I’ve talked before about my debate on whether or not we should purchase a new car or continue to put money into our two older vehicles. While they both generally run well, even with preventative maintenance we know that inevitably they will both need to be replaced in the future. I came across an article in Kiplinger’s Personal Finance magazine that addressed the same problems we are thinking about with our older cars. While I think that their estimated dollar amounts for upkeep of the average car are a bit high, I do like the comparison of purchasing the new car vs. maintaining the older car.
Many people consider the purchase of a new car as an asset, defined as something that has an exchange value. A new car depreciates the minute it is purchased and taken off the lot. While it does have an exchange value I wouldn’t consider it a viable asset. My husband is fond of saying that besides your underwear, your car is one of the only things you’ll own that can be guaranteed to be worth $0 at some point in the future if you keep it long enough. Of course he is joking since there would be some salvage value, but the average “daily driver” car definitely has no appreciating value.
Our family has two cars that are essentially free other than maintenance expenses. Recently, we looked into buying a newer car. This would cost around $10,000-$12,000 for a Honda Accord that is a few years old. Supposing we borrowed for this car, it would cost us around $250.00 per month in a payment and an increase of around $40 per month in insurance to add Comprehensive and Collision coverage (we do not currently carry these coverages). In contrast, we are spending approximately $500-$750 on either of our cars in an average year changing oil, transmission fluid, or making minor repairs such as thermostats. It’s just a better deal. We’ve also investigated all the typical objections such as “a new car is more reliable.” Our old cars are very reliable if you maintain them and are willing to spend a few bucks here and there and have a budget for an occasional major repair. A new car is just more fun and I admit it. However, it is an American tradition that we’ve decided to look past.
Here are two good articles you might want to read about the topic: