used cars for me to buy.  I really like making good decisions and being smart with my time and money.  If I would buy a new car, I would betray these 2 qualities.

Reasons to buy a new car:

  1. You are allergic to money, and want to get rid of a lot of it very quickly

Reasons to not buy a new car

  1. You have literally no idea if the new car suffers from poor engineering
  2. You lose thousands of dollars in value the second you drive it off the lot
  3. You are not allergic to money, and want to keep as much as you can

Reasons to buy a used car

  1. Engineering flaws are known, and you can avoid bad makes/models/years you know yielded bad cars
  2. You don’t want to take a depreciation hit
  3. You want to know the long term reliability of the car
  4. You aren’t allergic to money

Reasons to not buy a used car

  1. You walk, run, or bike everywhere

Only buy a new car if you literally do not need the money (i.e. only if you have all your debts paid, your retirement saved for, and only if you pay for it with cash or take advantage of a 0% APR and invest the difference in muni bonds).

3 thoughts on “Never buy a new car”

  1. I got a $4.5k tax credit from my new, Prius Prime. There is no tax credit on a used car so that tax credit mitigates a big chunk of the depreciation … if I ever decide to sell it.

    Having the plug-in hybrid, driving EV is half the cost of gasoline. Then about half of those EV miles are free thanks to free chargers at local merchants. Finally, getting 56 MPG on regular gas when driving long distances helps on vacations and out of town trips. Thanks to higher efficiency, no Prius earlier than 2016 comes close and they aren’t filling up the used car lots.

    1. I have to admit, those new Primes look pretty slick. My wife actually bought a 2012 Prius Plugin this spring. She gets 52 mpg on gas alone. The 2012 version only gets about 10 miles per charge for us, but that takes care of the majority of her round-trip car excursions. Let’s take a look at some numbers comparing the 2012 Prius Plug-in vs. your new Prime:

      2012 Plugin/ 2017 Prime
      Cost: 11k/22.5k (after tax credits, assumes 27k price)
      Miles per year: 12k (average American puts 1k of miles on per month)
      Miles per year (gas): 6k/6k
      Gas cost/yr ($2.6/gal): $300/$289

      So in this scenario, $11/yr is saved by buying a new Prius Prime, instead of a 2012 Prius Plug-in. However, the cost difference in purchase price is $11.5k. Let’s assume insurance costs are the same (but they aren’t – older cars are cheaper to insure). How many years will it take to recoup that 11.5k in this example?

      1045 years.

      Now, let’s just look at the numbers if we assume the Prius Prime costs $0 per year (you only use free electricity and never use gas) and the 2012 Plug-in ONLY uses gas. How many years would it take to recoup that 11.5k now?

      19 years.

      So comparing a 2012 Prius Plugin to a new, base priced Prime, you would need to keep the Prime for at least 19 years before you recoup the price differential.

      This ignores what you could have done with an extra 11.5k in an investment account over 19 years.

      $11.5k in a simple taxable account invested in low cost index funds would yield about $800 if we assume a conservative 7% rate of return/yr.

      If you drive the Prime without buying gas, compared with only using gas in the 2012 Plug-in, you save $600/yr in fuel costs. So even in this unrealistic hypothetical fuel example, you still lose at least $200/yr.

      Take a look at my opportunity cost post for more info on this way of thinking.

      1. We replaced a 2010 Prius with the 2017 Prius Prime Plus to get the standard Toyota Safety Sense P (TSS-P): dynamic cruise control, lane assist, alertness warning, and collision avoidance. One avoidable accident wipes out all fuel savings and the 2012 plug-in did not have it standard. The 2017 Prime also made improvements in the engine, transmission, and suspension.

        The EPA web site, http://www.fueleconomy.gov, has already done the math for both the 2012 Prius Plug-in and the 2017 Prius Prime:

        $3,750 saved over 5 years – 2012 Prius Plug-in
        $4,250 saved over 5 years – 2017 Prius Prime
        $500 saved over 5 years – Prime over Plug-in
        $100 per year (unique to Huntsville, another $60 saving in free EV)

        Avoiding future maintenance, the Prime pulls the cooled exhaust AFTER the catalytic converter where the hydrocarbons and NOx are neutralized. In contrast, the 2010-2015 engines pull the exhaust BEFORE the catalytic converter and are showing up with carbon-blocked, cooling passages.

        The 2012 Prius plug-in uses the P610 transmission with just an engine driven lubricant pump and MG2 for EV operation. In contrast, the 2017 Prius Prime P710 transmission incorporates sling lubrication and a one-clutch, a ‘racket’ type, so both MG1 and MG2 work as a more powerful, single motor. The P710 sling lubrication and internal ATF cooling means lower temperatures for longer life. Testing my two, transaxle oil changes show the P710 has much improved wear characteristics over the P610. Then the split, rear wheel suspension means more precise handling to avoid road debris.

        Toyota Safety Sense P alone justifies the 2017 Prime over a used 2012 plug-in or our previous 2010 Prius. The fuel improvements, better engine, transmission, and improved handling are free.

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