The Hows and Whys of Our Car Purchase: A 2009 Toyota Prius

If you had told us a year ago when we started our research that we would wind up settling on a new car for our car purchase, I would have laughed at you. We’ve been strongly committed to buying a late model used car for a long time, since we viewed it as the best “bang for the buck” option, especially since we intended to drive our newly purchased car until it literally began falling apart – a state that our 1999 Mercury Sable was in.

When we started our process for buying a new car, we focused on a small handful of factors:

We wanted a late model used car with a reasonable number of miles on it. We didn’t want to buy a car with a lot of miles on it because we believed we would be back where we started in just a few years. We were looking mostly for late model used cars with less than 60,000 miles on them.

A compact car doesn’t work. I’m six and a half feet tall. Our 1999 Mercury Sable is about the smallest car I can sit in comfortably. Smaller models simply do not work for me – I cannot sit in them because my knees are literally pressed into the dashboard.

Fuel efficiency and reliability were our primary factors. We’ve never been interested in bells and whistles. We don’t need a six-disc CD player or in-dash GPS. We have no interest in leather seats and so on. The basic package is enough for us.

We actually calculated the fuel efficiency of each car by calculating how much we would have to spend on gas over the lifetime of the car – up to 150,000 miles, which is our estimate for how far we would drive it. We figured 15,000 miles per year, with the cost of gas being $3 per gallon on average.

Fuel efficiency is particularly important for us because this car will be used for my wife’s commute. Roominess for long trips isn’t nearly as important here – we’ll mostly use it for commuting, local errands, and some weekend trips.

Thus, we started our search looking at 2004, 2005, and 2006 sedans. I visited the library several times along the way and we looked at quite a few cars. We eventually settled on a handful of models that we were interested in – the Honda Accord and the Toyota Camry led the pack, with a few other models we were considering. (The Prius wasn’t even on the radar at this point.)

What we began to notice is that, in the models we were looking at, the new cars weren’t a lot higher than the used versions we were looking at. We would see a used 2005 Camry with 50,000 miles on it at 60-65% the price of a new Camry, for example, and our per-mile calculations would show us that we would get the same value-per-mile out of the new car if we drove it to 150,000 miles, plus with the new car, we would get two or three years of initial low-trouble driving out of the car (the first 50,000 miles).

The prices were mostly the result of the economy in late 2008. Reliable used cars were holding their value well, but new cars, even on models that sold well, were seeing great prices.

Thus, we began to include new cars in our search. This was cemented at a large Toyota dealership in mid-February, when one salesman quoted us a price on a used ’09 Camry (with a few features we didn’t want) that was only $1,000 less than a new ’09 Camry.

Another factor: the stimulus package. Here’s the scoop, per cnn:

Under the Auto Ownership Tax Assistance Amendment, car buyers will be able to deduct sales and excise taxes on the purchase price of a car up to $49,500. As originally proposed by Sen. Barbara Mikulski, D-Md., interest payments would have been deductible as well.

The full text of the amendment (featuring fifty tons of legalese) is here, but the summary above makes the benefit pretty clear – the taxes paid on a new car plus car loan interest (note: the car loan interest provision was removed in a revision of the bill) are tax deductible. This saves us a few hundred dollars (at least) for buying new instead of buying used.

Yet another factor that nudged us towards new is the warranty offered on a new car. To put it simply, with auto insurance and a warranty, our only expenses on the car over the first several years are maintenance and deductibles (if anything happens). Although many used models have some degree of warranty available, most are very short term or are severely limited in some regard.

As our 1999 Mercury Sable began to exhibit more and more problems (failing struts, a transmission that would take five or so seconds to shift from first to second gear, our search began to grow more urgent. We received the 2009 car issue of Consumer Reports in the mail and my wife and I pored over it carefully.

We focused on the entry-level family sedan section and eliminated them based on a handful of factors: it had to have at least average safety, it had to have fuel efficiency above 22 miles per gallon, and it had to have a good reliability history. These factors quickly eliminated quite a few models, leaving us with just four new models that we agreed to consider along with the used models we were considering: the Toyota Prius, the Toyota Camry, the Nissan Sentra, and the Honda Accord.

Here is where the Prius began to really stand out for us. We did fuel efficiency calculations for these models assuming that we would drive them to the 150,000 mile mark with the same cost-per-gallon assumption we used above. According to that calculation ($3 per gallon), the Prius would cost us $9,782 in gas over the lifetime of the car (at 46 MPG), while the Camry (for example) would cost us $18,750 in gas over the lifetime of the car (at 24 MPG). A $9,000 savings on fuel (at the assumed $3 per gallon rate, of course) versus an average fuel-efficiency car was a huge factor for us in our calculations. To put it in another perspective, we anticipate putting roughly 15,000 miles per year on the car. Versus the Camry (which I’m using as an “average” sedan here for comparison), the Prius would save us $900 a year in fuel.

We spent a month comparing prices on used cars available at local dealerships as well as the new cars we had identified and, to put it quite simply, we could not find anything that really competed with the “bang for the buck” value of the Prius. Most of the used models we examined were priced close enough to the new models – even after negotiating – that we eventually came to the realization that the Prius was the right purchase for us.

Our down payment decision We had enough in cash to pay for the car in one shot, but two factors kept us from doing that. First, it would partially deplete our emergency fund, putting our family in a somewhat more risky spot. Second, we will have to replace our other vehicle (currently a Ford F-150 with somewhere around 140,000 miles on it) in the next year or two, so depleting our entire car savings might not be wise. Add into that the fact that our credit is stellar (we got a 4% rate on our car loan), we’re nearly breaking even by keeping the cash ourselves and holding it in a savings account plus we have the security of having a big emergency fund. We chose to put $5,000 down on the car to avoid any liability and insurance costs if we were to be underwater on the car at any point. The rest remains in our savings, minimizing our risk against other life emergencies.

(Edit: after reading many comments about whether or not we could afford the car, I wanted to note that we had enough in car savings to pay for the entire car in cash. We chose not to because we have a second vehicle that will need replacing in the next year or two and that may require major repairs in the near future (we consider that to be an emergency, hence the mention of “emergency” savings above – if our truck had failed right after buying the car, our emergency fund would have gotten hammered). At the same time, we were earning 3% in savings & CDs with the cash compared to the 4% loan – that didn’t offer enough incentive to lose the huge cushion in our savings.)

Thus, after all of this, we bought a 2009 Toyota Prius. After driving it for a weekend trip (and putting about 400 miles on it), the car is achieving almost exactly 42 miles per gallon (even with my wife lead-footing a bit on the interstate).

Here are four things we learned during the process.

Know what you actually want. Because this is a car we’ll use for commuting, our biggest factors were reliability and fuel efficiency. We did not want any extras, either – the base package is what we wanted. Thus, as we shopped, we were often comparing the base package for the new models versus a motley crew of packages for the used models, meaning the prices were often closer than they would be if we were demanding some certain “extras” as a minimum requirement. This changed our buying process significantly.

Before you even start shopping, spend some time figuring out exactly what you want. Spend some time considering the features you consider important – and focus on those factors. If a feature isn’t important to you, don’t pay for it.

Don’t restrict your horizons without a reason. Our original predisposition against new cars was mostly due to the prevailing notion that new cars simply aren’t a good buy. Yet, in those market conditions, we ran the numbers carefully and found that our overall cost of ownership with a new Prius over the period we intended to own it was lower than virtually all of the used models we could find.

Total cost of ownership per mile is a surprising (and useful) number. Most of our calculations centered around the total cost of owning the car up to 150,000 miles, then we figured out the cost-per-mile for the car. So, for example, if we have a used car we evaluate that has 70,000 miles on it, we figure out how much the cost of fuel and maintenance and insurance will be up to 150,000 miles, add that to the cost, then divide that by 80,000 miles (the amount we’ll actually use it). For the Prius, we figured up the cost of gas and maintenance and insurance through 150,000 miles, added that to the price, then divided by 150,000. In short, we looked for the best bang for the buck, not the lowest monthly payment, and the best deal turned out to be the new Prius.

Don’t go shopping in one day. Take your time. Visit lots of dealerships. Even if you know what you want, negotiate a bit with that dealer, but don’t sign on the dotted line immediately. Let them know that you’re visiting lots of dealers. I don’t claim to be a good negotiator, but I do know that visiting lots of dealerships, talking openly about the things we’re considering from other dealerships, and leaving dealerships after expressing some interest in a car on the lot only helped us over the long haul.

If you’re making a careful purchase, research and dealer visits will likely be part of the equation anyway, so play it to your advantage. This can easily save you thousands on the initial price.

Good luck!

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  1. It would be interesting to see how you negotiated on the car. Toyota appears to be cutting prices substantially (reference: http://www.businessinsider.com/rumor-toyota-cutting-prius-price-to-match-honda-insight-2009-3). Did you play multiple dealers off each other? How much did you get off MSRP?

    That, to me, is more interesting than what car you picked.

    -Erica

  2. Jesse says:

    Another money saving aspect of the Prius (or many other hybrids that use regen braking for that matter) is the lack of brake maintenance. Since the car uses the electric motor to slow itself, the brakes see little to no wear. This could go a long way if your typical driving cycle involves a lot of stop and go traffic.
    In a traditional car, every time you hit the brakes, it costs you money(lost kinetic energy and wear on brake components). In a hybrid, unless its a panic stop, it costs you nothing.

  3. JT says:

    Did I read this correctly…you said the 4% rate on your car loan was deductible? How is that, I didn’t think car loans were tax deductible?

    Congratulations on the car. The Prius is definitely very nice. My 10 year old Honda is just getting to 100k miles now so I still have about 5 more years to drive it, but when that time comes I hope to get a hybrid as well.

  4. Kat says:

    if your new Toyota is as good as the older ones I have owned, your cost over the life of the car may be much less than your estimate. I have never had one that gave trouble under 200,000 miles. There is a Toyota Starlet somewhere that had a verifiale million miles on it.

  5. tbone says:

    any concerns regarding the life of the batteries? do they lose charging power over time? how much to replace them? when do you need to replace them?

  6. Luke says:

    I did the same types of calculations in 2005, where I came down to a Camry and a Prius, though I had been wanting to get a late model one. At the time, the cost of a used was closer to 70-75% value of the new and the Prius was about $4,000 more than the Camry. Add to the extra cost more room for our family in the Camry and the ability to have my car work done somewhere other than the dealership, we finally decided on a new Camry.

    Thanks for your thought process on your Prius purchase. It was a great read!

  7. Brandy says:

    We had some different priorities (larger family, needed for x-country driving). We went looking for a late model used small SUV with a good engine. I also wanted privacy glass in the back, a power driver’s seat (I’m 4’11″, he’s 6′), and relatively good gas mileage (considering the SUVness and all). We found a 2008 Ford Escape with i-am-not-kidding 5,000 miles. Between the 2k rebate, the 0% financing, and the deductibility of the sales tax, we ended up buying a 2009 (same effective price as buying the 2008). It was the right choice for our family and we would have never considered buying new. Oh, and the dealership didn’t even try to sell the car above invoice. Great time to buy.

    We also got the addition of leather seats and Ford’s new sync system as a bonus (compared to the 2008) model. We weren’t even considering Ford, but it turned out to be the right car for us.

  8. Really good tips, Trent. I work for a dealer, and you hit it right on the nose when you advised that people take their time, shop around, know what you want, and above all, DO NOT BUY THE SAME DAY YOU LOOK AT A CAR!! Dealers want you to make snap decisions. Always go home and sleep on it first. Even if that particular does sell in that time frame, there are others out there, I promise.

  9. Mary says:

    I’ve actually been looking at that car a lot for when I buy my first car in the next year or so. Nice!

  10. Claire says:

    You are going to love it! I just bought at 2008 used Prius and it is fabulous – I’m averaging 42 miles per gallon – my first fill up $15!! My old car needed premium gas and was $30 to fill up more often.

  11. Ken M says:

    Good post!

    I would recommend using Edmunds.com for doing research on the price of the car, to get the invoice price and use their site to contact dealers to get their best price.

    Often going through their internet sales department you will get the best possible price without the hassle of an in showroom sales person. Then you setup a time to go check out the car.

  12. grizzly says:

    Unfortunately, the stimulus amendment did not pass as originally written. Interest is not deductible, only state and local taxes. See this article, which includes information about IRS rulings on this subject: http://www.savingtoinvest.com/2009/02/car-buyer-tax-breaks-in-obama-economic.html

  13. State sales tax on anything is always deductible.

    If you couldn’t afford to pay for that car in cash without eliminating your emergency fund, you couldn’t afford a new car, no matter how long you explain it away.

  14. Jennifer says:

    My oh my, your rampant preaching about how others do things and then constant rationalization when you do it a different way never ceases to amaze me.

  15. Sara says:

    My car is a 2000 and while it isn’t anything shiny, i would hardly say it is falling apart. Do you think living in a climate where it is necessary to use salt on the roads contributes to cars being unusable sooner?

    Are you concerned about repair costs of the Prius, considering the hybrid technology? I’m not well educated on them, but I assume you are.

    I tend to side with those who said that no matter how you justify it, taking out a car loan (even tax deductible) is never the best pf move. The best is to wait until you can drop the cash without worrying about the size of your savings.

    However, it isn’t a horrible move, and it is your choice, and I do think it’ll work out fine for you and your family. Best of luck

  16. leslie says:

    Isn’t the Prius a little small for you? I am honestly asking. I have never been in one but they seem small from the outside.

  17. J Brown says:

    So how did you factor in the family into this choice? I was surprised you went with a smaller car than a family vehicle. I just found out that my family is growing and our cars may not be the best option now. Can you fit a stroller with car seats in this car? I see that the prius gets good mpg, but what about miles per kids?

  18. Seth says:

    I recently started reading your blog and have really been enjoying your posts, but I have to agree with dogatemyfinances (#5) and possibly Jennifer (#6), although I can’t necessarily vouch for what she said about whether you have done this previously.

    Let me throw in one more aside before I start my complaints… I have nothing against Toyota or the Prius. It may be a great car… that is not what I am arguing.

    My concern is in your assumptions that you used for calculations and in the comparisons themselves. First off, you mentioned “we intended to drive our newly purchased car until it literally began falling apart”, but yet you use 150K miles as the basis for your calculations. Cars are being constructed much better than they used to be and it is not unreasonable at all to expect a minimum of 200,000 miles out of a well-built car. Again, I cannot speak personally for Toyota, but from my observations, it is extremely common for many of their vehicles to get upwards of 300K. If you truly think that you drive a car until the wheels fall off, then take a look at impoverished countries. You will find 20-30 year old vehicles still running great. If you (financially) want to make a car last, you can. The issue is that most people just don’t want to deal with the quirks of older vehicles.

    Second, you mentioned that “We were looking mostly for late model used cars with less than 60,000 miles on them”. Then you said you limited your search to 2004-2006. Do you consider 3 or 4 years to be late model? I agree that some great deals can be had by shopping for a late model car, but I think the general definition of “late model” would be a vehicle at least 8-9 years old. That is when you really start seeing incredible discounts.

    Personally, I drive a ’98 Volvo with 163K miles and have absolutely no problems. I bought it one year ago with about 140K miles for just over $5K. Again, this is not a “my car is better than yours” battle. A very trusted mechanic who exclusively works on Volvos said I can easily expect 300K miles or more out of this vehicle. Yes it only gets about 23 mpg, but a $5K car that should last at least 150K miles is a steal. The reason it is so cheap…. it is a “Late Model” and people think it would have lots of problems because it is 11 years old. Yes, I am assuming that my car will make it that long, but based on my past experiences and research, that is a very reasonable expectation.

    So, as I was saying… I have been enjoying your posts up until this one. I just wanted to point out some fallacies that you built into your calculations that I think skew the results. Just be honest with yourself. You wanted a new car, and you found a way to make the numbers justify it… no harm done, just be realistic.

  19. liv says:

    Prius’ are NICE :) congrats! i got a few years left before i buy a car, but I’ll debate the new vs used when that time comes. I also noticed that currently, the new and used car prices were really close together, a new car sounds like a better buy.

  20. Jeff Taylor says:

    “I cannot sit in them because my knees are literally pressed into the dashboard…”

    This made me chuckle, because I can completely relate! I am 6’5″ and when I borrow my roommate’s ’97 Sentra, my knees change the radio station during left turns.

    Have you ever thought about writing up a blog post on frugality for tall guys like us? I always end up paying more for things like dress shirts to get extra long sleeves, etc.

  21. Craig says:

    I am disappointed with your article and agree with comment #5. The issue is not whether or not you purchased new vs used, the cost per mile,deductible interest etc, but that you went into debt to buy a consumer product (a rapidly depreciating one) that you did not have the cash to buy outright (and I agree that buying a brand new car would not have been a wise use of any portion of your emergency fund). Now you are losing money every month in interest and have a required payment. You should re-read Day 14 of your “31 days to fix your finances” article. What happened to taking “that debt snowball and apply it directly to your dreams” as opposed to another car? Sorry to be unpleasant but most people read blogs such as yours because they have suffered so much from debt and are trying to escape its bondage (me included). This just sets a poor example.

  22. Joey says:

    “We actually calculated the fuel efficiency of each car by calculating how much we would have to spend on gas over the lifetime of the car – up to 150,000 miles, which is our estimate for how far we would drive it. We figured 15,000 miles per year, with the cost of gas being $3 per gallon on average.”

    Are you seriously making the assumption that the average price of gas over the next 10 years will be $3 a gallon? This is quite the case of fuzzy math, especially considering that we were over $4 a gallon less than a year ago.

  23. Troy says:

    I am with dog.

    I don’t agree with the purchase of new, and the financing of new adds insult. If you can’t “comfortably” pay cash, you can’t aford it.

    You just justified your way into a car payment by way of spreadsheet analyzation.

    The problem is you were choosing very “high demand” vehicles from dealers. There are several vehicles that are nearly new (1-3 years old), with 40K miles or less selling for HALF of what they were new.

    You just posted how NOT to buy a car. NEW, HIGH DEMAND, FINANCED, FROM A DEALER.

    Look at used, lower demand vehicles from individual owners not trying to profit and pay cash.

    I just looked at a literally showroom mint 2007 Ford Explorer Eddie Bauer loaded with 21K miles for sale for $14,900. Still under warranty. That vehicle lists for approx 40K new. 60% off. That is a buy.

    Good luck with that payment, higher insurance, and higher taxes. And that battery may sneak up on you and derail all your best laid plans.

  24. Lindsey says:

    Gas is under $2 per gallon and has been for several months, Your $3 per gallon estimate can make a Pirus look more justifiably but if our economy doesn’t rebound you may continue to have been a little high on the amount of gas savings you will achieve.

    Also I agree with the last commenter, how long do those batteries last as far a total life time is concerned, how expensive are they to replace? How long is the warranty I would love to see what you came up with in your research.

  25. Joey says:

    This kind of entry is precisely the type folks think of when calling you inconsistent at best and hypocritical at worst.

    You basically went and spent $22,000+ (if going by MSRP) before taxes, registration, etc, on a brand new car, and spent several paragraphs justifying the very behavior you’d have sanctimoniously railed against if you’d seen someone else spending $22 grand on a highly depreciable asset.

    Central to your justification is the assumption that you’ll drive the vehicle for 10 years at 15,000 miles a year. You didn’t have enough money to buy it in cash (if you had, you wouldn’t have used your lack of an emergency fund as an excuse), and you passed over dozens of used vehicles (including used Prii) that would have saved you over $10 grand up front in order to buy a new car.

    This is pretty much the definition of bad financial practice, no matter how you spin it.

  26. jreed says:

    Yeah, good luck to you too…..in the snow. This rates right up there with the absent clothesline and the 9% a year stockmarket returns. If this new Prius with payments decision gets out, your book will be going right to the outside discount table. Next you’ll be touting the Kindle as more economical than the library.

  27. Gary Hardin says:

    The verdict is still out on hybrid automobile batteries. No one really knows how often these batteries might have to be replaced, nor how much they will cost. The cost could be astronomical, like several thousands of dollars.

    Might it be best to wait about 4 to 5 more years to by a hybrid car, then we will have some track record on the battery issue?

  28. Joey says:

    It’s particularly telling, as a side note, that you didn’t mention…

    A.) The cost of the car as it sat on the lot,

    B.) The cost of registration, licensing, insurance, and taxes,

    C.) The monthly payments (and interest rate) you’ll be making to pay it off.

    You did mention, however, “we’re nearly breaking even…”

    I don’t know how else to describe this except as a convoluted attempt at justifying a financially unsound purchase.

  29. Gene says:

    Did you even consider a used Volkswagen Jetta TDI? Yes, Diesel is slightly more expensive than gasoline, but it’s a proven technology that gives you similar or better mpg than the Prius. The difference in up-front cost is negligible and maintenance should be much cheaper. The size of the passenger cabin is no smaller than a Prius.

    Oh, and ditto everyone else about the financing. Bad Trent.

  30. marta says:

    Like other commenters, I am kinda amused at your long justification of the purchase of a new car…

    You couldn’t really afford a new vehicle. The e-fund is for emergencies, so you should have saved specifically for the car… as you always preach.

    Also, why does your family even need two cars? You work from home! Or does the “ditch your automobile” advice apply only to other people?

  31. Lis says:

    First, @Troy and the Eddie Bauer Ford Explorer – my dad baought one used a couple years ago. It too appeared to be a great deal – it was overpriced junk at any price. Only purchase if your fave hobby is spending money getting your great deal of vehicle fixed once a month or more.

    Secondly, I have to point out that we simply do not know everything (nor is it necessary for Trent to share every single detail / $ amt of his personal finances) about this purchase. Trent and his wife obviously did a lot of research. We simply do not know exactly what he paid, what the taxes were, how the diiferent brands and models would have affected his insurance, exactly what his local dealers were asking for the new and used cars they looked at. Are there really bushels of used Prius out where he lives?
    Also, as for not paying all cash upfront – he clearly stated that they could have, but chose not to. Since his savings account pays somewhere around 3%, and his loan rate is 4%, he’s essentially made the decision to pay 1% interest for peace of mind and liquidity.

    Personal finance is a series of choices. Every situation is unique. Everyone values different things. Certain ideas may generally hold true across the board, but there will always be a situation, a circumstance, where conventional wisdom just doesn’t work. We all need to be able to take into consideration changing circumstances, understand how to “crunch” and interpret the numbers, and be open to changing our minds. Doing something the same way every time just beacuse it’s always been the “best” way requires no critical thinking skills. The point of a useful blog is to make us think and provide a different perspective.
    Thanks Trent! We are very soon to be in the market for a “new” car. You’ve given something new to carefully consider.

  32. imelda says:

    Eeek. I was all set to praise Trent for writing such a detailed article about this, given that he seemed to know more than I do about buying cars. Then I read some of the reviews…

    Now I’m just confused. Trent’s explanations seem to make financial sense– the Prius wasn’t much more expensive than used cars, he would save on maintenance, he would have a warranty, etc. Other PF bloggers (i.e. Ramit Sethi) have come to the same decision and also bought new cars, so I was grateful to see a detailed explanation from Trent of how this could make sense frugally speaking.

    But now many commenters are bringing up the original arguments that I thought Trent had refuted–that buying new, from a dealer, is always a bad buy, that you always do better buying a recent used model, etc. I’m left not knowing what to think. It would perhaps help to have actual numbers to compare.

    I will say that I remain surprised that Trent got a car loan for this car. Wasn’t the point of the car savings fund to avoid taking out loans? Or was it just to have the down payment, the way Trent used it here?

  33. Craig says:

    “Paying cash is the way to go, though, when you finally do buy (though that decision is based on other values), and late model useds are the best deal out there.”

    Trent @ 6:08 am March 11th, 2007 (comment #3)

    Lis is really letting Trent off the hook. He did not say that he had the cash to pay upfront, only that “it would partially deplete our emergency fund, putting our family in a somewhat more risky spot.” Whether we know everything about Trent’s finances is irrelevant. We simply know that he bought a car he could not afford after telling the rest of us to pay cash.

  34. J Brown says:

    I normally do not comment twice, but I am just speechless on this one. I have been reading you for 10+ months and I see this post as justification on what you wanted, not needed. I know this is a personal decision. I just do not see the logic. Like many have said before, the e-fund should not be used for this purchase at all. If it was a true e-fund reason, then that means you get “any vehicle” for cash for that point in time. What happens when your truck truly dies? You can still get used cars with a warranty from the dealer. I am looking at a van because I have to. I am trying to look at cost and then everything else after the cost. I am assuming you did the opposite, you looked at everything else and then worried about how best to make the cost fit. I am sure you got a good deal on a new car. Yes, this car will last a long time, depending on the battery issue. Worse case you will have good resale. But even with all the above from your article, in the end – it is just a new car that is over priced that the bank owns. Remember even if it is on sale, it still cost more money than a used car.

    I can make a similar comparison to the above.
    You could have a cheaper monthly payment if you leased the car. Why was that not on the option list? I know why it is totally against logic too, but the prices are so good now.

    Thanks for the information on this decision, I would like to read more of your logic, but I still disagree with the decision.

  35. todo es bien says:

    Hey Haters!
    The cost to Trent to maintain his liquidity is minimal. It is a snap to get a better return than that nowadays.(Though it doesn’t sound like Trent is opting to) Trent didn’t even play the “good for the environment card”. But he should have. Ultimately he is going to consume 50% less gas then he would have. If we were all doing that, the world would be a better place, and we would be paying 1.25 a gallon for gas. Instead we have all the poseurs in their Eddie Bauer specials. Finally, one reason we are locked up financially is all the overblown consumer spenders have swung wildly back the other way. Responsible spending (and I would call spending within your means, buying a highly environmentally responsible and well crafted vehicle responsible)is not a bad thing right now. Man you guys act like he took a trip to Vegas.

    Judge not that you be judged?

    If you are dealing with a 10-year time scenario the likelihood of gas being well over 4 a gallon is easily within reason. It is certainly much higher than that right now in some parts of the world and the same factors that drive that price their may come into play here. How come you guys arent railing on the people who took out loans they couldnt afford on houses or ran up credit cards, or spend more than they earn? sheesh. I drive an old car, and I wont be changing that ever, (could buy a Bentley for cash) but cut the guy some slack.

  36. Sandy E. says:

    With all due respect, to save $$$ from the depreciation of any new car the second you drive it off the lot, I would advise people to always purchase a car with 30-40K miles on it. For someone who is supposedly frugal, I am really stunned that you didn’t do that, or at least scratching my head. And then, why wouldn’t you, of all people, have a car fund separate from an emergency fund, saved to avoid car payments? You went into debt for this car. Why?

  37. xn says:

    Prius? What a waste.
    A TD Golf is superior in everyway, and around twice as efficient.

  38. adrian says:

    lol, this is hilarious! Initially I thought it was an April Fool’s joke but it’s only March 21!

    Well, practice what you preach… errr… preach what you practice?.. no…. practice whatever you want ;-)

  39. LTruslow says:

    I know this is cliche…but is this a case of “Do as I say, not as I do.”

  40. Des says:

    I’m curious about the 150,000 mile deadline. Our car just recently broke 200k needing nothing beyond regular maintenance. I’m sure eventually we will need to fix things, but it’s nowhere near done with its useful life yet. If you’re buying a Toyota (and plan to take care of it properly) it will easily outlive your 150k mark.

  41. Dan says:

    Unless I read it incorrectly, he stated that he took $5000 out so that he could have money left in his AUTO FUND to make a down-payment on another vehicle in the next year or two. Figuring he has multiple accounts under ING, I would assume one of them is for his car savings, but could be included in “emergency fund” were the emergency large enough to require it. He most likely has enough in the entire ING account to pay for the car with cash, but was not comfortable with doing that. I personally dont see anything wrong with making the personal choice to pay a tax-deductible 1% on a car loan, especially considering the level of security it provided for his family by maintaining the integrity of his savings. I am in fact quite glad to see this article because it illustrates the importance of being flexible when trying to stick to the “rules” of PERSONAL finance.

  42. Karen M says:

    We have a hybrid, and love the gas mileage. It was one of the reasons we bought it. (I live in California where it reached around $5/ gallon last year.) Also, in California, the battery is warrantied for 100,000 miles, as per state law. This could potentially save us a lot of money.

    However, hybrids lose their great MPG rating in the cold! The engine remains on much longer, meaning the MPGs drop to that of a “normal” car.

    At any rate, a hybrid works well for us. But our situation is very different.

  43. Faculties says:

    I too am stunned. It sounds as if you only looked at used cars offered by dealers. Of course those have the prices jacked up sky-high. Why not look at used cars offered by private sellers? All you have to do is to take it to a mechanic and make sure it’s sound. I got my car, a used six-year-old Toyota with 20,000 miles on it, for $1200 from a private seller. That’s what the dealer had offered her for it, so she sold it to me for the same price. You can’t say that the extra $18,000+ you paid can possibly make a new Prius an even deal with that. And going into *debt* to buy it?? You could not afford a new car. Your credibility is shot with me.

  44. Carolyn says:

    Wow, after reading all the negative feedback you got, I had to comment (I rarely do).

    I own and happily drive a 2008 Civic, purchased new, for exactly the reasons you cite in your article. It was a way better deal than a used car, full warranty, without any questions on what the previous owner might have put the vehicle through. Anyone who thinks that it is possible to find a better deal on a late model Japanese vehicle just hasn’t been in the market lately.

    Kudos to you for making the best decision for your family instead of stubbornly sticking to what you’ve been preaching for a while.

  45. Karen says:

    You share an ice cream with your kids at the state fair to save a dollar yet spend $22000 on a SECOND car when you work from home.

    Consider me unsubscribed – your advice is worthless.

  46. SalveRegina says:

    Owie! What’s with all the nastiness?

    Anyway…we looked hard at a Prius before buying our last commuter car (late model used) but the uncertainty about the battery life kept us away.

    I have been curious about that question ever since….Any insight?

  47. teri says:

    I confess I am also surprised by Trent’s choice to buy a new car, but the reasoning seems fairly sound to me. I suspect they’ll pay the car loan early, since they have the money but prefer the larger cushion they’ve grown used to while saving. The environmental impact of the car choice is huge, and I wish more people considered it.
    As to Karen (#29), it seems like sharing ice cream doesn’t just save a dollar but also saves wasted ice cream (most 1-3 year old kids can’t/shouldn’t eat a whole one) and also saves temptation when one is trying to eat healthy. And given that they are looking for a car for Trent’s wife’s (sorry, can’t remember her name right now….) daily commute, and the one she was using was no longer safe, this seems like a good choice. Their other car is a large truck which probably gets terrible mileage and is also nearing its last leg. So in many ways, this is the main car–the other car is not in daily use, and if it was it would be expensive and environmentally harmful.

    I’m impressed with the amount of research and time they took to come to this decision–given that they did not PLAN to buy a new car, but economically FOR THEM it seems to make sense, environmentally it seems to make sense, and the car they’ve been using is no longer useable…it seems to me (granted, I’m new to this whole PF business) that getting a low-interest loan with tax deductible interest–a loan which they will probably pay off quickly–seems reasonable.

    Maybe that’s just me.

  48. JT says:

    Jeez people…calm down. Its not like the guy has a gazillion dollars in cc debt or anything. Many people finance a new car, if you can pay it off in two years or so its not always a bad choice, especially if you have good credit and can score a great rate, as Trent did (4%).

    When I bought my car 10 years ago, I bought it new and am still driving it. Plan to for another 5 years or so. If you think about it, paying $22k over 15 years is not such an evil thing.

    Now, if he were to buy a new car every 3-4 years just for bragging rights, that would be stupid. If he were leasing it, another bad deal. I don’t see anything so evil about buying a new car if the rest of your finances are in order, taking care of it and driving it for a long time. As someone else said, its a personal choice.

    Frugality can mean different things to different people, but to some people their only definition seems to be buy everything used and feel guilty about every penny spent. Very narrow minded view if you ask me.

  49. JT says:

    By the way, I finally had a chance to google the auto incentive tax break that Trent mentions. The final bill that passed is different than Trent describes…it does allow a deduction for sales tax on the car but NOT on interest payments for auto loans (that provision was originally proposed, but was not included in the final stimulus package).

    Here is the link to the CNN story on it:
    http://money.cnn.com/2009/02/12/autos/final_auto_sales_stimulus/

  50. Kat says:

    Excellent article. Lots to think about and I appreciate the detailed explanation of your thought process. While it’s commonly thought that buying used is the more frugal option, the exception to that is buying new with the expectation of driving the car into the ground (100,000 miles or more).

    Unfortunately, Trent, you seem to have attracted a bunch of financial guru wannabes who seem to have cornered the market on sour grapes. One gets the feeling they just hang around, waiting to play gotcha. Sigh.

  51. Marc says:

    I’ve been reading your blog for over a year and I’m stunned at the response to this post (which is a great, detailed account of your process by the way).

    People – Trent has said for a long time his family needs 2 vehicles. His wife commutes and just because he works from home doesn’t mean he should be trapped there all day (remember he has young kids and lives in a quasi-rural area). A Prius is hardly a lavish car in any sense.

    Mathematically, since the interest on the car loan is tax deductible (or if he can get better than 4% on his money anyways) there’s nothing wrong with getting a loan. His net worth is NO worse than buying it outright. The government is doing everything it can to get people to buy cars and take out loans, clearly these perks have been taken into consideration.

    The car you drive can be a very personal choice, and while I think it’s great he gave out the details, obviously some people are going to disagree with his choice. Statistically speaking the Prius is fairly reliable vehicle with a good-sized production run. I can’t believe someone suggested an upscale SUV – did Trent not say they valued fuel efficiency and didn’t need fancy features?

    As for used vs new – the point has always been that it’s *often* preferable to buy late model used, however that’s not always the case (advocating always used or always new is narrow-minded). Besides, buying used you’re always taking some risk of getting a lemon; sure you can have a car inspected thoroughly, that’s not necessarily going to catch weird electrical or intermittent issues.

    Congratulations on the new car, I hope it serves your family well. It sounds like you did your homework and although it’s impossible to foresee every eventuality I think you made a sound, rational choice. Good article, even though it’s apparently controversial!

  52. DD says:

    I remember heating experts say that the Auto Assistance Ownership Amendment wouldn’t spur many people to buy new cars…shows what experts know :)

    I’m enjoying the feedback you’ve received so far. I recently got a lot of grief for a decision I made (and blogged about), so I’m feeling you. But probably as in my case, you knew it would be coming.

    Hopefully this doesn’t taint the new car smell. Enjoy your new ride!

  53. Lauren says:

    I think a huge issue here is that over the past year or so the economy has just gone crazy. People are suddenly frugal, which changes a lot in the equation. Whereas there WERE those people who’d buy a new car everything 3-4 years, suddenly now everyone is starting to hunker down, and recent model used cars are now harder to come by and the prices have gone up.

    I do agree that Trent comes of at a hyprocrite, but the fact is that the economic situation is much different now than it was even 2 years ago, and so it is necessary to shift ones perspectives accordingly. I needed to buy a new car last November and found the same thing as Trent- my husband and I began looking at used, but eventually realized that we could get a new card for 0 down and 0% interest, and the dealers were desperate to sell so we got a great deal. Things change.

  54. Brandon says:

    It is amazing what a hot button car buying has become. I also believe that you have to crunch the numbers and make the best decisions possible, but that being said, you really need to LOVE the car you drive too! You will spend alot of time in it!

  55. J.D. says:

    *sigh*

    Although I will grant that much of this posts smells of rationalization (and actually mentioned as much to a friend before reading the comments), I think that some commenters are being overly critical.

    I had a discussion recently with another personal finance blogger. “It surprised me,” I said, “how many PF bloggers buy new cars. I’m going to do it too, I think.” He and I discussed how a new car is not always the wrong decision. This other fellow and I both have the same philosophy: buy a new car and drive it into the ground. I love the idea of buying a late-model used vehicle, and I understand the advantages of doing so, but it’s just not the right choice for me. I would buy a used Mini Cooper from a little old lady, or from a friend I trusted. But I’m not going to buy one from a dealer. I’d rather buy new.

    Still, although I intend to buy new, I do plan to pay with cash.

  56. steve says:

    Rules of thumb are what you use when you don’t have time to analyze the situation properly. In Trent’s case, they took the time to analyze and discovered that buying the car new, and financing it, was the best choice for their family.

    As to total cost of ownership: I think $3.00 per gallon is a conservative estimate for the future cost of gas over the next 10 years. This sub-$2.00 hiatus in gas prices probably won’t last more than 2 years, even without regulatory issues around gas usage. In which case, the fuel savings of the Prius will be even more favorable towards Trent’s “Total Cost of Ownership” analysis. The battery issue is, admittedly, still a bit of an unknown, but sometimes in life you don’t always take the sure bet.

  57. BirdDig says:

    I want to know how you fit in the Prius? I’m 5’11” and I practically have to sit in the backseat of one of those. And I cannot imagine taking it on weekend trips with two kids in their car seats in the back. I hope you all pack light, not a ton of trunk space. I don’t own one, but my company does and I almost always drive my own vehicle (a truck) over it because I just hate the Prius. To each his own, I suppose.

  58. Faculties says:

    J.D. singles out the main point. I can believe that under some circumstances a new car would be a better deal than a used car. But not being able to pay cash suggests that this car wasn’t planned for sufficiently. Why no car fund? Or why was the emergency fund too small to accommodate the car? That’s what the emergency fund is *for* — to keep you from having to go into debt every time some larger expense comes along. Going into debt means living beyond one’s income. Sometimes, in cases of emergency, you have to do it. But was this an emergency? Apparently not enough of one to warrant using the emergency fund. If doesn’t add up to me.

  59. I thought along the same line when I placed about $6500 for the downpayment and insurance for my Nissan.

    Footing the entire cost in one shot for a depreciating asset doesn’t make sense. Not only is my emergency fund compromised, there are opportunity costs by missing out on better investments.

  60. Mitch says:

    Dude, I can’t help but smile thinking back on your “the cost of the psychology of new” article. Well, now you know the cost of new…

    Enjoy the car, enjoy reading the comments.

    As for me, I am with the buy used group, I think you justified a mistake, however, you can afford it and it won’t kill you, it just sucks that you lost some credibility. Later.

  61. Kirk Bond says:

    I’ll concur that the car decision is complicated. Good work on doing your homework and finding what works best for your family.

    Obviously you have stirred up a lot of venom here. But in the end, Trent, thanks for sharing your journey. We can all learn from that.

    Those who cannot read your advice and disagree with a decision without throwing the baby out with the bathwater are missing out!

    Again, thanks for sharing the process you went through. I appreciate the humanity in your posts.

  62. Gwen says:

    Nobody has commented so far on how Trent’s purchase stimulates the economy. Even though becoming miserly is no en vogue, in order for the economy to get moving again we need people who can afford it to start buying things. It sounds like Trent’s family could afford this purchase and he was very methodical about his decision.
    Also, as a long time reader I can say that Trent is never “preachy” in his articles. He always says that wise personal finance is about doing what is best for you, not blindly following rules of thumb.

  63. Stephen says:

    I’m not convinced that this was a good idea.

    I don’t see how the total cost of owership would work out in comparison to a used car.

    And as always – if you have to borrow, by definition, you can’t afford it.

  64. Ian P. says:

    I think Trent’s original logic was flawed. And I mean before he even got to the numbers. If he had really done his research he would have know that JDPower just named the Buick LaCrosse the MOST RELIABLE midsize sedan. Not Toyota, Nissan, or Honda, yet he didn’t even look at GM. Why? GM’s reputation? Perception is not reality folks. Both GM and Ford have come a long way. He can buy a 2008 Buick, Chevy or Pontiac, for half of what he paid for the Prius. He would have got a larger, more fun to drive car with similar reliability and fuel economy as the three imports he named. There is only one reason to buy an import over domestic right now, and that’s resale value, but if you’re keeping your car for 10 years, resale is irrelevant. He said he did his research, but if he actually had, then he would bought a good ol’ American car instead of an import with a battery that’s going to cost a small fortune to replace in 5 years when it dies.

    Well, this whole article really makes me change my opinion of Trent. Anyone who knows cars, knows the Prius is NOT a sound financial decision. But I’m sure Trent will enjoy driving it to Starbucks where he can listen on his iPhone, read his Kindle, and type on his MacBook Pro. Maybe on the way home he’ll stop and buy some Monster Cables while he’s at it. Meanwhile, the rest of us will continue to make REAL sound financial decisions.

    As much as I disliked this article I have to admit his bold-type advice is sound and is written in his very concise way. However, it’s too bad he didn’t follow his own advice.

  65. Jessica says:

    Funny, my 6 and a half foot husband fit into our compact car just fine. And if the car is meant for your wife’s commute, why is your fitting into it comfortably such a big deal?

    Really, I’m just surprised at how small your savings seem to be, and that you actually talked about tapping into your emergency fund. Oh well.

  66. Melissa says:

    Thank you for supporting the economy by buying a car. I am sorry it was the ecomony of Japan. Don’t talk to me about foreign quality either because the US car companys have caught up with the foreign cars. I am sorry you didn’t support your fellow Americans by leaving your profits in America.

  67. Michelle says:

    I’ve got no beef with buying a new car over a used car, if you can get a great deal. I do have issue with financing a car. No matter how great an interest rate you got on the loan, you’re still paying interest rather than earning it. If you paid cash, then took the money you would have spent on the payment and put it in an interest bearing account, then in 5 years you’d come out ahead. Works everytime.

    One thing I’d like to know, how big was the dealership where you bought your car? My husband and I have bought two late model used cars with approx 25K on them from small independent dealerships, and have paid significantly less than larger dealerships were asking for the same car. In fact, our last car was appraised for insurance at $14K and we paid $10K for it. I’m just wondering if you really explored all the options when it came to used cars.

  68. Cathy says:

    I heard a news story today saying that buying new cars is more cost effective than used in this economy. Dealers are having trouble moving new cars off the lot, so they are adding all kinds of incentives, cash backs and attractive rates. Used car demand has gone up, which means prices go up, and available inventory goes down. Thus the situation Trent describes – the price of a new car, when you factor in incentives and deductions – is LESS than buying a 2-3 year old used car.

    It’s about running the numbers, not ideology that frugal means used. You can’t ever go on a blanket statement like that.

  69. Cathy says:

    Ian P: Do you mean the JD Powers report that also named the Prius the most reliable compact car?

    As for GM and Ford coming a long way, that’s debatable. A friend of mine just got GM to buy back her lemon they sold her. She turned around and spent it on a Toyota. My boyfriend tried to buy a Ford last year, cash in hand, and ended up walking away so disgusted by the slimey sales tactics.

    BTW, buying Toyota, Honda and Subaru is buying American these days. They employ many American workers in Indiana, Kentucky and Georgia. Not the Prius in this case. Toyota canceled plans for a Texas Prius factory because the economy tanked and demand went down.

  70. sunny says:

    Wow, I have to say I’m disappointed that you bought new and then financed. As a budget analyst it seems to me you analyzed the data until is suited your needs.

    Did you factor in the cost of battery replacement? Consumer Reports has consistently reported that the Prius does not save enough in gas cost to justify the expense.

    I bought a 2007 Subaru this summer with 30K on it paid 15K the dealer gave me a full warranty starting at 32K. Oh and I paid for it.

    Not trying to beat you up but this is inconsistent with the frugal lifestyle your blog promotes.

  71. steve says:

    Trent didn’t mention whether he looked at it or not, but if I were in the market and looking for a new car, I would consider looking at the Toyota Yaris as well, which has a relatively high MPG rating with a conventional engine, and also has lots of headroom, I believe starting around $14,000.

    I hope the Prius works out for Trent and his family.

  72. Trent says:

    We had plenty of savings to pay for the entire vehicle in cash. Two things kept us from doing so. First, our truck is a 1997 Ford F-150, which has a poor reliability history and is sitting at 135K miles. We did not want to deplete our entire car savings (in fact, we have viewed our car savings as an emergency fund for a long time because we have been really testing the limits of reliability with our cars). Second, when we got the quote for the loan and discovered that it was only 4%, we realized that with our money already sitting in cash and CDs (remember my writings about CD ladders several months ago?) earning over 3%, we wouldn’t be gaining much at all by tapping into things and paying cash.

  73. Jen says:

    In 1999 I bought a brand new car and financed it with a regular 5-year auto loan. I spent $400 a month for 5 years for that car, and I’m still happily driving it 10 years later. I didn’t have all the incentives to buy the car new that Trent did and I still think I did well with the car.

    A few years later, we bought a late-model used car for my husband. It didn’t cost much less than a new car, and the only reason we went with the used car was for insurance savings. That has been a good car too.

    Both are Hondas, and I really do think that with Hondas and Toyotas, it’s hard to get much of a deal on the low-mileage used cars. They hold their value well (for good reason). I have had such good experiences with both cars that I feel very loyal to the brand. My Honda Accord was made in Ohio, by the way.

    Trent, I hope you and your wife enjoy the car. Your readers seem pretty nasty.

  74. smurfett says:

    I’m wondering why you don’t include the costs of maintaining your car in your calculations. For a prius, do you have reputable mechanics in your area who can actually work on the car? Do priuses cost more to maintain because it’s a hybrid and the technology is different because the parts are more expensive?

  75. Trent says:

    “I’m wondering why you don’t include the costs of maintaining your car in your calculations. For a prius, do you have reputable mechanics in your area who can actually work on the car? Do priuses cost more to maintain because it’s a hybrid and the technology is different because the parts are more expensive?”

    The entire hybrid system is fully warrantied to 100,000 miles by default. Everything else is pretty similar to a Camry.

  76. Courtney says:

    My notes:
    1) I’ve had a Toyota Prius since 2002. My husband commutes to work, about 70 miles per day, and we save about a car payment per month in gas compared to sub-compact cars that we’ve had as rentals during the times it’s been in the shop. This is averaged over the last seven years – yes, we save that much money in gas.
    2) My Toyota Prius has as much room as that year’s Camry. In fact, I’m tall (5′ 10″ – female), and I tested the back seat for comfort, and it was very comfortable. The trunk space is amazing. (Yes, my year has a trunk.)
    3) Corporate Toyota has been Fantastic about customer service. I’ve gotten free battery replacements (a coupon in the mail!), thousands of dollars back on service, etc. The batteries last about 150,000 miles with regular use. They cost about $4,000 to replace, which is still cheaper than a new car. No, I’ve not needed to replace mine yet.
    4) My Prius has had perfect service requirements. Unfortunately, people seem to like to run into it. The first accident, 6 weeks after I bought it, I was at work, at my desk and my car was parked in a space in the work parking lot. My boss’s daughter sideswiped it but good, necessitating replacement of the hood, the side panels, and all the way down to the trunk lid. It’s been t-boned by an elderly gentleman, head-on collided by a drunk driver, and rear-ended by a high school kid. After all this, it drives nicely, and still gets fantastic gas mileage.
    5) The Toyota Prius is highly recommended by Consumer Reports as one of those cars you can drive to 250,000 miles – and I certainly intend to go there. At 7 years old and 135,000 miles, it’s still comfortable, easy to drive, roomy (4 adults plus luggage for a week long trip are comfortable), and runs very well.
    6) I don’t have any room to talk about the finances of the car….except to mention that I got rear-ended by an 18-wheeler in my paid-for 2000 Honda CR-V in July. Of course, it was totaled. We _have_ to have 2 cars, because we live a little “out there” (no taxi service or bus rides) and I stay home with my 15-month-old daughter.

    So, even though we had a rental, we had to scramble to buy a new car once the insurance company determined that the CR-V was totaled. We ended up with a 2008 Honda Pilot because we also have my mother, who is handicapped and needs more space, and our adopted teenager, and we also require a 4WD. The dealer offered us $5,500 off invoice for a mid-level new Pilot with a kick-butt interest rate. I was actually thinking about a CR-V or RAV-4, gently used….but at that rate, it was _cheaper_ to buy the Pilot! Gas isn’t really a consideration for that car, because it rarely breaks 5,000 a year. I LOVE that car! ;)

  77. Ashley says:

    I made the same choice to buy new last summer. My dad (a financial consultant himself) and I logged many hours researching used cars, only to realize a brand new Toyota Camry, my car of choice for safety and reliability reasons, was only $1000 more than a used Camry with 80k+ miles on it. If you had asked me before I did my homework on the matter if I would EVER have owned a new car, I’d have told you absolutely not. Sometimes math trumps conventional wisdom, especially in the current economic climate.

    I looked at buying a Prius and found even 2003 models with 100,000 miles on them cost nearly as much as the new model and in almost every case, a 3 year old Prius was listed at or over MSRP. And I only looked at ones from private sellers. No dealer anywhere near where I lived had a used Prius in stock. Of course, this was summer 2008 when gas was $4, but we’ll see those prices again in the next 10 years unless alternative fuel sources can replace most of our oil consumption.

    If I was going to buy a car tomorrow, I think I’d make the same choice as Trent.

  78. Trent says:

    “Your readers seem pretty nasty.”

    They’re not. They just have strong opinions (and sometimes go a little bit further than they would face-to-face because they have the screen of anonymity that comments provide). They wouldn’t comment if they didn’t care and weren’t passionate about the topic – I’m actually quite happy to have passionate critics.

  79. Susanne says:

    Wow – I didn’t realize this post would spark so much heated debate. I suppose that’s a good thing, though. :-)

    It was interesting to read about your car-buying process. I was surprised by the result, but I can see why you wouldn’t want to put the majority of your savings into paying for the car in cash at this point in time, given all of the current economic issues.

  80. Chris H. says:

    The Millionaire Next Door discusses using a “price-per-pound” method for buying cars. With the recent increases in gas prices, do you think that theory is outdated?

  81. Troy says:

    The main issue I have is the financing, and the justification to not tap your emergency funds, whether a true emergency fund or a car fund, because you feel more comfortable with the cushion.

    Forget the arbitrage of earning nearly as much as the cost of the loan. That is only justification, not reason. And it is temporary.

    The real reason for financing is the false sense of security having liquid cash provides, and I don’t get it. Your liquid cash is only a security if it isn’t already spoken for, but it is. For this car AND the other/next one.

    If you are worried about an emergency, and in fact you state there is a high likelyhood of using those funds for the other car that will soon need repairs or replacement, then you are only delaying the eventual position you will be in which is in debt with no equal assets.

    That position will be a “hammered” or much less valued emergency fund, and a car payment on a depreciating Prius.

    You justify buying new and financing with “we had enough in car savings to pay for the entire car in cash.”

    But then you say “We chose not to because we have a second vehicle that will need replacing in the next year or two and that may require major repairs in the near future…”

    So it is fairly certain that the reason you use for financing (have the cash) will evaporate any time in the next two years.

    That makes your reasoning virtually invalid. You won’t have the cusion for much longer, and then you will be left with a payment, but no longer the reason for the payment.

  82. J says:

    Ha Ha Ha. The joke’s on you Trent. You want to buy a new car? Fine. Have the balls to admit you want a new car. This post was pure yuppy justification. You might as well have been telling me why a mortgage bailout makes complete sense and is fine in YOUR situation. You would have been all over someone else who did the same.

    Just like you should have the cahones to admit the only reason you can write blogs about it, is because your wife keeps you in the h-uppy (yuppy with hippy tendencies)life you’ve become accustomed to. You like it, fine. She likes it, great, but have the decency to admit that that’s how it is!

    Just like I still wish you would cop to the 401k cash out that is what really paid off all of your debts. No such luck

    Oh yeah, to all of those who will freak out because I dared to criticize the godly Mr. Hamm…he has a public BLOG..people should be able to put their two cents in without Trent or his worshippers having a melt donw in their Prius

  83. tambo says:

    Trent, I haven’t read all the other comments, but we have a 2008 Prius – bought mostly because my husband was having a 200 mile per day commute for work and gas usage with our ’92 Explorer was awful.

    One thing we learned – BUY PREMIUM GAS. Last summer we averaged 53 miles per gallon. The mileage went down a bit over the winter – cold batteries aren’t as efficient – but now that it’s warming up, we’re creeping close to 50mpg again. For an additional 20 cents a gallon, we get a 20% increase in mileage. Seems like a good deal to us!

    Anyway, we really like the car. lol

  84. Neal says:

    Give the guy a break for buying a hybrid. They’re trendy and he got a good warranty. Toyota has great service. I just got converted after finding the elusive low-mileage import (2006 Matrix).

    Yes, a diesel would be better over time if we built diesel refinery capacity (which we’re not). So if we’re stuck with gas, and you don’t consider the batteries to be a deal-breaker, a new hybrid is a great choice. Congratulations Trent.

  85. Kate says:

    Gotta love the posts that spur so much debate. :o)
    I can understand where Trent is because I was there just a few months ago. Although I looked at used cars, my bad experience with two used cars (and yes I did my research…and they were still bad experiences) and the fact that I don’t like all the bells and whistles because they tend to break led me to the new car lot. It is hard enough to find a new car that doesn’t have a hot tub, let alone find a used car that doesn’t.
    After much, much, much research I decided on a Toyota Yaris and so far, I have been extremely pleased. Not only did I get a good price but it gets about 40 miles/gallon–at the time it was the best of all the subcompacts. The amount of room inside is unbelievable–I don’t need to put premium gas in it (see comment 79) and it got 40 miles/gallon during the coldest weather (see comment 40).
    For those of you who are saying “never take out a loan” you may be forgetting that Trent does have a wife who is driving the car to work and he has two small children. Having a reliable car and some extra cash in the bank is worth the peace of mind sometimes to take out a loan with a low interest rate. People who gripe about spending money may end up with a lot of it but, believe me…the people who live with them are often quite unhappy.
    Trent’s last advice not to shop in a day and be ready to leave the dealership is sound. The price I ended up paying was well below the first price that I was quoted simply because my husband and I got up and walked. We priced numerous dealerships and physically visited three of them. Even if you get a great initial price (which is highly unlikely), the price will go down if you leave and come back.

  86. tdh says:

    @Troy
    My guess is that Trent is hoping to keep that truck running for at least another 18 months. If he is saving $800 a month, he can replace that truck at that time without having to touch the emergency fund that he has in place now.
    Trent has posted in his articles about debt snowballs that he has a strong security need for a healthy amount of cash in the bank.

  87. Becky says:

    Good for you Trent! We recently bought a new car too – because it was “cheaper” than used. Only for other reasons. It’s just a commuter car so we wanted the bare basics. We didn’t need anything fancy (heck, we even got crank windows in our “new” car!). All the used ones we looked at were more expensive than our base model – because none of the used ones were base models!

    Also – it took us about 2 weeks to seal the deal. We’ve never bought a car in the first day of searching. We like storming out and causing scenes! They always call you back!

  88. Kevin says:

    Trent did NOT lose his credibility with this post. We only know of his decision to buy a new car because HE posted about it. Now if he bought a new car in secret then continued to post about buying used cars that might consititute a loss of credibility. Like the other commenter said, I would have liked to seen Trent buy an American car (as I did yesterday). But that is really none of my business.

  89. J Brown says:

    I understand how when you compare used vs new Toyota\Honda the price is somewhat better on the new.

    The real question is “why choose a Toyota vs. something else”? Is it worth the extra money?

    I did some quick research on Carmax. I looked at Toyota, New, Camry it was about $19k. Then I added used, at least 2007. The price only dropped to about $17k. Yes, Toyota holds their value.

    However, if I removed Toyota and added the other makes, the price dropped to about $12k. I know there is much more detail to consider than the price, but it is worth the extra $7k for the new Toyota vs the used GM, Ford, etc?

    In the case of a hybrid, is it worth the extra cost up front? How many gallons of gas\years does it take to save $7k?

    Furthermore, I know that Toyota has 100k mile warranty, but the batteries will likely have to be replaced after this warranty is up. A non-hybrid Toyota should last 200k+ without paying to replace the batteries. So now you need to compare not only the upfront cost, but also this future cost. Then you compare it to the non-hybrid cost. You are looking at a lot of gallons of gas to break even over the life of the car.

  90. m says:

    I have no issue with your decision-making process for a new car. My mother just went through the same process and found similar savings in buying new, something she NEVER does. She reasoned that the price savings, as well as the side benefit of economy stimulation, was worth it.

    However I agree with Gary (#25): The Prius is awful in more than 1/4″ of snow. A Civic hybrid would have been a better choice. I just gave up a VW because it was awful in terms of repairs so I have little to say about the Golf, but I know most VW-ers are quite passionate about their cars.

    This is an example of how frugality and practicality do not always meet each other in the middle – it is fine if you want to be frugal, but you also need to think about the practical reality of your purchases based on other factors, like where you live. For example, a $20 down parka rated at +0 degrees is a great deal for someone who lives where it gets cold, but not someone who lives in southern Arizona.

  91. Jean says:

    @ Melisaa (comment #65) – I purchased a Honda Accord a few years ago. By purchasing a “Japanese” vehicle, I am helping to support my family – my dad, my brother-in-law, and two of my cousins, who all work for Honda suppliers in Ohio. Now my dad’s plant is closing and my brother-in-law’s hours have been cut b/c Honda’s production has been cut. You need to do some homework before you start saying that purchasing a “Japanese” vehicle doesn’t help the American economy. Sure, not all of their cars are manufactured here, and the profits do end up overseas, but the bottom line is that it’s helping my family make a living – in America.

  92. Denise says:

    Pros and cons aside, I appreciate Trent’s honesty in this post. Remember, he stated that other considerations came into play when buying his car new. I think that it is perfectly valid to not want to deplete your savings, no matter which catagory that you put them into. I see Trent, in his past blogs, as listing the pro’s and con’s of his decisions. No one can look ahead and say, for certain, what the ecnomy will be like or for that matter, good deals. Personally, I have very limited funds and I will always buy used instead of taking out a car loan, but you never know what the future might bring. If my car fund and emergency fund were wiped out and I desperatly needed a car, I might have to take out that loan.

  93. Joe says:

    Trent – Did you develop a spreadsheet to be able to compare the costs, and if so, could you post it for download?

  94. Hey I just wish my emergency fund had enough in it to buy a car! I keep having too many emergencies. Great post and loved all the comments.

  95. Lorax says:

    “If you paid cash, then took the money you would have spent on the payment and put it in an interest bearing account, then in 5 years you’d come out ahead. Works everytime.”

    1) Factor in inflation, and the lag time banks have to adjusting to it. This is especially true if we get high inflation when the country finally digs out of the credit mess.

    2) Factor in operating costs. They probably had to drop $3000 on a new transmission for their old car. If they bought used, they’d have a higher cost of ownership.

    3) Factor in opportunity costs. a) can Trent make more money writing than sitting around a repair bay waiting for his car to be fixed? b) is the price of a new car artificially low right now and the price of used car artificially high?

    “JDPower just named the Buick LaCrosse the MOST RELIABLE midsize sedan”

    JDPower’s awards don’t exactly have the most stellar reputation. Powers is not bad for what it measures, but the measurement time frame is just too small (and sources – aka consumers – may be less reliable than actual testing).

  96. Lorax says:

    Trent is taking a lot of heat here.

    We need to give him credit for honesty.

    And then we need to look at the facts. In my case, I ran the numbers a few months ago for my brother and decided that a NEW CAR (shock! horror!) is more cost effective than used given the current markets.

    I don’t actually need a new car right now, but I’m thinking of buying one anyway. The market may never tip this far in favor of the consumer again.

  97. Bill in Houston says:

    I certainly don’t fault you getting a new car, especially at the interest rate, but a Prius?

    You said you are six and a half feet tall. How do you fit in that thing? I’m five-eleven, and admittedly very broad through the shoulders. I sat in a Prius and was cramped.

    My wife and I shopped for a car last year (her ’99 Kia had two small breakdowns in a week, and history of problems, but she bought it long before we met). We searched for several factors and room was one of them. We went through Costco and got a 1.9% interest and it cost us $300 over dealer price. We bought a Nissan Versa for my wife. Decent mileage (my wife averages 30), it has enough room for me to sit without hunching, and it has a surprising amount of cargo space with the back seats down. We used her Versa and my Altima to move into our new house last November.

    A new car, with warranty (we also bought the additional service/maintenance plan, which pays for itself in 2-2/3 years of routine service) is far cheaper than a used car without warranty.

    If you’re going to buy a car, now is the time. Interest rates are low and dealers are willing to actually… deal! I saw the signs last year and am not disappointed.

  98. Donna says:

    After reading Trent’s article and all of the comments I am amazed that most folks seem to equate being frugal with purchasing used cars. There are ways to use new cars to support a frugal lifestyle and to teach others to be frugal. But, you always have to look at the long term and not the short term. Our cars always had a minimum of 100k miles on them before we looked at acquiring new(er) ones. Because my husband and I were both shift workers,(and fortunate to have jobs that paid a decent wage) we couldn’t always be there to ferry my kids around to or from before or after school events once they were old enough to drive. While in high school my kids were also dual- enrolled in the local community college and had to be transported there for classes. (By the way, dual enrollment can save LOTS of tuition money for college, perhaps another subject that can be addressed by Trent at some point.) Anyway, when it became time to consider replacing one of our high mileage cars, we purchased a new one, using the best financing available and paid double payments to pay it off way before the term was over, usually in about 18 months. Then we drove that car for a few years, or until it was paid off, before giving it to one of the 2 kids. My daughter is still driving the 2000 Civic she was given at 16. She’s now 23. It has 78K miles on it and is still going strong. She plans to keep it many more years. My son only recently traded his 1990 Civic that had 200k on it for a 2008 Honda Fit. He never had a car payment until he was 30. He bought the Fit just before the gas crunch and got a low interest rate and is paying double payments. He’ll have it paid for this year. He hopes to get at least 200k miles useage out of it. Because the kids acquired cars from us they knew the entire maintenance history. They were taught from day one that consistent auto maintenance will extend the life of a car and learned just how nice it was to drive a car without having to make payments like their friends were struggling with. Not having to struggle to work long hours in high school and college to pay for auto debt enabled them to focus on getting the grades necessary to get merit scholarships to college, which they did. By investing in the cars for them, and freeing them to study hard, we saved at least a couple of hundred thousand dollars on college tuition we didn’t have to pay. They did work to pay for insurance and fuel, but didn’t have the pressure of the car payments too. Neither kid graduated with any student loans, car loans or credit card debt. An ill-advised used car purchase may not have allowed the kids to do this because if one of the vehicles had failed, replacement costs could have derailed their financial goals. My husband and I retired young (52), after 30 years at our respective workplaces, and we drive a 2002 Honda CRV with 98K miles and a 2003 VW Passat with 78K miles, both purchased new and paid off within 2 years of their respective purchase dates. We will drive them until they drop, which we figure will take a long time because we don’t have any job commuting to do. My philosophy is that purchasing new, as long as you plan on driving it “forever” is not a bad thing. If you are going to trade every few years, you are foolish.

  99. Connie says:

    I find it difficult to imagine that you could not find a safe and reliable replacement vehicle for which you could pay cash without dipping into your emergency fund. It sounds to me as if you’ve just gone into debt to buy something priced beyond what you can comfortably afford.

    Rather than selecting a car you could buy without going into debt, you have chosen to encumber your family with what may be years of monthly car payments with the full knowledge that you will need to also replace a second vehicle in the near future.

    Trent, you are the king of rationalization. I hope for your sake that your wife remains employed, your writing income remains steady and you and everyone else in your family remain healthy enough that you can continue to afford the increased debt you’ve taken on. Just don’t forget to increase your emergency fund by enough to cover those monthly payments!

    I’m thinking that if you would invest in some CFL’s to replace your head, tail and dome lights, maybe that will take some of the sting out of making a monthly car payment with interest, instead of saving your money and earning interest on it.

    Believe it or not, there are plenty of well maintained road-worthy vehicles out there which would give you many years of relatively trouble-free transportation without going into debt.

    While your personal financial decisions are yours to make, you have chosen to put the information out there and to invite our comments. I’l just say that it seems ironic to me that you are often so free in your criticism of others’ choices, while finding ways to rationalize away your own choice to go into debt.

  100. Melody says:

    Wow. Massive amount of sour grapes for this post!

    Here’s my 2cents on the subject, since everyone else seems to have weighed-in also!

    Trent is where I at least, would like to be. He needed a car, had intended to buy a late-model used for several years I imagine, and was saving-up for that eventuality, AND the eventuality of his truck needing replacement soon after.
    THEN – reality changed. A new car became the better ‘deal’. Now – here’s where Trent and myself, in my current situation, would differ.

    My credit is shot and I am looking at bankruptcy. Therefore, if I did save-up a couple years for a car, I would almost be *forced* to look at a used car because my credit won’t be that great by then and I’d be paying probably closer to 6-8% interest or higher. Trent, however, has his financial house in order. He says he saved-up enough for this car purchase, but wants to have the freedom of cash in the bank. Believe what you will about the economy and where it’s going, but it all comes down to individual perception. If he feels more comfortable with that choice then who are we to say otherwise?
    Basically, he has the freedom and flexibility to make this type of choice, BECAUSE he is financially stable. We don’t know exactly how much he has coming-in and how much he is saving vs. spending. As someone else pointed-out though, if he is saving a substantial amount, the account will be replenished quickly and/or the loan will be paid off ahead of schedule, saving him interest. It’s not like he is all-the-sudden made a rash of impulsive buys or otherwise thrown all his hard-earned lessons to the wind. THAT, would make him a hypocrit and loose credibility. The fact that he made a personal choice that his lifestyle and saving habits ALLOW HIM TO MAKE seems well within his rights as a PF blogger and an individual with a brain.
    Bottom-line, adherence to the anti-capitalism party-line of “don’t spend and don’t borrow money from ‘the man’” in this case is not common sense, if you ask me. Personally, I applaud Trent for seeing the bigger picture. Maybe he will get burned on the battery for his car – and maybe he won’t. None of us here I would imagine are qualified to definitively answer that. But if we start second-guessing every decision that we make and living in fear of what ‘might’ happen, then doesn’t that negate the whole ‘freedom’ part of ‘financial freedom’?! It certainly doesn’t bring you peace.

  101. Jennifer says:

    I’d be interested in seeing a post about how I can make my own soap for washing my car by hand. I’m certain you’ll be happy to critique those of us who have “improved our quality of life” by taking our paid-for cars to the car wash and paying $8 per wash. Heck, who couldn’t benefit by “earning” the equivalent of roughly $40 per hour by simply making our own detergent vs. the cost of the car wash. I’d also be interested in seeing the breakdown of calories expended during the hour it takes to wash by hand. Let’s not forget the cost of hoses, nozzles, scrubbers, and drying devices.

  102. Leisureguy says:

    Good choice. We bought a Prius four and a half years ago and have had no trouble at all. We regularly get 46 mpg.

    One thing Toyota offered at the time we bought it: you could buy a pack of coupons that covered all regular maintenance for 1/2 price. That is, you pay in advance for 60,000 miles worth of regular maintenance, but you pay 1/2 price. That was a fantastic deal.

    No battery problems at all so far, BTW. And I think a 150,000-mile life is reasonable for Iowa. I drove my Nissan Stanza for 235,000 trouble-free miles, but that was in California: no cold winters, no salt on roads.

  103. wren says:

    Definitely a lot of people whining here about how Trent bought a new car, what the heck was he thinking, is he crazy, how is that frugal, who does he think he is?!? So either all the folks actually believe he made the wrong decision, or the jantelaw of Denmark has crossed the ocean in a BIG way. Geez… the man had the money to do what he wanted to do, which was get a safe, reliable car for his wife and make sure they could afford to fix (or replace) his vehicle when the need arises, without leaving them straining. Do you honestly think he didn’t think out the whole thing to the point of obsession before making the decision? All I’m reading in the comments is a whole lot of ‘you got a new toy, not fair, I want one too!!!’ *sighs*

    Keep up the good work, Trent… you make me rethink things all the time and I appreciate your level of candor and suggestions. Even if I don’t have any desire to make homemade detergent, for clothes or cars. :D

  104. Spat says:

    Even with all the pluses and positives, do you really *like* the Prius? For my 2007 Subaru Impreza, sure it doesn’t get the best MPG since its AWD, but there’s just so much more to it that makes me really like that car. Mine is being financed, but at zero point nine percent (0.9) I’m laughing at not even looking at interest. Reading 4 percent was like wow, but then its an average financing charge I’ve seen from dealers.
    Also Toyota is the one and only one company that will NOT bargain with you on price. You pay the MSRP and that’s the end of story. I think they did this to take out the most dreaded part of the purchase, especially for women who hate to bargain about the car price, from what I’ve read.

  105. Connie says:

    For those of you who think “stimulating the economy” must involve going into debt, think again: I assure you that one can just as effectively stimulate the economy by paying cash for a vehicle you can actually afford.

    Half the reason our economy is in such dismaying condition right now is that we have developed the mindset that it’s “okay” to incur debt in order to make purchases that are beyond our means!

    Spend what you must, in order to purchase what you need. But those who keep spending what they don’t have, will probably never know the true freedom and stress reduction that comes from living within one’s actual financial means.

  106. Jay says:

    A few more words on this…

    ON TAKING THE LOAN… People, a 4% loan is essentially a gift. If you expect “typical” inflation over the life of the loan to be 3%-4%, which I’d say is pretty reasonable (though with the current environment this may be different), the lender is getting a sub-1% real return (after inflation).

    If you think a 4% loan is a bad idea for the borrower, and therefore a good deal for the lender, I’ll make you a deal: you loan me money at 4% interest, and I’ll take all the money you’re willing to loan me. Combined with the fact that Trent is earning 3% on his cash right now (so the loan is only costing him 1%, a small price for liquidity in my eyes), this is a good deal. If I were him I would have financed the whole shebang at 4%- if you’re sure you can make the payments and are getting a rate that’s barely better than inflation and barely higher than what you’re making on cash, why not?

    ON THE CAR CHOICE… For me the big thing here is actually how much he’s driving the car. 15k miles per year is a lot of mileage to put on a car, significantly more than the 10k-12k that I usually hear about as the norm. I trust that that’s accurate for Trent, and it makes the Prius a better deal for him personally.

    Another alternative to buying a recently made car is to find a pretty reliable used car that has still lost a good bit of its value (eg, Hyundai) and that’s maybe in the 40k-80k mileage range. If you can stomach the risk of buying an older used car, and if you can get 30 mpg (reasonable in many sedans if you drive carefully and don’t lead foot it).

    Assume that you pay $10k for a car like that, drive 10k miles per year, and get 30 mpg. Assume also that you drive it into the ground and sell it for $1 10 years later (not realistic, but being very conservative here). Gas (at $3/gal, per Trent) is (10k/30)*3 = $1k/year, and the value of the car that you’re using up is $10k/10 = $1k per year, so by Trent’s cost of ownership (gas + car value lost, nothing else) you’re at $2k/year, and you’ll have cheaper insurance than a new car, and you’ll still get maybe $2k (instead of $1) back for the car in 10 years. Even if you add in a few major repairs (though by Trent’s logic, you shouldn’t have to, as the car will be right around 150k miles when you get rid of it), you’re still ahead money wise. I’m not saying that this is what Trent should have done (I think he made a smart choice, given his particular circumstances), but just proposing this as an alternative car ownership strategy.

  107. KJ says:

    A few comments- we also purchased a new Prius a few years ago (now paid in full).
    We’ve lived with this car for a while:
    1) 46mph is optimistic; we find that our Prius performs a bit differently in summer vs. winter (gas blends are likely a consideration, too). We live in east central Illinois (I believe the terrain is similar to Iowa), are careful drivers. In the summer, we average 45-55mph; in winter, 35-40 mph is more realistic.
    2) The costs of those maintenance services (at xx, xxx miles, etc.) are not insignificant – did you do a cost comparison on those? Oil changes must be at the dealer, too- I know a friend who turned her (albeit Honda) hybrid into a glorified $20K+ paperweight by taking it to the local quick lube – they don’t know how to handle hybrids. I suspect you might find a way around this, but ‘penny wise pound foolish’ might come into play if you do- to be forewarned is to be forearmed.
    3) Differences in auto insurance costs are also a factor (don’t recall if you mentioned this consideration; I know it was a deciding rule-out factor when we decided against certain car models in our search).
    4) As for winter driving, be sure you have an alternate vehicle to use if you’re going any distance (>1 mile) out of city limits. The Prius has the road-grabbing ability of a wet icecube on a grade > 5% with NO ‘oomph’ available to get you out of the situation.
    (Yes, we have excellent tires, know how to drive in the winter, have additional ballast added in the back (which cuts down significantly on cargo space,), etc.).
    Have had the thing literally slide backwards at 4 way stops on even the slightest icy/slick grade; giving more gas, other winter driving tricks did NOTHING to help the situation (ridiculously inadequate!). (& forget about waiting at elevated railroad crossings- AVOID! ha!) We use our old beat-up AWD Subaru if we have to travel outside of city limits in the winter, and even at times in town if even a bit icy.
    5) I’m a 5’6″ woman and am almost sitting in the backseat when I drive it- can’t fathom how a 6’6″ man would drive this on a routine/casual basis. Moreover, I find (despite multiple adjustments) that my hips/lower back are sore if I have to travel > 50 miles at a stretch. The seat comfort of the front seats is NOT a major selling point.
    6) Get used to the blind spots- they are significant in a Prius, and do require a bit of an adjustment for some. My dear SO nearly smacked the noses of cars in passing because the visibility was so poor.
    6) Likely not a consideration, but my SO drives in Chicago and needs to use valet parking at times on business. Be sure you keep that pad of instructions on how to run the car handy- most places still are flummoxed by the operation, and their tiny type contracts are written to relieve themselves (the valet company) of all liablity. We’ve had to conduct mini training sessions with parking attendants to ensure our car’s integrity.

    Yes, the gas mileage was terrific at $4/gallon, but am glad we’ve the Subaru to drive into the ground, too – both serve their purposes and one doesn’t replace the other.

  108. jc says:

    I think Trent made a well-informed decision for his circumstances at this point in time. Others may be in different circumstances and have different opinions but I’m sure he can’t tell us everything that influenced his decisions only the major factors. I do agree think that the Prius should last over 200,000 miles. My sister has a 10 year-old Honda Civic with over 230,000 miles on it in New England (plenty of salt and cold up here and her car has never been garaged) that is still going strong so Trent may see even greater savings than he is planning on.

    My parents used to ALWAYS buy American cars (Dodges, Plymouths & Chrystlers) when I was growing up. The cars were unreliable and the last cars had many major issues only months after their purchase (they were purchased new) and things didn’t improve over the 12-14 years they kept the cars. As an opinionated teenager having to learn to drive on these cars I had no shortage of complaints. My father offered to let me do the research and select his next car. He had saved all his purchase receipts so I spent weeks making detailed graphs (dorky I know) on the cost of ownership of his current cars and researching a new one for him to purchase. He bought a Honda Civic in 1997 (assembled in the US) with the understanding that he could complain to me if there were any problems (in retribution for my sometimes relentess teenage complaints about his car choices). In total he has spent under $2,000 over the 12 year life of the car on repairs and maintenance including oil changes and routine major things such as the timing belt/water pump. Needless to say there were no complaints.

    I think each person has to do their own research and thoroughly research the reliability, safety and cost of ownership on the cars they are considering whether they buy new or used, American or foreign. Myself, I prefer new cars and drive them until they will go no more, one of my sisters likes to buy used cars and has had good luck with that method but it is personal depending on your own personal needs, wants and situation at the time of purchase.

  109. Katie says:

    Trent, how do you deal with people who feel entitled to scrutinize your every move? Seriously, people, get off the laptop and get a job. If you have time to whine about an auto loan at 4%, you need help.

  110. guinness416 says:

    Presumably by knowing that the fact people get on their laptops to read this stuff pay his mortgage, Katie.

    Enjoy the prius Trent!

  111. J says:

    We went through a similar analysis when we bought our new car a car a few years ago, and the numbers fell in favor of new. Seems crazy, but it did.

    As for the 150K mile “horizon” — do do some analysis, you need to pick some arbitrary limit. While the car may not encounter a mechanical fault, it may also be involved in an accident, get crushed by a tree, get flooded, and so on. Also, if it’s still running fine (and most cars probably will be), there’s nothing to stop you from continuing to drive it, and count the additional time as “gravy” — while knowing full well that you can replace it if something occurs.

    Consumer Reports lists the Prius as one of the most reliable cars out there, the size is decent and nowadays you can pick them up for a decent price. It’s a fantastic piece of engineering that works as advertised, and the haters just can’t seem to find enough faults with it that never seem to actually materialize — the batteries are going to fail, the transmission is going to fail, etc.

    Enjoy your new vehicle, Trent. The Prius is a decent buy, used or new. Also, it’s interesting to see your thought process for investigating some of your core beliefs and assumptions. Oftentimes these DO need examination when faced with some of the things life throws at you. Too often people are so caught up in their own personal dogma they are paralyzed by inaction. Also, let’s also not forget that this is primarily Trent’s WIFE’s car. While he does indicate they share a lot of beliefs about frugality and living life, she may have her own input into the decision that’s not rendered here — and as she is an independent ADULT, she is free to make her own call on what she’s going to be driving for the next 10-15 years.

  112. This comment isn’t part of the main debate (because I don’t care what other people do with their money), but I have heard it is not a good idea to take a new car on a road trip right away before running it through a break in period where you do not drive it fast or at non-varied speeds.

  113. Ryan says:

    Give Trent a break, people! This is not some race to see who can spend the least amount of money in the world.

    He shared with us a detailed post discussing why you shouldn’t just be locked into thinking that you must buy a late-model used car. His wife’s old car was becoming more unreliable by the day. She has the right to buy a new car.

    The Prius is a solid choice, and maintains its value pretty well, even as it ages. It is also a bit of a hedge against rising fuel costs, as it becomes comparatively cheaper to operate and maintains a higher resale value as the cost of a gallon of fuel increases. They plan on driving this for at least 150,000 miles, and judging by other Prius owners, they will have NO problem reaching that, and probably very few issues going even higher!

    Let the man be! He is not criticizing every one of your purchases!

  114. Elizabeth says:

    Thanks for detailing the process that you went through to buy a car. Enjoy the Prius! :)

  115. clc says:

    We have been a 2-Prius family for 2 years. We put 15,000 miles a year on each of them: one with traveling for work miles – avg. 48 mpg, and one with driving around town miles (that one has mom and 2 teen drivers on it!) – avg 45 mpg. We are thrilled with the cars – absolutely no complaints! The 2 cars we had before that were a pickup and a minivan – I don’t miss the minivan at all, and we have a relative with a pickup truck for the times we need to borrow one (that relative loves driving the Prius instead during the trade!)

    Hope you’ll loves yours as much as we love ours :)

  116. bill burton says:

    1. A day or two research proves the reliability of Toyota hybrid technology e.g. Toyota has replaced ONE battery pack in a decade of hybrids, ONE.

    2. Two months ago I paid $17k for a ’07 Camry Hybrid w/30k miles on the clock. My mpg figures to date are 45, 30, 30 and 35 (inner city Chicago). I expect to get 250k miles out of it.

    The fact that you do not mention the price paid implies by itself rationalization.

    At any rate, best of luck with it!

    Bill

    Bill

  117. Ali says:

    Congrats on your new car! I hope you enjoy it! Ignore all the criticizing voices on here!

  118. Dean says:

    It may be worth factoring in the idea that the only place interest rates can go is up. So in a years time the savings earning 3.something% may be over the 4% the car loan is at. (I’m assuming it’ll take more than a year to pay off and car finance interest rates aren’t variable…but I always paid cash so don’t know)

    p.s. Dear America,
    Bigger is no necessarily better. Plenty of people are tall and drive hatchbacks.
    Love,
    Europe

  119. Vicki, Albuquerque, NM says:

    Trent, congratulations on your Prius purchase. It looks like you put in a lot of time figuring out all the details as to why this purchase makes more sense than buying a conventional used car. I did the same thing when I bought mine, and many weren’t capable of understanding the details that made this a wise purchase when I bought as well. I have some info for you that I hope will be useful.

    1) I lost my job recently and so sold my Prius. It wasn’t that the Prius was too expensive, it’s that having any car at this point (insurance, etc..) is too expensive. The Prius is still a high demand car and holds its value much better than conventional cars do. I sold it to the same Toyota dealership that does my maintenance, and they sold it that same week to someone else as a certified used vehicle. So, keep up with your maintenance at Toyota and your vehicle should keep its value. I never was in a position where I was upside down in that car. I had it for almost three years and loved every moment I drove.

    2) I averaged between 48 and 53 miles a gallon. The trick is to realize how much more sensitive the gas petal is on the Prius and play with it. When you barely tap down, you can get the same momentum as you do out of a regular car, but use more electricity/less gas. It takes a bit to get used to, but it became a game to see how much I could improve my gas mileage from tank to tank. Now when I drive a friends conventional car, I am always surprised how far and hard I have to push down on the gas pedal to get the same speed and momentum results that I got from my Prius. You could be getting so much better gas mileage than you write about…just use a baby’s touch with the gas pedal…start barely touching the gas pedal and slowly adding just a little bit of pressure, so you two can retrain your brains as to how hard you need to press on a gas pedal to reach a certain speed.

    3) In my quest to continually outdo my previous gas mileage I discovered that when going across town, I was better off staying off the interstates, as through much of town…I could go almost fully on electric down regular streets. Sure, this is not for when you’re in a hurry…like if you’re late for work…but, if you have the time—just change your route between point A and B so that you can run on electric more.

    4) People were always surprised how well my car preformed—in the desert, in the mountains, up the mountains in the snow, etc…because of its shape, they think it’s a much smaller car than it actually is, and no one (including my dad who, until he actually took a road trip in my car) spouted much of the nonense many of your anti-Prius commentators have…yep, there’s nothing like driving very fast up and down mountains to prove to someone that everything they thought bad about the Prius performance isn’t true.

    5) Don’t use the cruise control. It’s designed for conventional cars, hot how hybrids work—so it works your gas pedal like a conventional car which doesn’t give you any more speed and performance, but does hurt your gas mileage. Every time I used the cruise control, I ended up turning it off because I could get the same speed and performace with much better gas mileage by working the gas pedal myself.

    I hope you love the car. If you have any questions about gas mileage in the Prius, shoot me an email.

  120. kitty says:

    Wow, so much anger because someone who is NOT in debt and most likely has money bought a new car and took a low interest loan.

    A few points.
    1. Just because Trent doesn’t have cash at hand doesn’t mean he doesn’t have money. He may have a lot of money in other investments that earn higher interest. Even CDs were paying 5% just a year ago. Trent may have locked in that rate.

    2. As one poster above brought up – there is a good chance we’ll get high inflation in a couple of years. Low fixed interest debt can be a hedge against inflation – your payments are cheaper (this will depend on how long the loan term is – short-term the prospect of inflation is low). Not to mention that higher inflation leads to higher interest rates. There is some probability regular bank accounts will be paying 6% as soon as economy starts to rebound. Chinese deciding to sell the US debt can lead to higher interest rates as well.

    3. Hondas and Toyotas depreciate a whole lot slower than average American models. When I totaled my 2003 Corolla in 2006, I got over 75% from the insurance company. This is 25% loss in 3 years not in one year. Granted total value is higher than resale value, but if you are not planning to sell your car total loss is the only thing you need to worry about.

    4. Time is money and so is reliability. Someone who commutes long distance to work needs to be sure the car it isn’t going to break in the middle of nowhere. Also as a poster above pointed out, Trent may have better use for his time than to wait for a car being repaired.

    5. Car depreciate is value, sure. Has anyone ever thought why it happens? Could it be is that the reason is that when you buy a used car you have no clue if the car is good or if it is junk. Maybe it was in an accident? Maybe it was driven in bad conditions? Maybe someone did some creative mile reduction? The latter is illegal, but it doesn’t mean someone didn’t do it, nor is it always easy to detect. Would you sell a good 3 year old car? I wouldn’t. Sure, a former owner may just returned a lease or fancies driving a new car every 3 years, but it could also be that he has a reason. The mechanic may not notice all of the problems with a used car. Sure, everyone here can tell a lot of stories on how they bought a used car and it was great. But plural of anecdotes isn’t data. There are some excellent used cars and there are bad used cars. You just don’t know.
    A deep discount on used vs new cars is in part the price of uncertainty.
    Now you own 3-year old car, the one you bought new is the car you own everything about. You know how you maintained it, you know how many miles on it with a 100% certainty. Hence, your own 3-year old car (that doesn’t have any problems) is better than an average 3-year old car. So for as long as you are not planning to sell it, the value of your own car is always higher than the value of an average similar used car.

    6. After you drive your car for a few years the original cost stops being important. If you bought a new car, your cost of repairs likely to be smaller for the first 5 years than if you bought a used car. You are likely to need to replace your used car sooner than the car you bought new, hence you’ll need to add money sooner.

    As to Trent’s suggesting buying used in his previous comments but buying new — people are allowed to change their mind when their circumstances change. Some people can’t afford a new car, others can. For some people buying used a better decision, for others it is not.

  121. Sandy says:

    I don’t know that it’s that big of a deal whether he bought new or used. We’ve had both during the course of our life together (22 years). I think the key for us has been to never have 2 car payments at the same time. If you have to be a 2 car family, try to pay one off as soon as possible, and drive it into the ground, and if you need a newer car to replace the currently paid for car, you won’t be “car broke” with 2 payments per month.
    Just my 2 cents.

  122. morrison says:

    In today’s economy, I’m really shocked that anyone would get a loan. I am also shocked that anyone would buy a car that is NOT American. Even Obama complains that hybrid batteries are made in China and Korea. So, I am very disappointed in your choices.
    You do NOT own your car. The bank does. I don’t care how much money you put down. If you couldn’t afford to buy the car outright, plus NOT put a damper on your savings, that was the first clue that technically you could NOT afford the car.

    In today’s economy, you miss just one payment (even if the check get lost in the mail) you run the risk of having the repo man show up on your property in the middle of the night. Don’t believe it? I know many of friends and acquaintences who have had their cars repossessed. You can not trust the banks anymore these days. They are all in worse shape than you know.

    It doesn’t matter how much you thought about this purchase, how you worked out the numbers or what time of day the sun rises in your neighborhood. Having any kind of loan right now, especially a secured loan, such as a car loan, is, in my opinion, a serious mistake.

    What’s the rule of thumb that obviously we haven’t learned yet? If you do not have the cash to buy something, don’t buy it!

    Please folks, don’t listen to the advice on this post. It is in error.

    PS: I bought a brand new Ford Focus and I paid $16,500 in full, with a personal check! It gets between 44 and 46 mpg on the highway. I won’t need a replacement battery in a few years at a cost of $3000-$6000. I am paying $2.09 for a gallon of gas. I only spend five measly bucks on gas per week!

    I saved an American company (Ford hasn’t taken one penny of bailout money) and someone’s job plus helped my country wean itself off foreign oil. You can buy an ’09 Focus for only $14,500 today.

    Shame on you!

  123. PreviousPriusOwner says:

    Congratulations, on your new car.
    I wish you could do a follow up on how it is working out for you after 6 months, specifically on 2 things:
    1. How is your back and how is the seat.
    2. How has the prius taught you to drive better than before :).

    Apart from the seats, it is the best car on the market today. Congratulations on a great car.

  124. Susan says:

    You will love your Prius. I purchased my first Toyota in 1990. Our family drove that car with very only rountine maintenance to well over 200,000 miles. Our second Corolla is still working well for us and now has over 230,000 miles. And my 5 year old Camry now has 115,000 miles with no issues to date!

    Congratulations on a great choice! I look forward to owning a Prius some day.

  125. J says:

    @morrison

    I can see you didn’t read the part of the original posting where Trent says that he has the cash to cover the loan.

    You might want to read up on your battery news. Toyota has replaced ONE. They are reliable. Open up Consumer Reports and look at the reliability ratings for the Prius, it’s top-of-the line.

    You also need to read up on the global nature of the auto industry. There’s a better than even chance your Focus’s engine was made in Canada and the car was assembled in Mexico. There’s no guarantee that it saved one American job.

    I’m not saying Ford is a bad company, they definitely are back to producing some excellent models that do America proud after the horrible era of Jacques Nasser, when pennies were pinched and quality was more like Job 15. Out of the big 3 American companies they definitely have a good line up of cars, and have some nice stuff coming over from Europe, as well.

  126. kentuckyliz says:

    When the plan passed that offered a tax deduction for the sales tax on the purchase of a new car, I admit I entertained the thought for a minute. I dug out the calculator and plugged in:
    $25,000 what I might spend on a new car, and yes I have the cash beyond the emergency fund
    x 6% state sales tax rate
    x 25% my marginal tax rate
    and that gave me a big fat $375.

    Now I have two well-functioning beaters, in fact, just dropped $1600 for repairs recently. Hey, that’s 4ish car payments and will last a while…longer than four months.

    So, would I buy a new car right now, when I don’t need one, just for $375?

    Naw…that’s chump change. Not enough to motivate immediate action in 2009. I have easier ways to get $375 without having to buy a new car I don’t really want.

    Maybe that doesn’t stimulate the ecomony, but it’s green because it maximizes the use of the raw materials that went into making the cars I already own, and I am helping the federal government. They need all the revenue they can get their paws on to fund that giant stimupork plan. LOL

    So either way, I’m patriotic and green.

    Take a look at these pictures of unsold cars around the world, being stored in unused airfields and at ports…and remember that if you are going new car shopping. Remember Econ 101–excess supply and low demand drives down prices.
    http://www.ritholtz.com/blog/2009/02/unsold-cars-around-the-world/

  127. Thanks for sharing this story with us Trent… but you have to promise us one thing. Please schedule your calendar to write an update on this topic in a year.

    You know as well as anyone that some car buyers are seduced by the new car smell and the experience shopping for a car such that they can rationalize anything. I say this from experience!

    I’m not accusing you of this but I’d love to hear your perspective on this experience and this purchase when it is not so fresh.

    Again, thanks for sharing and the process you described is invaluable!

    Dave

  128. A.M.B.A. says:

    I’m really disappointed in your choice of car and method of purchasing for many of the same reasons others have already stated. Also, as others have said, your definition of an “old car” is way off base. We have a 1993 Tauras w/ only 108K miles and our “newer” car is a 1996 Tauras w/ 140K. They look great, run well b/c we take care of them, and we live in the upper midwest w/ 2 young kids as well.

    A.M.B.A.

  129. bill burton says:

    @morrison – my Camry Hybrid was made in Kentucky. Your “American” car was most likely made in Canada or Mexico. Check it out.

    @TRENT – while I still want to know what you paid I have made a hundred worse financial decisions than you this past year AND I AM TRYING!

    So keep up the good work. You deserve a new car (:-{)}

    BTW have you considered the “hive mind” approach to writing/financial decisions? For example you might have posted your thoughts before buying and received your impassioned readers sanity check for a better end result. Just a thought.

    Peace!

    Bill

  130. Zannie says:

    Much to my surprise, according to the Green Lantern (Slate’s environmental advice column) the Prius is the better choice for the environment as well:

    http://www.slate.com/id/2194989/

  131. Zannie says:

    @ Seth

    Yes, 3-4 years old is “late model.” Late model means recent–less than six years old. You seem to be confusing it with meaning “older” but that is not the case.

    http://en.wikipedia.org/wiki/Late_model

    They are generally recommended as good value because they are cheaper than new, but do not have the mechanical problems that older cars tend to develop (and the older they are, the longer they’ve had a chance to be neglected by someone).

  132. Em says:

    I consider myself rather financially responsible. I am a 42 YO accountant, 3,500 sq ft 1965 brick ranch house on 3.5 acres will be paid for in 2 years, 4 kids that I stayed home with for 7 years. Left my job in 1999 making $63K when my husband only made $40K. I have done and continue to do a lot of things to save money, but I will NEVER buy a used car. I bought my first new car in college – a ford – and financed. After 100K miles, gave it to my little sister because it didn’t have air conditioning. I bought my second new car out of college in 1991 – Geo Prizm, paid off in 2 years and gave it to my oil change guy with 200K miles last year. When I started back to work part-time a few years ago, everyone would laugh at my car, but I didn’t care, since I hadn’t had a car payment in 15 years. I turned around and bought a new Honda Civic last year (paid cash) and will drive it for probably 15-20 years. In 2000, I bought a new toyota sienna – paid cash – it now has 110K miles and I will keep it another 10 years – until the last kid heads out to college.
    I don’t care what anyone says – I will not buy someone else’s potential problems. People are more likely to sell the car with “issues” than they will the good realiable car. You guys keep buying your used cars – and i will keep buying new! Great Blog – btw Trent. Love reading it!

  133. Bill in NC says:

    I can certainly understand paying the “new car” tax for a spouse.

    The real economic issue here is it worth it to pay the “hybrid tax”?

    That tax is at least $7000 for, realistically, only 10mpg over a comparable compact car – at $2/gallon you’ll not recoup that premium.

    And gasoline will NOT be going up in price anytime soon as we are in a severe and deepening recession, with further unemployment and fewer commuters to come.

  134. Shevy says:

    Well, this purchase obviously touched a sore spot for a lot of people. I don’t care that you purchased a new car instead of a used one. I’ve had both good and bad results with buying used and all it takes is a major repair for a used car to become a Very Bad Buy. I’ve decided that I generally prefer to buy new and have the safety net of the warranty, plus all the included maintenance (free oil changes etc.).

    I also don’t care that you financed it rather than paying cash outright. What does confound me is that you had to pay 4%! When we bought our PT Cruiser we had our choice of 0% financing for up to 4 years or 0.9% for 5 years. We chose the 0.9% because the payments were $50 or $60/month less and then we paid it off early. But there was a point there when we really did care about that $50, so it was the right decision for us.

    So how did we, with our not stellar credit, get a better deal about 6 years ago when interest rates were generally higher for everything than you did today with your solid credit?

    I expect we’ll run this car into the ground but I plan to get a 0% deal next time and finance as much as they’ll let me. Of course, by the time I buy a new car I also plan to have the cash sitting in my ING account, earning interest until I transfer it out one car payment at a time.

    Don’t think 0% will still be around? It’s been around for years. You just have to time your purchase.

    And for everybody pontificating about gas prices, they’re already on their way back up and I believe they will continue to rise even during a recession or depression. If fewer people drive, OPEC will just cut production in order to keep prices high. And the gas companies won’t want to make less profit either. If they’re selling fewer litres or gallons of gas do you really think the price will drop (unless the government sets price controls)?

  135. Kate says:

    Re: comment #105:
    Toyota will not bargain; one must pay MSRP. Not true…I just paid well below MSRP.

  136. Kevin says:

    I think I finally understand the ongoing row with Ramit at I Will Teach You To Be Rich. Ramit hits the big things and doesn’t fret the pennies, while Trent believes every cent counts and even goes so far as to make his own laundry detergent. It’s now finally clear WHY Trent must obsess over both big and small savings – he HAS to make every penny count in order to offset the occassional huge, budget-crushing, hypocritical gaffes like buying a brand-new car (while working from home, no less!).

    Bus passes for us commoners, shiny new Toyota for the man behind the curtain.

  137. Battra92 says:

    A Prius?

    Son, I am disappoint. :(

  138. viola says:

    I don’t see a mention of the taxes Trent will pay on the 3% interest he’s getting on his CD, which now makes the “bread even” on paying 4% car loan not so breaking even.

    That’s still not too bad of an interest rate though. And for people griping about buying the new car, I can’t personally put a price on years of worry-free driving that comes with a new car, particularly one with the reputation of Toyota.

    And those JD Powers reliability ratings…that for cars up to 3 years old. That would be a car still under warranty. Woopty doo. I want a car that’s reliable at 120,000 miles and 8 years old, like a Toyota.

  139. Dean says:

    ‘Your “American” car was most likely made in Canada or Mexico. Check it out.’

    Not to be snarky but which continent is Canada and Mexico part of?

  140. Shay says:

    Regarding cars for tall men:

    My husband, who’s 6’9″, was also recently shopping for a new car. I echo the number of readers who wonder how you fit in there. Power to you, of course, but DH couldn’t even get his knees behind the wheel in that one.

    I see another person already mentioned the Nissan Versa, but let me add another note of praise for the car. My husband fits very comfortably in any seat in the vehicle. We’ve transported five adults in it with just a little squishing of shoulders in the backseat, but tons of legroom. For two or three, even four adults if you must, it’s a great car for a roadtrip. Tons of space in the back, especially for such a little car.

    The higher end models come with some neat features: keyless entry, bluetooth cell phone synching, satellite radio (with subscription).

    It’s under $20,000 (I think I’ve seen ads lately that put a base model under $12,000) – we paid ours off in less than 2 years. AND it gets great mileage – we just got back from a roadtrip and averaged 31 mpg with a high of 33 mpg. Goes about 300 miles on a tank. Ish. YMMV.

    Anyway, for any tall readers looking for a great buy on a good car, there’s my two cents.

  141. DeMo says:

    I did it all wrong. I miss my Honda Accord. I bought a 2001 Jetta because I feared that the repairs to keep my Honda going would be more than it was worth. And now that I have my Jetta, I’m not so crazy about it. It definitely doesn’t have the great gas mileage, and it’s definitely smaller than my Honda. I’m looking forward to when it’s paid off and hopefully having enough cash to go back to a Honda.

  142. Beckik says:

    I was sold on the Prius too after renting one in Ft. Lauderdale…my boyfriend and I drove about 155 miles that day and the gas gauge didn’t budge. We had to stop to make sure it was filled back up and it only took 1.7 gallons….we were amazed. It’s a great car! Congrats on your purchase!

  143. Trisha says:

    I’m curious why you did not investigate certified used? I have purchased both of my last 2 cards this way. The warranty then is for up to 100,000 miles and the mileage on the car is low. Currently I have a 2006 Scion XA that will be covered under manufacturer’s warranty until 100k. I drive 60 miles a day and believe that the additional warranty is worth it for me. That said, I have not needed to use it *yet* for the XA.

  144. steve in W MA says:

    “Even Obama complains that hybrid batteries are made in China and Korea. ”

    Obama was pointing out that American industry is already behind in energy innovations and is in danger of falling further behind, not that lithium ion batteries for hybrids are bad because they are built elsewhere.

  145. steve in W MA says:

    “You do NOT own your car. The bank does.”

    No, Trent owns the car and the bank has a lien on it. The lien is only executable if Trent fails to fulfill his agreement.

  146. Art says:

    Trent –

    You know I love you, but I think you may have just jumped the shark on this one. A Prius?? You will be hating that decision on the next long road trip with growing children.

    My BMW 750i has 280,000 miles and I’m getting 26 MPG combined city/highway. It runs great and I would not hesitate to drive cross-country anytime. The best part – I paid only $5k for it. It will take you about 27 years of driving your Prius to come close to matching my savings. And you’ll be driving a 27-year old POS Prius. I’d rather be driving the BMW.

    And don’t even get me started on the safety issue. Everytime I see a cheap econobox crushed on the freeway, I always wonder what gas mileage the owner was getting so I can write in on his tombstone.

  147. goldsmith says:

    Dear oh dear, see what happens if maths trump preconceived wisdom! I enjoyed Trent’s detailed analysis, and I think Trent has a real talent for conveying stuff like this in his writing.

    Back in the summer of 2007, I got promoted into a job where I needed a car. I did a considerable amount of research on small city cars, what with being a middle-aged single who’d only drive himself, his overnight bag and a few files around on an island the size of West Virginia. I came up against a similar problem, that virtually all used cars had such a horrible fuel economy and high CO2 emissions that I didn’t really want to commit to any of them.

    In the end, I settled on a Citroen C1, a super-mini so small it isn’t even imported into the US. It has the same fuel efficiency and CO2 emissions as a Prius (important in Europe, where cars are taxed by their CO2 emissions), but costs only a third of the price. I bought a basic demo model (and I mean basic: I keep joking that I bought the last new car in the history of the automobile that does not have remote central locking :-)) for 2000 Euro less than the list price. I had to finance this, but I just finished the loan after 18 months, for a total cost of credit of slightly less than 800 Euro.

    Oh, and I am 5.11 too, and fit into it comfortably. The first comment from every passenger I have ever had is: “I cannot believe how roomy this car is!”

    Again, thanks for sharing your story and your thinking, Trent. Have fun with the Prius! I have once been a passenger in one, and I think the noiseless glide on the battery is pure magic! :-)

  148. J says:

    I’ll just post a meta-reply to hopefully forestall other posts like it.

    Hi Trent,

    I can’t believe you bought the Prius instead of a car from $vehicle_manufacturer, who makes a vehicle that’s far superior in terms of @characteristic. I can’t believe you made such a
    choice. I’m @emotion about what you did.

    Reader

    @characteristic =
    ( fuel economy, price, value, reliability, saving American jobs, size, trailer towing ability, seating, size, JD Powe rating)

    @choice =
    ( lame brained, unpatriotic, wasteful, evil, wrong, not frugal)

    @emotion =
    ( disappointed, ashamed, shocked, betrayed, mad, angry )

  149. Jessica says:

    Way to go on the new car. I’m glad you and your family found what you were looking for. I drive a 1998 Camry with 118k miles and have had NO problems with performing regular scheduled maintenance. It’s realiable for sure.

    I was just curious, what did/will you do with the car you replaced? Since it is starting to have a lot of problems I didn’t know if you would sell it, junk it, trade it, etc? What’s the best option for getting rid of a car that’s not in the best condition? Any info. would be appreciated.

  150. Oskar says:

    You say, that after you decided to buy a new car, you narrowed it down to the Toyota Prius, the Toyota Camry, the Nissan Sentra, and the Honda Accord, and that at that point, the Prius really stood out.

    Given that selection, I am not surprised, but I wonder how you got to it. We bought a new car last week for similar reasons and with similar criteria, and apart from the Prius, our other two finalists were the Honda Civic Hybrid and the VW Jetta. Both of those have much better mileage and cost-over-lifetime figures than your other finalists.

    I am wondering why your finalists were so different from ours.

    (FWIW, we bought a new Honda Civic Hybrid to replace our 1992 Subaru Legacy, at a good price, sales tax waived, and 2.9% interest)

  151. Glenn Beeson says:

    Interesting that you mention getting exactly 42 miles to the gallon in a hybrid. I am driving a 2007 Honda Civic (non-hybrid) and getting exactly 41 miles to the gallon. What kind of range do you see on one tank of fuel?

  152. Brian says:

    @people attacking Morrison…

    A good way to highlight your ignorance of basic business and/or the economy, is to state “My Toyota/Honda was built in ____ (US State) so I’m buying American too”
    Not really. What a car company pays to assemble in-country is much less than its management and overhead (i.e. sales, design, marketing, finance,etc) and also, where it buys parts.
    The domestic manufacturers still have HQs in America as well as spend 2X as much money buying from US suppliers than the import manufacturers. A GM or Ford car, even built in Canada or Mexico, still keeps significantly more money in the USA than Toyota or Honda.
    Although buying a Kentucky-built Toyota is better than buying a Stuttgart-built BMW, it’s still a long way from supporting your own country.
    And before the haters start, I don’t work for the Big 3, (in fact, I’m not even American).
    @Morrison, good for you!

  153. Craig says:

    I am surprised that so many people are upset by this. He obviously put a great deal of thought into this and decided that the savings of a used car wasnt worth the amount of years and miles that it would cost. Makes sense to me – I would be more concerned if he didnt go thru the process.

    I had a similar process when I bought my civic in 07. I started out looking for used ones – the most common was a 3 year old one with 40-50k miles for $14k. I bought a new one for $17k. I did not feel that saving $3k was worth it. Besides having the warranty used up, it was an older body style with less safety features. I will also know that the vehicle is maintained the way that I want it to me for the start. 2 years later I am still very happy with my decision.

    In my opinion, part of good personal finance is to not get stuck in rules of thumbs – like “only buy a late model used car”. That is very shortsighted. Do your research and determine what is best for you at the moment. Times change, deal change.

  154. Virgil says:

    Did you ever stop to consider why your readers are getting nasty?

    You basically made yourself a hypocrite.

    And, you go to outlandish lengths to save a few bucks all so you can waste a big load of cash on one of the worst invesments you can possibly make: a NEW car.

    Remember this post, mentioned in a previous comment: “Paying cash is the way to go, though, when you finally do buy (though that decision is based on other values), and late model useds are the best deal out there.” Trent @ 6:08 am March 11th, 2007 (comment #3)

    “We chose to put $5,000 down on the car to avoid any liability and insurance costs if we were to be underwater on the car at any point.”

    So, basically, you just BLEW $5K so you could buy a new car, because as you admit, the car will likely depreciate at least that much in the very near future, and you don’t want to be “underwater” with the loan.

    Considering the lengths you go to in order to save a few bucks here and there, and you already had two running vehicles anyway, and the fact you really only need ONE car for your wife to commute in, you just pretty much voided any validity you had with this blog, especially after telling other people to save up and pay cash.

    In the unlikely event both vehicles broke down at the same time, it would be much less than five grand to repair them, especially if they’re maintained properly. I had a car that I drove to 231,000 miles.

    I might have let you off the hook if you had actually paid for the car, but the financing decision was doubly dumb.

    And you have the gall to justify this decision after getting up on your soapbox in your recent “Quality of Life and Consumer Spending” article. It would sure take a lot of Sydney eating lunch out once awhile, buying cups of coffee, or seeing a lot of movies to add up to the thousands of dollars you just blew on the new car, and the thousands you’ll be losing because you financed it.

    You just succumbed to the same idiocy you regularly criticize other people about from behind your keyboard.

    Once you come off the emotional high from this CONSUMER purchase, maybe you’ll realize what a mistake it was, to buy the new car to begin with, and to come on here and have the audacity to try and justify the decision.

    Hope you enjoy your new ride, and be sure to think about the other things that money could be spent on, like buying an ice cream for your son instead of sharing one.

  155. Robin says:

    I too, am disappointed that you took a loan, Trent. I have been an extremely (almost 2 years) long term reader and have always seen you speaking against debt. I see your rationalization, but at this point, you have only hurt your reputation by taking on debt.

    I do understand your new car/used car dilemma, though.

  156. Virgil says:

    Did you ever stop to consider why your readers are getting nasty?

    You basically made yourself a hypocrite.

    And, you go to outlandish lengths to save a few bucks all so you can waste a big load of cash on one of the worst investments you can possibly make: a NEW car.

    Remember this post, mentioned in a previous comment: “Paying cash is the way to go, though, when you finally do buy (though that decision is based on other values), and late model useds are the best deal out there.” Trent @ 6:08 am March 11th, 2007 (comment #3)

    “We chose to put $5,000 down on the car to avoid any liability and insurance costs if we were to be underwater on the car at any point.”

    So, basically, you just BLEW $5K so you could buy a new car, because as you admit, the car will likely depreciate at least that much in the very near future, and you don’t want to be “underwater” with the loan.

    Considering the lengths you go to in order to save a few bucks here and there, and you already had two running vehicles anyway, and the fact you really only need ONE car for your wife to commute in, you just pretty much voided any validity you had with this blog, especially after telling other people to save up and pay cash.

    In the unlikely event both vehicles broke down at the same time, it would be much less than five grand to repair them, especially if they’re maintained properly. I had a car that I drove to 231,000 miles.

    I might have let you off the hook if you had actually paid for the car, but the financing decision was doubly dumb.

    And you have the gall to justify this decision after getting up on your soapbox in your recent “Quality of Life and Consumer Spending” article. It would sure take a lot of Sydney eating lunch out once awhile, buying cups of coffee, or seeing a lot of movies to add up to the thousands of dollars you just blew on the new car, and the thousands you’ll be losing because you financed it.

    You just succumbed to the same idiocy you regularly criticize other people about from behind your keyboard.

    Once you come off the emotional high from this CONSUMER purchase, maybe you’ll realize what a mistake it was, to buy the new car to begin with, and to come on here and have the audacity to try and justify the decision.

    Hope you enjoy your new ride, and be sure to think about the other things that money could be spent on, like buying an ice cream for your son instead of sharing one.

    I’m sorry to be harsh, but as a loyal reader of this blog for a couple of years now I feel as though I’m entitled to an opinion, especially since visitors like me are paying your bills for you. I especially feel you deserve the criticism for betraying the principles you’ve preached about for so long.

    I don’t feel anything I’ve said here is that much more judgmental than you’ve been towards other’s bad choices in past articles.

  157. KCDesi says:

    Wow. I am amazed at the number of responses on this one..

    Trent did you consider the option of buying a used Prius say 2008 or 2007 model under 20,000 miles? Wouldn’t it be cheap to buy that compared to your brand new model off of the show room?

    KCDesi

  158. Tim says:

    I have two comments:
    1) I really am skeptical about what the car salesman told you about a used being only $1000 less. Oftentimes if you buy from an individual and make them an offer less than list, it will be accepted and you get the car less than what they listed and less than bluebook value listing. I understand though that a used hybrid might not be much less.
    2) What about the batteries on these hybrids? I have heard they are very expensive to replace. Why did you not figure that into the fuel usage cost?

    Just wondering if these two items crossed your mind…

  159. kitty says:

    KCDesi – I am sure Trent can answer, but what most people who buy Hondas and Toyotas find out is they don’t depreciate in value that much. 2008 or 2007 used Hondas and Toyotas aren’t much cheaper than new Hondas and Toyotas. You can google for prices.

    As to “buy American” — show me an American car that keeps its value as well as Japanese cars. I don’t see that buying a lower quality item just because it is made in the US is patriotic. The US car manufacturers need to learn to compete. Plus, there are plenty of US companies that export to other countries. They need people in other countries to buy American products. We are a global economy.

    About debt. I think what people don’t seem to accept is that there is a difference in taking a loan because you can’t afford something and between taking a loan when you actually have money but for whatever reason you feel it makes sense for you financially. If someone who is struggling with debt asked me for advice, I’d suggest that they buy used too. Yet I buy new cars. It doesn’t make me a hypocrite – what is the right decision for someone with my net worth isn’t necessarily the right decision for someone who doesn’t have money. Even what is a frugal choice is different. If one can easily afford a new Lexus, buying a new Prius is a frugal choice. For someone who has no savings and is in credit card debt, even a 3-year old car may be a luxury.
    As to saving money on small things while spending a lot on something else – everyone has different priorities. I can spend $200 on a single performance at the Met, and I bring my own lunch to work and hardly ever eat out. Everyone has different preferences.

    As to taking loans – my multi-millionaire friends take loans when they feel they can get more money on their investments or even because they believe in future inflation and feel that a low interest loan while investing money to protect against inflation is a good choice. They feel they may lose on interest now, but will gain in future. I don’t necessarily agree, but only future will show if their choice was right. If not – they can afford a little extra expense.

    I don’t know how much money Trent has, but from this and other posts it seems he is not exactly struggling. Plus, he explained why he changed his mind. Doesn’t he have a right to change his mind?

  160. morrison says:

    You people can attack me all you want. Re-read my post. I never said my Ford Focus was personally BUILT in America. I said I saved (and supported) an American Company: Ford Motors. Ford is an American company and they make fantastic cars. Here is an article today that Ford will expand the Focus to be electric and will knock the socks off anyone in 2011:
    http://tinyurl.com/cps3uo

    What we have here with Trent is a person, who is now starting to make money and he is making all of the common mistakes a person makes when they get back up in the red. He is buying himself fancy, expensive, unaffordable STUFF, such as the Prius, and remember those $2000 top-of-the-line washers & dryers he got for 50% off? Still expensive and beyond his wallet. But, I digress.
    Trent is turning into a has-been yuppie. He’s taking out loans. As long as he has a lien on anything, he doesn’t own it! Same with a mortgage on a home and a car loan. Miss a payment, and you will find out who really owns what. Trent is just renting out his lifestyle and because of this, in my eyes, he is no longer qualified to be giving out financial advice.
    I am a multi-millionairess and I continue to live on $50K a year. I enjoy being smart with my money. I could easily afford a brand new Mercedes and pay cash for it but it is NOT the smart way to be living ones life. Frugal is the new black. Being green and respectful of the environment, not wasteful of the earth’s resources, has always been the ‘in’ thing for me and my way of life. And lastly, I strongly believe in supporting my country, America! Whatever it takes.
    I’ve already deleted The Simple Dollar out of my rss and probably won’t be back here to read the other insulting comments Trent’s readers will make about me. I couldn’t care less.
    But I will say that, people, if you don’t have the money/cash to purchase something outright, do not buy it. This is not a time in history to be taking out loans. Live within your means. This has been the worst financial crisis ever in America and I haven’t lost one dime! Because I live totally debt free and well below my means. I love it! Support America as best you can. And God bless you.

  161. Bill in Houston says:

    Wow, all the carping about taking out a loan on a car.

    Folks, interest rates are at their lowest right now, and dealers are willing to deal (as I said in Post #98). Why not let the dealer money work for you?

    Yeah, I’d rather pay cash for a car, but this frees up other money (emergency fund, et cetera) that you might need now. For example, suppose you buy a car and pay cash, draining your rainy day fund. Two months later you lose your job. Your car is paid for but you have no savings. That isn’t smart. It’d be different if you were paying 8 or 10 percent on a car note, but Trent is paying what, 4%? Not bad. I chose to go the loan route on my wife’s Versa because of the 1.9% rate. Over 48 months compounded monthly, we pay 7.9% more than the cash price, but have the use of the principal for that time period. Trent pays 17% over the course of his loan. He put five grand down, too. Good things.

    Oh, and to paraphrase some dweeb on the Internet:

    “Leave Trent ALONNNNNNNNE!!”

  162. Mary says:

    I’ve been reading this blog for about a year to get a better idea about finances, since I’m not ‘yet’ independent from my parents, and so I want to be prepared.

    I originally just wanted to say: “Hey, if your wife is lead-footing it, use cruise control whenever possible and you can get 48mph on the highway easy” said from a Prius driver.

    And then holy crap, read the emails and everyone’s yelling.

    Holy crap!

    Really, I’ve read all of his other things as he decided that yes, they need another car, and then what he wanted in the car. I’ve heard that Prius batteries last at least 100,000 miles. We own two Priuses…Priai. I got my mom’s 2004 one when she got a 2008. No problems have attacked us from the sky.

    Yes, he may have wanted something, and the want was at the tippy top of the need. And? The reason he “shares an ice-cream with his child to save one dollar” is so that he CAN buy a new car if he so chooses. It wasn’t an impulse buy, it’s not endangering his finances. It’s not flaunting what he has over you have not readers still in debt.

    A while ago he was interviewing someone who scrimps and saves everywhere so that she can go on lavish traveling trips. She saved SO she could do that.

    If we only save, and don’t ever do anything with it…what’s the point of saving? Seriously. He’s still comfortably living, no giant debt, and he got a new car.

    Get over it.

  163. CPA Kevin says:

    Unless you live in a no income tax state like TX, WA, FL, etc. the sales tax deduction is a moot point as your state income taxes will almost always be higher.

    It sounds like you got a good financing deal @ 4% – I probably would have taken it as well rather than fork out all that money at once and lose a ton of liquidity.

    For all those complaining about Trent’s decision – he obviously did a ton of research. When the facts change, sometimes your mindset changes. I think there was a great quote about that somewhere…

  164. Sandy says:

    I guess you’ve decided to only have the 2 children, then? If you have the 3rd, I guess the next vehicle will be a minivan?

  165. CPA Kevin says:

    I do find it curious that you spent so much on a new car when your next one will need to be replaced so soon. Honestly, when I first read this post I thought you had replaced your F-150 with a Prius since you never mentioned the other car being that old…at least that I remember reading. I wonder how going from no car payments to 2 so quickly will affect your finances?

    I’ve had a 98 Jeep Cherokee since 2002 – paid $11,000 (probably closer to $13k with interest) for it and paid off my 60 month loan 14 months early. It has almost 150k miles now and hasn’t skipped a beat. A set of new tires here, a new battery there and it’s good to go. I plan to drive it until it dies – which I hope is 250k miles or another 6-8 years or more.

    I’m curious what happened to your 1999 Sable that caused it to degrade so fast. Maybe that speaks to the quality of Ford cars built around that time. Especially considering your F-150 is not that much older.

  166. Virgil says:

    Reading Mary’s comment I can safely say this person will be a slave to the bank as long as she lives.

    To me, driving a slightly used car is preferable to not choosing to share certain life experiences, like buying ice cream, with my children.

    I just don’t buy the justification of NEEDING a new car. As someone mentioned earlier, take a trip to another country. I can promise you that there are cars from the 80s and early 90s still running quite well in Mexico. You can make just about anything last forever if you choose to.

  167. Eli says:

    Trent,
    Ignore the haters. You did what you thought was the best thing for your family. A new, efficient, reliable car has tons of intangible benefits that don’t show up on balance sheets. Everything from a feeling of eco responsibility to lessened tension and anxiety while commuting.

    After three solid years of improving my bottom line while letting the rest of my life suffer I have come to the realization that Dave Ramsey like intensity leads to wasting the better years of your life with very little enjoyment.

    So after putting up with my 1996 civic for 14 years and 212000 miles I went out the other day and gave the recession the finger and bought a new sports car!

    It didn’t hurt that the new car was a 2007 left over with a full warranty that was discounted more than 10,000 off of msrp (a 36.2% discount). So basically I got a brand new car that the dealership had already taken the depreciation hit on. I bought it for less than what the used ones were going for so even with the loan it’s still a net gain in my net worth. I plan to pay it off in 18 months or so so I will be cheating the bank out of most of their anticipated interest anyways.

    Anyways now I smile all the way to work. Frugality is great but if debt freedom starts to feel like the misery of slavery feel free to loosen the purse strings a little and enjoy your life. After all you could get run over by a bus the day after you pay off your last debt…

    I still don’t know how you fit in a prius though. I am only six feet tall and I find them short on headroom.

  168. Meghan says:

    The finances of your post make sense, but not the car you chose. The batteries of the Prius will lose much of the efficiency during the winter, not saying they won’t work below freezing but they won’t work well. Also how much does it cost to replace the batteries? I can’t remember the figure but a friend decided against a hybrid for this reason. You may save 9K in fuel, but if you have to replace the batteries twice you’ll end up spending more.

  169. David says:

    Great choice. Low emissions, great gas mileage, plenty of room (I fit in them too) and the durability of the Toyota brand. The first Prii are over 10 years old and going strong – you won’t have to worry about it dying on you. And besides, batteries are only $1000.

    Who cares how you paid for it? Enjoy it; you work for your money like everyone else. I guess I don’t understand all these comments hating you for buying a fuel efficient, popular, well-made car, and financing it as 90% of customers do.

    Glad to hear your purchase is working out for you!

  170. Shey says:

    I think the problem here is not that Trent bought the car; it’s that he (a popular finance blogger many of whose readers are personal-finance beginners) is making a questionable argument that buying the car was a good decision from a financial standpoint. It’s one thing to say, as J.D. has with respect to the Mini Cooper, that a purchase might be extravagant and unnecessary but he wants it so he’s going to go for it. In fact, I think that’s the kind of balance that is necessary in personal finance: We save on some things so we can splurge on others that are more important to us. Fine. But then own it. Justifying an unnecessary purchase as somehow being a good investment does a disservice to readers who might mistake it for actual financial advice.

  171. Mark says:

    Hi Trent,

    The great part about your blog is that it gets people thinking… The not so nice part is that everyone seems to take everything you write as face value…

    People need to take a breather when it comes to pointing the finger; if you feel that Trent didn’t do “what he usually preaches” then hey, don’t read his blogs!!

    I believe every situation brings upon itself its own particular solutions no matter how you look at it – I understand that Trents decision may sound less “frugal” than what he usually does but hey, I believe he’s not only earned a right to change his type of decisions – i.e. “spend” less frugally – but also to not receive rants from peoples who seem to convey a “greater than thou” attitude!!

    I would like to see the financial situations of all the peoples who placed a derogatory remark about his decision – I’m sure many are not in a financial situation to point a finger…

    I believe that Trent has earned the right to change his way of spending his money AND how he saves it…

    Trent, continue giving us some great reads; I for one and in this case, take them as food for thought for my future car purchase decision.

    More importantly, thanks for showing to me that however and whatever financial decisions we have taken in the past can & should be changed with an updated financial decision… i.e.: you need to save & pay off your debts when you’ve got them but this attitude changes when all of them have been paid & you’ve got money saved up!!

  172. Andrea says:

    People just have different points at which they trade in cars. My sister and BiL trade in like clockwork every 2-3 years, whereas I am driving my 2000 Subaru that has only 161,000 miles on it. Unless something goes horribly wrong or it really gets unreiiable (I teach night classes and am often in lonely parking lots rather late at night), I thoroughly expect to drive it to 250K or more.

  173. Rob says:

    If you really want to purchase a new car and get the most “bang for your buck,” consider doing it like Frank did. http://milkyourmoney.com/2009/05/12/why-i-purchased-a-used-vehicle-and-you-should-too/

  174. I bought a 2006 Prius new. Basic package. The car it replaced was a Toyota 4 Runner 10 years old and $250,000 miles. At the time I made the purchase, Emigrant direct was paying 5% on savings accounts, my interest rate through the credit union was 5.85% therefore I chose to keep the cash cushion and make payments. 18 months after I bought the Prius, gas prices shot up to over 4 dollars per gallon. I live in truck country and I cannot tell you the number of people who stopped to ask me what my mileage was. There is a 10% difference between winter and summer gas mileage with the Prius. In the Summer I get over 46 mpg in the winter it is 42-43 mpg. Other than and air filter changes it has not required any significant maintenance. Total mileage? $80,000. One final word about Toyota, my Toyota dealer is also a GM dealer. Toyota issued a service advisory to replace the engine gaskets at Toyota cost in about year 6. I walked into the dealers garage to check on my vehicle as the engine had to be disassembled. I love to see how things work and seeing my engine in pieces was something I just could not pass up. The mechanic said something I will never forget: “look around, you see GM cars and trucks, yours is the only Toyota here and there is really nothing wrong with it.”

  175. Michael G.R. says:

    Congrats on the Prius, good choice. Might have been better to wait for the new Prius to come out (2010 model), but aside from that you did well.

  176. Rinna says:

    This is one of the first articles on this blog that i have read, but i have to say that i really disagree with your purchase of a Prius. My husband and i bought a car last year and settled on a new Honda Fit. Not only does it cost much less than the Prius, it also gets great gas milage and is remarkably roomy. There is even a video that I think you can find on uTube that compares the Prius vs. the Fit cost-wise and comes to the conclusion that taking into consideration the higher initial price of the Prius and the higher maintenence costs (those batteries are expensive, not to mention made out of lithium which is horrible for the environment when being mined and disposed of) that the higher gas mileage of the Prius doesn’t really make up in gas savings, and in the long run the Fit comes out as the cheaper car to own.
    I’m not bashing your choice of car – Prius is a nice car and might be better suited to you for some reasons. I just want people to know that there are other options. Also I love my Fit and everytime I see someone else in one I smile a little.

  177. Dan says:

    The Prius is the best bang for your buck car out there. Consumer Reports absolutely loves it. The Fit is great too, but Prius tips it because of the gas mileage and a lot more space (especially important if you have kids). Don’t worry about the batteries. Those fears are all a myth spread by hybrid haters. There’s no record of the batteries having problems and they are guaranteed 8 years or 100,000. The Prius has incredibly low maintenance costs. I totally agree with Trent’s decision on the financing. At such a low rate, he’s essentially paying $100/year for a much healthier emergency fund. Good call. Totally disagree that waiting for the 2010 would have been a better option. This summer they were selling 2009 Prius for under 23K with 0% financing. No way Trent could have seem that though. All in all great decision by him.

  178. Trent,
    Something you mentioned about leather seats caught my attention and I wanted to share it. Leather seats ARE ALWAYS WORTH THE EXTRA COST. I owned a limo service for many years and all of our Town Cars (wouldn’t buy anything else!!) had leather seats which I discovered was incredibly durable. I had cars with 300-400K miles on them and the seats were still in great shape–no holes or tears–not even in the driver’s seat!! I have leather seats in an 04 Amanti that has 70K miles on it and they look new and the leather in my 08 Solstice with 45K miles also looks new. I’ve never had cloth or vinyl seats that didn’t wear out and tear in 50-60K miles. I’ve got a Town Car limo and a Town Car sedan that both have over 225K miles with perfect interiors. Leather cleans up beautifully (something to consider with kids) and is so durable that it’s well worth the extra money!

  179. J. says:

    If you have the cash, are diligent about maintenance and drive your cars until they drop, a new car is the way to go. I would say even with a small car loan, new is a good choice if you fit the other two criteria because how you maintain and drive a car makes a HUGE difference in how long it will last and on your repair bills.

    By being the only owner, you have the opportunity to optimally maintain, repair and drive the car from the day you own it. You will know almost every single thing that has ever been done to it.
    Unless you know the seller, there is no way to know for sure how a used car has been treated. For example, a car driven 30,000 miles of short trips in stop and go traffic will not be in as good as shape as a car driven 30,000 miles mostly consisting of long freeway drives.

    My 2003 Elantra wasn’t glamorous even when she was new, but I treat her like a queen and she’s mostly returned the favor :) I expect this to continue for at least another 7 years.

  180. ranch111 says:

    I would have bought a used Honda civic, gasoline engine. Half the price or even more depending on what year you buy…People are paying too much of a premium on the Prius to justify it as a prudent buy. My current vehicle is a 1992 4Runner. 15 miles to the gallon in the city. 260k miles. I’ve owned it for almost 10 years and will drive it until it the wheels fall off. I do not consider gas prices or MPG when purchasing a vehicle. Car payments are not an attribute of frugality.

  181. haverwench says:

    We had much the same experience when shopping this year for a car to replace our late, lamented ’94 Accord. We originally planned to buy used, but after a little initial investigation, we found that new cars were roughly equivalent in value per year of useful life. We also discovered that buying new was practically the only way to get a stick shift, which we both wanted. (This was the main reason we did not seriously consider a Prius.) So we are now the proud owners of a 2011 Honda Fit, and we are as pleased as Punch with it. It’s not *quite* up there with the Prius mileage-wise, but 39 mpg in mixed driving ain’t bad. And you can haul *anything* in it. Seriously. We call it the “microvan.”

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