The Cost of the Psychology of New

My wife and I are actively in the process of purchasing a replacement for the car my wife uses for her commute. During our initial search, we focused pretty tightly on late model used options, but as we searched, we began to find that, for many of the models we were looking at, the new models were so heavily discounted and incentive-laden that they were only slightly more expensive ($1,000 to $2,000 more) than the same 2005 or 2006 model. Thus, we’ve begun to include the new models in our search. (For those interested, we’re mostly looking at a Toyota Camry – boring, I know, but it has the features we want.)

A month ago, when I would talk to friends about our car purchase and our intent to buy a late model used, they mostly reacted with indifference. However, when I began to mention that we were considering a new car as a potential option, their tunes rapidly changed. “Really? You’ll have to stop by and show it to us!” was a common refrain from people.

This actually brought back a lot of memories of my gadget-buying days. Whenever I’d get something new and nifty, I would be compelled to go around and show it off to people. I’d stop by and visit several friends, mostly just to show off my new gadget, and I’d often wind up involved in social events that I wouldn’t otherwise participate in. Thus, on top of the bill for that new gadget, I’d also have a few dinner bills, a refill of my gas tank, and some extra miles on my odometer.

We all have a natural tendency to want to be admired. The interest that others show in us when we have something new to show off is pretty compelling. People look at us with some degree of envy and, on some level, we enjoy that. I know I certainly do.

The key, though, is to recognize that such attention is very fleeting – and it has a surprisingly expensive cost. If I were to be convinced to buy new just because of my desire for a taste of adulation, I’d get a bit of fawning from several friends for a few days and then it would die off to the occasional question about the car. For that, I’d pay quite a bit (aside from the additional cost of buying new right now, which is an entirely separate debate): a higher insurance rate, a tank of gas and some miles going around visiting friends just to show off the car, some miles on the odometer, and a move ever closer to an oil change and other maintenance needs.

As for my wife and I and our car purchase? We’re still shopping and negotiating, but we’re being quite cognizant of the influence that the psychology of new can have. Thus, we’re focusing entirely on what will get us the most years of reliable automobile use for the dollar, regardless of whether it’s new or used.

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  1. GayleRN says:

    Last time I bought a car it was a similar situation to now. Financing a late model used was at 7%, Financing new was 0% with a cash rebate. The price differential was only a couple of thousand. I bought the new and have been very happy with my purchase. Maybe another way to look at it would be price per mile intended to be driven. Let’s say you were looking at a used with 50K miles and a new. You are intending to drive to the 150 K mark on either one. What would be the price differential that would favor one over the other?

  2. SavingFreak says:

    If you are like my wife and I we run our cars until they fall apart (we do adhere to the international law that the wife gets the good car). So what we look for are cars that are reliable but have poor resale value. Hyundai used to be our car of choice but as people have caught on that they are as reliable as Toyota and Honda we have started looking at Kia (made by Hyundai). You get the best warranty in the business and the cars go for at least 200k (well, that is how far we have gotten with our Hyundai and it hasn’t blinked an eye).

  3. Rick Roberts says:

    Nice post.

    “As for my wife and I and our car purchase?” It should read: “As for my wife and ME and our car purchase?”

    I is subjective. Me is objective. Remove “my wife” and read it. You would never say, “As for I,” would you?

    Just sayin’.

    Peace.

  4. Rick Roberts says:

    Nice post.

    “As for my wife and I and our car purchase?” It should read: “As for my wife and ME and our car purchase?”

    I is subjective. Me is objective. Remove “my wife” and read it. You would never say, “As for I,” would you?

    Just sayin’.

    Peace.

  5. Jared says:

    The fact that the late and new models are so close in price us great! Are you planning on a regular or hybrid Camry? My brother owns an 08 Camry hybrid and he routinely gets 40+ miles to the gallon (and we live in Colorado).

  6. Nicole says:

    Not sure if you’re costco members or not, but going through them to buy a car usually gets you a really good rate.

  7. Anne KD says:

    We’ve been toying around with the idea of getting a new car for me. I bought my car new with the idea of driving it until it falls apart. My 2001 Civic still runs great, no leaks, can get 40 miles/gallon, no problems at all… but my husband is 6’6″ tall, a big guy, and his knees are in his chest when he sits in it, plus the seat has to be put at a 45 degree angle for him. His car, a 2003 Murano which he bought partially because he could fit in it, has been having issues and probably should be replaced. It’s problematic when his vehicle is in the shop. We’re thinking new cars for the same reason you are, Trent.

  8. J Brown says:

    I would do the math for a given set of yrs or mileage. Some dealers in the MD area are giving away free maintenance for 5 or 10 yrs. That additional savings may turn out less than a used car. I would strongly consider all makes and models, I know Toyota has “the features you want” but what about the features you need? Would the Toyota Corolla, Honda Civic, Ford Focus still meet those needs?

  9. krisj144 says:

    Superb post Trent. You really hit the nail on the head with this one.

  10. Joey says:

    With my family’s help, I bought a ’90s sedan last month with about 130,000 miles on it. Cost me $2000 off the lot. I’m hoping it’ll last me for the next four years of grad school. So far, I’ve put 240 miles on it sans probleme.

  11. KC says:

    Let me start by saying I’m a used car person and my husband is a new car person. His 10 yr old Civic was totaled in May 2007. He wanted another Civic, I wanted him in a slightly bigger car with 4 drs. We settled on a Camry. The new design had just come out about a year before and this was pre-recession. We had cash for a new or used car. He wants a new car, I’m totally against it. So I look around for a good used Camry. But the more I look the more I cannot rationalize buying a used one. This car has such good resale value that the used ones weren’t that much better of a deal when you compared mileage/age to price. The price just didn’t fall that much as the car aged. We ended up getting a new one and paying cash for it.

    You still need to shop around because a lot of factors have changed since we bought our car (mainly the economy and the price of new cars). But don’t feel guilty for buying new Camry if it is indeed the best deal.

    That being said my husband still likes his car and plans on driving it til the wheels fall off. I, the adamant used car buyer, doesn’t regret the purchase either. We didn’t have to take out a loan for a car – and I came to realize that was really my goal.

  12. LC says:

    I’m glad you have seen the light! In our case, our new car actually ended up cheaper than any used cars we could find that had acceptably low miles. We did add on the rust protection because that was the one thing that gave us headaches on our previous
    (12 yo) car. When you keep them that long it really does make sense. Especially now that the car companies are struggling, I would think their rebates are even better, and they were really good before ($6000 off in 2005)

  13. Elias says:

    What about the implications of the warranty, tires and oil that come with a new car? A used car my night an oil change or will have a set of tires that needs to be changed sooner.

  14. Judith says:

    When you mention the other car, it’s always “my truck”, or “my car” (I searched to verify that my memory does not betray me).

    Your wife’s car gets to be called “the car my wife uses for her commute”.

    What are you telling us?

  15. ChrisD says:

    You say that driving round to visit friends adds to the cost of a shiny new gadget. But spending money to see friends is worthwhile! That’s the whole point of friends, they are people you want to see. I can’t count that money was wasted.
    Unless by ‘friends’ you mean people you can’t be bothered to hang out with unless they will ply you with flattery!

  16. Rob in Madrid says:

    how do the Detroit 3 compare used and new, often they are just as good quality but because of all the problems they are way cheaper used and sometimes new.

  17. Stephanie says:

    Hi Trent,

    When I purchased my car about 6 months ago, I received so much attention it was off-putting. I bought the car because my old one was dying and I needed a way to get around. I didn’t get a car to show off a new gadget.

    I don’t think people do it intentionally, but why can’t we pay as much attention to things that are more important and or intriguing? Are we really that simple that we can’t come up with more interesting conversation? I think we could all work on improving ourselves to that end.

    -Steph

    PS – Thanks for sharing, I always enjoy your posts.

  18. Mule Skinner says:

    Ford products are notably improved in reliability recently.

    They look good to I.

  19. We went through the same process two years when we had to replace our main transport. Ended up buying a brand new Honda Fit because it was only a couple thousand dollars more than all the used models we were looking at and had a great warranty and better gas mileage. I still cringe occasionally when I make the payments but the payments are less than we were spending to keep the old car on the road!

  20. mollyh says:

    We recently purchased a brand new 09 Nissan Rogue, and we went through the exact same thought process. We were looking to buy late model used, but the new models were so discounted and came with so many ‘extras’ that we couldn’t pass up the deal. While in negotiations with the dealership, the manager said that he simple could not lower the price any more, but he did throw in 5 years of free maintenance. 5 years! All I have to do is show up at any Nissan dealership and I can have any routine maintenance done free of charge. That in and of itself is worth the the extra 3K we paid for the new model.

  21. Brigitte says:

    ChrisD–Comment 13–that was exactly what I was coming to say! These days as everyone is busy and we all get into the daily grind, we forget to make contact with those we care about until we have “a reason” to. Maybe that reason is you thought of them and wanted to say hi, but “I just called to catch up”–well, there’s your reason right there, isn’t it?

    So what’s wrong with having an excuse to give yourself permission to see your friends?

    Driving around the first 72 hours to see my friends and show off my USED car was what gave me enough miles to find some “quirks” that were not disclosed to me originally–and made it possible for me to get some of the money back to make the repairs it would have needed anyway.

    I didn’t buy a car to sit at home. But if you’re determined not to find yourself with the extra miles and cost of going out to see your friends, invite them all over for a potluck dinner where you can show off the shiny. It’s warm enough now even in Michigan that you can grill steaks and burgers (though I don’t enjoy eating outside quite yet).

    Is it ironic that “Fast Car” is playing on the radio as I write this comment?

  22. Geektronica says:

    Good points on the psychology of new.

    But really, are you considering a car that expensive? It’s going to lose most of its value in a few years.

    I made the mistake of buying a brand-new Altima (which I love) last year, and then bought a $2900 pickup a few months later. You know what? The Altima is nice, but it isn’t eight times nicer than the pickup. Both do the job; if I wanted a car nicer than the pickup, I could certainly get a decent used one for under $10,000, and it would hold its value much better than the new Altima.

    Dave Ramsey says you shouldn’t buy a new car unless you have a million dollars – and he means it. For a great explanation of his rationale, see:
    http://www.daveramsey.com/etc/lms/drive_free/
    (click the “Play Video” link from this page)

    Having just bought a new car (that I can well afford), I must say I agree with Dave’s advice. I should have paid cash for a car in the $5,000 range. You lose the most money on depreciation, regardless of the great interest rate and discount you may get on a new car.

    I think the sweet spot is in the $5,000-$10,000 range. You can get almost anything you want (3+ years old) for under $12,000.

    But, the key point is that you’re shopping for a car for your wife, so…

  23. BirdDog says:

    Back in 2004 when I traded my 2000 Ford Ranger 4×4 in for my brand new Ford Explorer Sport Trac 4×4, my insurance actually went down. I was shocked. I called then back just to make sure I hadn’t made some colossal mistake and had ommitted some coverage. They justified it by saying that the new vehicle had some safety features that the four year old one didn’t. So long story short, the insurance premium isn’t always more expensive.

  24. Prasanth says:

    Trent,

    Do look at Ford vehicles. Their quality have imroved a lot and imho are now comparable to Toyota. The new Ford Taurus looks great too.

  25. Bill says:

    My 2004 Ford Focus has been great. Sure the resale value is low but, in Taxachusetts that means the yearly excise tax is minimal.

  26. Russ says:

    I swear I don’t understand this ‘admired for your gadgets’ thing. I can’t think of a single time I’ve EVER visited someone just to show off some new toy. And yes, that includes the time I bought my first car (which I still have, 6 years later). I think it’s more to do with the company you keep – I can’t imagine my friends being even vaguely interested in my cell phone or ipod, much like I’m not interested in theirs, so this problem never comes up.

  27. Battra92 says:

    One word: Hyundai. Seriously, Toyotas are nice but a bit expensive. Hyundais (and Kias as well) are wonderful new cars. I love my Elantra and if you’re in the market for a Camry, a Sonata might be right up your alley. They get better gas milage than the Camry and personally I think they are pretty darn sexy.

  28. northern illinois says:

    I had this same decision in 07 and bought a new camry vs. a used one. I needed the security of driving a reliable car and felt that it was time for me age 60+, to have a new car for the first time!! my other 97 camry has 192,000 miles on it.

  29. Maggie Shaw says:

    I’m confused. You don’t mind spending an extra $1000 or so for a new car but you’ll still buy the generic cereal over the brand name. What matters more to you and your wife? A new car you both feel comfortable with or the approval of others?

    I just bought a new Honda Accord. It gets great mileage and has a higher resale value. Just a thought.

  30. CBus says:

    Trent,

    This kinda ties into the personal branding article you talked about a while back. You’ve branded yourself as someone who attempts to practice all things frugal. You’ve been advocating “buy slightly used late model” for nearly three years. But you also fawn over your high quality, higher cost culinary items because the offer a better value over time.

    I think in this economic climate, with incentives and rebates and buying power, NOT buying new would be a mistake. Most people who aren’t leasing will be holding on to their current car for the foreseeable economic future. Supply of new cars is going up, demand going down…its all working in your favor.

    I would recommend looking at the consumer reports articles on choosing a car for child safety (reviewing attributes such as window height, window switches, and seat belt retainers) to make sure you buy the safest car for your fam.

    Best of Luck.

  31. Fred says:

    If you are looking for a car that is desirable and efficient (Camry/Accord/Corolla/Civic/etc), you will find that the price for used is often about the amount that the car is “used up”. Assuming a car is good for about 200k miles, a 5 year old Camry with 100k on the clock is about half the price of new.

    If you drive very little, or live in a state where they do not use road salt, a used Toyonda can be a reasonable choice. Otherwise buy new, or buy from a used second-tier manufacturer car that experiences higher depreciation.

  32. Christine says:

    I’ve owned a wide variety of used cars-Fords, Toyotas, Hondas, Chevrolets & Plymouths, Chryslers & Dodges, you name it. In 2006 I bought a 2005 Camry and it was the best car I’ve ever owned. Comfortable, reliable, great-looking, etc. Now I have a 2006 Sienna (also a Toyota), which I plan to keep until the wheels fall off. I’ll probably remain a Toyota customer from here on out.

  33. julie says:

    We just purchased a new car also, paid cash, new chevy Traveres the cost was less than 11000 with the chevy discounts ,and the Gm Card discount. The cost of a another used car which my husband normally buys was close and no warrinty so much better buy going new.

  34. Abby says:

    I recently bought a new car (Ford Focus) instead of a late-model used for many of the reasons here. Plus, the new car offered a much better warranty. It even comes with roadside assistance which let me cancel my AAA membership for the next couple of years.

  35. m says:

    Doesn’t the plan signed by the President give you rebates on taxes paid on a new car? If so this may give you more incentive to buy new and of course the warrenty.

  36. I recently read about the pricing desparities in used and new autos– a through cost benefit analysis is needed.

    As for the culture of “New”– that has been ingrained by marketers and our peers. I ubderstand your feeling the underlying cultural expectations– my answer is do what is right for you, now and in the future . . .

  37. kz says:

    “People look at us with some degree of envy and, on some level, we enjoy that. I know I certainly do.”

    Seriously?!? Am I honestly in the minority on this? I don’t at all enjoy being on the receiving end of envy from friends. In my opinion, friendship – true friendship – is devoid of envy. That’s just such an awful sentiment. Frankly, I’m glad I’m not a friend of yours.

  38. GEoff says:

    Trent, I noticed the exact same thing when I purchased my Accord this summer. It was by far the nicest car I have ever bought and the first one I didn’t simply pay cash for. The car looked gorgeous and drove like a dream, I loved it. I was really proud and excited and I really wanted to show it off.

    However everytime I told someone about it their excitement faded when they found out it was an ’01. ‘Oh, you bought a used car’ they would say with a lack on interest bordering on disdain. Well, yeah, it’s new to me, new as in different, new as in not the 92 Mazda I’ve been driving for the past year. I thought we were friends and you were genuinely interested in my life and the things that happened in my life… guess not.

    I finally just stopped telling people about because it was deppressing me.

  39. GEoff says:

    @KZ, yes you are completly alone in that. One of the basic human emotions/desires is to be looked up to / admired. Better when it comes from who you are and what you do. But virtually everyone likes it even when it comes from what you own.

  40. Diane says:

    I would go with the better deal, which sounds like buying new at this time. I bought a new Chrysler Town & Country in 2006, now 3 years old. It was just too good a deal to pass up compared to used.

    I drive a lot to soccer games & tournaments with my son, and needed something reliable that would last. We’ve already put 55K miles on it, so I’m glad I went with the new one.

    Don’t feel guilty about buying new if that’s the better deal. That’s not the same as buying new because of an “image”.

    Remember, this is not toilet paper that will be used up and tossed! It is a long term investment in your family’s transportation. Sometimes spending a little more up front really is more economical in the long run.

  41. Sharon says:

    My source for buying big ticket items for years has been Consumer Reports. We NEEDED a replacement car for my husband’s 1993 Pontiac, which HAD to be replaced in July, 2008. We went to the DM public library and and read info on used cars and new cars (also, available for trucks and vans at any Des Moines public library.) We looked to no avail to buy from a private party. Until a friend in Ca. referred me to Craigslist. We found a nice 2005 Scion XB with low miles on Craigslist. The newer models of the Scion, unfortunately, have a bigger engine so gets less gas mileage.

  42. Sharon says:

    I must admit. Also, buying new is not as important to me since my husband and my goals have changed to saving and planning for retirement instead of shopping for therapy. I have to visit our current goal often as old habits die hard !

  43. J says:

    When we were looking for a car around 2001, we knew exactly what we wanted and looked at used models first. We then found that a new model was $1000 more. It was a no-brainer for us, we went new and got the 3/36K warranty as well as the more efficient and powerful engine the newer model afforded us. Used models (most 2 years old) typically had 30-40K miles on them.

  44. Wendybird74 says:

    Sorry to break from the whole Car issue, but I think this post can also apply to other large dollar purchases.
    My husband and I are thankfully on the same page when it comes to using our dollars wisely when making purchases, so recently we were in the market to purchase dining room furniture. We checked out the Raymore & Flanagan, and a few other big name furniture stores. Then we checked out a local antique and used furniture dealer in our area.
    We ended up going with the estate furniture purchase and got a whole room of beautiful furniture that fulfilled all of our requirements for the same cost as a single brand new table. (It is actually made out of wood..not particle board…which was also important to us.)
    Recently a relative was over and was very impressed…until I said that it was used. It was almost an immediate turn around in her composure and my husband and I had a private laugh later.
    I would love to see a day when being practicle and using up a commodity (such as our furniture which still has plenty of life left!)is more impressive than buying new!

  45. J says:

    Wendybird74 — you should have just said something like:

    “We acquired these pieces via a private sale.”

    That would have impressed your snooty relatives. You could also use the term “private auction” if appropriate :)

  46. Michelle H. says:

    I bought my Camry new in 2001, and still love it! Best car I have ever owned. Dependable, reliable, great ride, plenty of room for 2 car seats, and after 8 years I still love to drive it. I plan to drive it into the ground.

  47. Michelle H. says:

    I bought my Camry new in 2001, and still love it! Best car I have ever owned. Dependable, reliable, great ride, plenty of room for 2 car seats, and after 8 years I still love to drive it. I plan to drive it into the ground.

  48. kz says:

    @ Geoff:
    Being looked up to and/or admired is completely different than being envied. I look up to a lot of people, and strive to follow their example in particular areas. I do not envy them. There is a difference, and it’s not subtle at all.

  49. Britt says:

    I just paid off my first car, a brand new Chevy Cavalier. I’ve had it approx 5.5 years and just now needed the brakes changed and new tires. Funny thing is they gave me a lifetime warranty on my brakes…guess they don’t know I’m planning on keeping my car for a VERY long time. It only has 35,000 miles so far.
    As for hubby.. he drives a 08 Silverado we bought last summer. The owner of the gym he runs also owns a dealership so we got a good deal. New bedliner, bed cover, hitch and replacement seats plus fully loaded for around 25,000.
    I didn’t really want a new truck but our 01 Jeep was falling apart and we plan on keeping both vehicles til they die but we’re gonna take care of then so that doesn’t happen :) Also we’re only 25 and the truck is our only debt besides our mortgage which will be paid off in 15 years.
    Sorry for rambling. Just had to say…

  50. Britt says:

    I just paid off my first car, a brand new Chevy Cavalier. I’ve had it approx 5.5 years and just now needed the brakes changed and new tires. Funny thing is they gave me a lifetime warranty on my brakes…guess they don’t know I’m planning on keeping my car for a VERY long time. It only has 35,000 miles so far.
    As for hubby.. he drives a 08 Silverado we bought last summer. The owner of the gym he runs also owns a dealership so we got a good deal. New bedliner, bed cover, hitch and replacement seats plus fully loaded for around 25,000.
    I didn’t really want a new truck but our 01 Jeep was falling apart and we plan on keeping both vehicles til they die but we’re gonna take care of then so that doesn’t happen :) Also we’re only 25 and the truck is our only debt besides our mortgage which will be paid off in 15 years.
    Sorry for rambling. Just had to say…

  51. EdTheRed says:

    Just wanted to add that the Vehicle Report from CS is an incredible deal for $9.99. It gives you the dealer cost for everything: the car, the options, the freight. Everything.
    In 2003 I ordered two reports: one for a Civic and one for a Corolla. Long story short, I got a car that was stickered at $17,989 (before fees and taxes) “out the door” (after fees and taxes were tacked on) for less than $15,350 and change.

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