Updated on 07.31.14

The Big Debate #2: Leasing, Buying New, or Buying Used?

Trent Hamm

?This week, The Simple Dollar is taking a deeper look at five common personal finance debates.

Going to the car dealership always feels like a game of roulette. You go in there, hoping to put your money down on a car that’s a winner, and walk out of the lot with something you actually want, not something you’ve been talked into by the dealer.

A big part of the whole process is deciding up front what you want, and the first decision is a big one: new or used? Each has its advantages and disadvantages and it’s worth a closer look.

What Are The Options?
The choices here are pretty straightforward: buying new, leasing new, or buying used. Buying new and buying used both mean that you plan to actually own the car and involves a title transfer and so on. Leasing a new car effectively means renting the car for a long period – the dealer owns the car – but the payments for leasing are far, far lower than the purchase price.

What Are The Big Differences?
Buying new is the most expensive option, but it’s also the longest term option. A new car is often under warranty for several years and you can sometimes end up driving one for as long as a decade. Unfortunately, much of the time, the price is prohibitive – new cars tend to be the most expensive option.

Leasing new enables you to get into a new car for a much cheaper price, but when the lease ends, you’re left with nothing. If you have a significant need to drive a new car on a budget (see below), this may be a reasonable option, but in the end, you’re playing the dealer’s game. After your lease runs out, you have no wheels.

Buying used lets you get into a car for cheap, but it’s not a new one. However, a late model used car usually gives you several years of driving before it needs to be replaced. This is often considered to be the best value for your dollar by many personal finance and car experts. For example, the CarTalk guys are “big proponents of late-model used cars,” and Liz Pulliam Weston says “The average new car loses 12.2% of its value in the first year, according to Edmunds.com; on a $20,000 car, that’s $2,440, or more than $200 a month. Some cars depreciate even faster, depending on demand, incentives offered and other factors. Why not let someone else take that hit? Not only will you be able to save money (or buy more car), but you’ll pay less for insurance.”

So What Should I Do?
The big question you need to ask yourself is does the car provide any extra value to me beyond transporting me from point A to point B? The answer to that question depends heavily on what you choose to do for a career and how much time you spend in the car. If you use your car to drive around clients, for example, you’ll have some extra value from having a shiny new car.

If you’re in that position, your decision is probably pretty easy. There’s added value for you to constantly have a newer car, so buying a car on a lease is likely the most effective way to go. If you want to minimize the miles on the leased car, consider keeping an old reliable used car around for personal use.

However, if you’re like most of us and don’t get any extra value from a car other than transportation, definitely include late model cars in the equation. Quite often (but not always), late model used cars offer the best value, but always compare the late model price to the new price. Some models don’t depreciate significantly (like Hondas and the Toyota Prius) and others may have large factory or dealer incentives to buy new (like a large cash allowance). If you can find an opportunity where a new car is only a thousand dollars or so more than a late model used, go for the new – such bargains are rare, but they do happen.

The key to buying a car is to take your time, do the research, and make the right buy for you. Know what you want (and know what prices you should expect) before you go, make sure you know about any special deals, and go to the lot as an informed buyer who’s not panicked to buy a car right away.

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  1. A tactic frequently used by millionaires is to buy late-model used cars from the original owner, rather than from a dealer. They get a better price, and potentially end up knowing more about the vehicle’s history.

    I leased a new car from 2000-2002 and I won’t be doing that again. Before and after that, I bought used cars that were less than two years old, and both were excellent.

  2. Ken says:

    My first brand new car (bought in 2002) cost me over $5000 in repairs this year in spite of being well maintained. I paid $26,000 for it and according to Edmunds it is worth about $8,000. If I sold it today then, I would have averaged almost $4,000 per year for the “privilege” of starting with a brand new car, not counting the extra cost of insurance and registration. I hope to be able to drive it for 3 to 5 more years, hopefully it won’t require any more major repairs.
    My next “new” car is going to be a 1966 Barracuda. I’m going to pay about $15,000 to fix it up, it will get about the same mileage as my current car, and since some people consider it a classic, it will probably at least hold its value.


  3. I’ve never bought a new car, always second or third owner used cars for me. I have purchased several great cars this way and enjoy doing my research before each purchase. My best car ever, has been our 2002 Toyota Prius. Not just because it’s a hybrid, it’s been our cheapest to own. If you can purchase from a third party, you’ll probably save a few hundred from dealer mark-ups.

  4. Kevin says:

    I’m in the “buy a year or two old” camp. I’ve had good success that way so far, as have my parents. But we tend to keep cars upwards of 10 years or until they die/become too expensive to repair. Although, some of these 0% financing or big rebate offers might woo me to buy new the next time we’re in the market.

    I’ll never lease, it is just a bad deal all around.

  5. Andy says:

    I bought my car new because I wanted the latest safety equipment. Should I be in an accident, it will have been worth it!

  6. sir jorge says:

    I saved 6K and put it as a down payment on a new car, the payments for the rest are sooo low that it has been a perfect plan.

  7. KC says:

    My sister owns a horse farm and has a 1978 pickup she bought in the early 90s. Because of the engine in it (apparently it has incredible pulling power that you can’t find in today’s models) she’s actually had offers for about what she paid for it over a decade. So essentially its lost none of its value. As for her everyday car she buys a POC (piece of crap) for about $1500. Usually its a little Kia or Saturn or some other small car with 80k miles on it. She’ll drive it 5 years, do routine maintenance and then sell it for $1500. So, in other words if a car is running it has an intrinsic value. She actually never spends money on the purchase of a car cause her cars are all worth about the same (next to nothing). But she has surprisingly reliable transportation. The only caveat in my opinion is that you have to be willing to drive a POC and not care what others think. The upside is she’s 39, owns a lot of land, horses, and two houses outright. She has no debt, unlike many of the others in her circle who have giant shiny turbo-diesel trucks and a big car note.

  8. Angie says:

    I have a question about cars. My main semi-regret over the past year was buying an expensive car new. But I am trying to see if I should reconcile this mistake by trading it in and getting a used car.

    My current car is financed ~34k at 8% for 60 months (I know its dumb!). Giving me a monthly payment of $670. I can “afford” this payment but also have ~150k student loans between me and my fiance that I want to pay off as soon as possible. I am aiming for within 4 years. Within the next 6 months, we will begin to pay 1200 extra towards are loans each month.

    If I trade in my car I will either break even or take a 1-2k loss on the vehicle. Which is heartbreaking. But, if I could buy a 1 year old used car for 10-14k I can cut my car payment in more than half. I can then add the extra $350 towards paying off my loans. My loan payoff spreadsheet tells me this will shorten my payoff by about 8-10 months. But at that point each month is ~$2,900 payment.

    All the money points towards trading it in. But I know I will likely have to PAY THEM to trade it. I currently owe 26,000.

    Other notes:
    -I am extremely emotionally attached to my car. I could easily see myself owning it long after payments are completed. Whatever car I end up getting will not be fun to drive.
    -My replacement vehicle will likely be a Hyundai Accent or equivalent car which will have very low resale value at its 5 year life according to estimates (~20% or 2,700). My current car is expected to have a 5 year value of 15k.
    -Maintenance costs of a newer car will likely be less, but not mcuh. Along with gas expenses.

    Should I try to reconcile my mistake and feel less guilty? Or accept my mistake and cut my losses where they are?

  9. KC says:

    I don’t follow my sister’s advice, I like more upscale cars. But I’ve found you can buy them coming off lease for about half their value and still get plenty of miles out of them. So I get a $35k car with about 50k miles for less than $20k. I’ll drive it about 10 years and definitely get my money’s worth.

    My husband buys new cars, but he’ll get something less upscale (CAmry/Civic, etc). He’ll get one with a few features but not loaded. And he’ll drive it 15 years. But his new car usually costs about $5k more than mine. So its pretty much a wash who has the better plan, me or him, but at least we both get what we want and it doesn’t cost us an arm and a leg.

  10. Jim says:

    Generally I don’t think you’re going to do better with a lease over buying new. If the car dealers and manufacturers didn’t come out ahead with leases then they wouldn’t bother offering the option. I think the only time a lease might make sense is when you absolutely *need* a new car for work and you simply can’t afford purchase payments. But I think that is not going to be a typical situation at all.

    Admittedly I have a bias against leasing and I’m willing to admit there are probably some situations where leasing makes more sense/ or can work out cheaper.

    In any case if someone is looking at buying new verus leasing I’d compare the terms with a calculator like this one:


  11. KC says:

    Angie – Find a really used Honda Civic (about $6k worth) and pay cash for it. Your husband should do the same if he isn’t already in a “beater”. Then focus entirely on paying off those school debts Then focus on credit cards and any consumer debt. Despite what people think these cars have incredible reliability. Find a good mechanic and let him care for that car.

    I drove a 16 year old Nissan while being married to a doctor. We could “afford” a nice car, but we were better off in the old cars and paying off the debt. I’m glad I did, I’m richer for it and I still miss that old Nissan – it was a helluva lot cheaper than the Acura I’m in now.

  12. Lurker Carl says:

    The “best value” auto purchase is a low mileage, one owner vehicle that’s over 10 years old with complete maintenance records. These vehicles are a bit more expensive than other automobiles of similar vintage but are in like-new condition.

    I recommend choosing a cream puff that was a popular model and had a good reliability record. Old Consumer Reports magazines are helpful in this respect. My only suggestion is to replace all the rubber components like belts, hoses, tires unless the previous owner had already done so.

    I have owned six such vehicles over the years. All were purchased at prices less than 25% of what they cost new. Each one had less than 30K miles and provided us with over 100,000 miles of relatively trouble free service. I say relatively trouble free only because three of the vehicles were built over 45 years ago. And I resold three of the six for more than I orginally paid for them.

  13. liv says:

    good luck finding a cheap civic like that…i’ve been checking online for used civics and they’re like 3k less than if i want a NEW one!!! sheesh. i’d be willing to fork over the 3k for a shiny, new one with 3mths of new-car-smell and no miles. i’m still in limbo on whether to drive my 10yr old one into the ground or trade in for a new one. gas prices are messing with me getting a new car! maybe buying private would help in getting it that cheap.

  14. "Mo" Money says:

    I don’t like the depreciation, therefore I don’t like to buy new. But if you can afford to throw a $100 bill out the window of your new car as you drive down the freeway once a week, then buy new.

  15. Liz says:

    Thank you for the post on this. I bought a new ’08 Toyota Corolla last year after spending months and months trying to find a late model Civic/Accord/Camry/Corolla and found that even from private sellers, these cars were holding their value well. The reason I bought new was I got an extremely low interest rate and the monthly payments were only $25-50 higher than an Accord as much as 4 years old. Yes I am paying for the depreciation, but I plan on driving it til it dies like I did with my last car which was over 13 years old.

  16. Borealis says:

    Hondas and Toyotas just don’t depreciate very much, which makes it hard to buy a 2-3 year old vehicle.

    I just looked up my 2006 Honda CRV on the Kelly Blue Book, and the retail price for my vehicle with 22,000 miles is $500 more than I paid for it new. Even the sale by owner price has only depreciated $2000 after 2.5 years.

  17. Val says:

    Whew, this post came at the right time for me. I am in the market for my first car and all the info is overwhelming! I will definitely try to look for a late model car, especially one that is certified.

    The problem is that I am a broke college student! I cannot afford a really decent late model car unless I extend a loan for over 36 months. I am not sure if I want that kind of obligation right out of college when I will also have other expenses such as student loans, rent, etc.

    Should I take out a loan for a decent car that will last me a while (I would plan on driving it to the ground lol)? Or should I just get something cheap that will last me for a bit and then purchase a better car later when I have a full time job and have some financial foundation? Anyone had the same dilemma and can give some advice?

  18. Izabelle says:

    We bought a 2001 Focus this past winter for $4000 cash.

    It drives like a charm, looks great and so far all it has cost us is “summer” tires (my part of Canada has mandatory seasonal tire switch), as well as minor maintenance that we did ourselves. Not only do we have zero car payment (which more than covers the tire switch and parts for DYI repairs), but the bank paid us interest while we were gathering the money!

    When this car dies (which won’t be soon), I will do it this way again.

  19. Sid says:

    You could also think of leasing as another form of financing. The lower payments while leasing could allow you to save up to purchase the car out right at the end of the lease term.

    Leasing also allows you to “try out” the car for a couple years to determine if you want to keep the car long term. If the car gives enough trouble in the first couple of years while under warranty, it’s probably not a good sign for long term reliability. At the end of the lease term hand the keys back and let someone else deal with those problems.

  20. I love these great debates! I bought a new truck and I will never go NEW again! My next car is going to be a very late model because I only use it to get from point A to point B like you said. The nice thing for me was that I bought the truck in my Dad’s name and I was the co-signer and that gave me a very good interest rate.

  21. Deborah says:

    I’ve been keeping an eye on used Prius’s (Prius’??) through Carmax, and lately the used price is so close to the new price – I’d have to have the car transferred – that the interest rate plays a major factor. I can get a full 1% (or more) cheaper interest rate on a new car – which adds up over the cost of a loan. I’m going to wait as long as possible to buy another car and I’m saving for the next one, but the delicate balance between down payment and interest rate will ultimately decide between new and used.

  22. Justin says:

    @ Angie,

    You have a lexus??

  23. dan says:

    Trent, have you shopped for a car in the last few months. The slowdown has forced car dealers to mark down most new cars so far that late model used cars are no longer a bargain. Private sellers need to pay off their new loan. Dealers just need to sell. And even with the cars not marked down, you will find most sales managers eager to take a chunk off.

  24. Matt says:

    I’m very much in the new car buying camp.

    I’m savvy enough to research long-term reliability, and have used cars checked out by professionals, but you never know how hard a car was used or abused. Even if the service records are impeccable, you can never really know if the engine, clutch, or transmission internals were stressed by hard driving, adding wear in excess of the actual mileage. Somebody who buys a car and drops it with a year or two (even off a lease) is unlikely to care about it as a long term vehicle.

    I buy a new car and I know how it’s treated on day one, how it’s broken in, and that the paint is maintained through regular wash and wax (preventing rust in those later years). I also take advantage of rebates, warehouse club discounts, credit union connections, and every tactic I can use in negotiating; a $21k MSRP car cost 14k new off the lot with all the options I wanted. That beat depreciation by a big stretch.

    And where does one find a 10 year old car with 30k miles?!?!

  25. Drew says:

    I just signed a 3 year lease. After months of research, I found it to work best for me. I drive less than 11,000mi/ yr, I need a reliable car. I have no maintence expence! The arguements against leasing are that in the end you don’t own it, well, a car is a liability, I’ll let the dealer own that. Yes in the begining, the dealer “has you” but on turn in day, you have them. You can turn in the keys and walk away. Bottom line is RESEARCH! Know what you are getting into. A lease is not a good option for some drivers.

  26. Everyone forgets leasing can make sense for business owners. My FIL leases vans for his computer business. Tried to explain but the tax reasons made my eyes glaze over. Leasing can work.

  27. doctorS says:

    Cars are such a scam on our pockets. How many times have we seen a situation where a car has an issue with something that just went out of its warranty the previous month? It is like the car has artificial intelligence and knows when it is out of warranty and breaks down immediately. How many people has this happened to? I always going to go after the certified pre-owned used cars, I have always had success with them and you can find decent warranties for them as well. Every situation has its own pros and cons.

  28. Lurker Carl says:

    Matt, seniors have the low mileage automobiles. I buy mine from estate auctions and private sales, been doing it for 35 years. Don’t look for them at dealerships, they will disguise the defects and inflate the price. Buy directly from the owner or family.

  29. Trevor says:

    There’s no question about it- most of us aren’t in a position where we NEED a new car to impress anybody; in fact, I would say financially the best option is always to buy a used car.

  30. I disagree that you need a brand new car if you need a nicer car, you can easily maintain your car such that it can still look new after many many years.

    Also, anyone in sales gets a free company car anyway. :)

  31. Soni says:

    Heh…the next to last time we bought a vehicle, the lot owner probably thought we were made of profit the first time he saw us. It was hot and so I was (uncharacteristically) wearing a dress, the one I call my “barefoot and pregnant” dress because it looks so hick (but was really cool in the heat), and hubby can look like a down-and-out redneck when he’s not paying attention.

    So here we are, Mr. and Mrs. Broke White Trash, hunting around the pickups (hubby’s a contractor) looking for deals. We must have looked like real suckers, because he started laying it on thick about what values his vehicles were, and doing everything he could to get us to trade in our current truck (which looked way better than any of his, but which was about one faulty sensor away from irreversible death, which was why we were there).

    Boy did his face fall when we came back the next day! I’d spent the previous afternoon researching the vehicles and had a sheaf of printouts. Instead of my ‘submissive miss’ dress, I was wearing a wife-beater and some dirty jeans and was carrying a used car checklist in one hand, and a magnet (to test for bondo) and flashlight in the other. He really started looking glum once I started back-crawling my way under the truck of our choice and poking around under the hood like I knew what I was doing – which I did, since I’d just finished two years of auto maintenance at the local vo-tech. (Best money I never spent – yay, Americorps Education Award!)

    Poor guy. He got our last-legs trade in and in return we got an Eddie Bauer version of a full-sized truck in way better condition, at a bargain rate since I had the actual used retail values for our area already printed off and highlight, with circles and arrows and a paragraph on the back of each one explaining what each one was. (Sorry, Arlo Guthrie joke there, couldn’t resist.)

    In the end, I almost felt sorry for him. But not quite. Teach him to judge a woman by her cover. :-D

    BTW, we secured ownership of that truck the first month by paying off the bank loan with a credit card that had a much lower rate – saved a bunch of money on interest, and never had to worry about repossession of our sole means of support if the pooh hit the fan for a month or two. Sweet.

  32. Sam says:

    If you plan to make a business out of buy and sell cars, trying second hand cards, renovate it (e.g change wheels, repaint to hide scratches) then sell it at higher cost. Here in the Philippines, thats actually the trend of most car distributors.

    I agree with the post above, if you only use your car for transpo and it doesn’t give you any value than that, then 2nd hand cars should do. However, if you use your car to generate more income for you or you use it for business, buying a new car should make sense.

    Fix My Personal Finance

  33. Rob says:

    Just a couple thoughts to add:

    Chrysler has finally come to their senses and decided that they are a car company and not a bank, so they will not be offering leases financed directly from Chrysler anymore. GM and Ford may follow suit and this may throw a wrench into determining what will be the best decision for some, considering there may be a gap of time before the independent leasing companies pick up the slack. This may also mean that it may cost more to lease (more individual overhead from independent leasing companies). I’m not saying this will change the lease vs buy analysis, but it is something to watch as the auto industry moves forward.

    As a citizen of Michigan, one factor that I have to seriously consider is the employee discount associated with buying new. Many of us are lucky enough to have relatives who work(ed) for the big three and can use their employee discounts to lower the cost of new cars, almost eliminating the first year depreciation hit. GM has recently had a program where each employee can designate ANYONE to use their employee discount for 1 new car, which extends the offer effectively to anybody who is in the market for a car. Couple this with the latest 0% financing and buying new may be a compelling idea. I’ve found that friends who move out of state have a hard time explaining the available incentives to dealers and salespeople (who have no idea about employee friends and family discounts), so make sure you know the types of discounts that may be available to you before going to the dealership.

    Thanks again Trent for shedding light on some of these pesky finance questions. I find that your thoughts, coupled with the comments, are very effective to promote discussion and make informed decisions.

  34. Eric C says:

    According to something I heard on the radio (confirmed by NY Times, link below), Chrysler is getting out of the lease business. If that is something they are doing, I wonder if leasing is going to become less common in the future, and if other auto manufacturers will follow suit.


  35. reulte says:

    Val comment 15 – As a general rule, do not finance a car until you have a full-time job. Your best bet is to use alternate transportation (if you can) until you are working full-time with a decent salary. If you must buy a car – go for cash paid, cheap as possible for reliable (I’d say less than $2500). Ask around to see if anyone has such a vehicle they’ve been planning on selling and research, research, research!

  36. scatterhaiku says:

    i agree with the observation that it can sometimes pay to have the first owner take the hit on depreciation. a lot of buyers are unable to keep up with their car amortizations unfortunately, but this does lead to a number of repossessed cars available for sale from banks, or directly from distressed owners, with sizeable discounts offered.

    thankfully, where we live, mechanics don’t charge all that much so when looking at second hand cars, one can bring a mechanic along to take a closer look at the merchandise, for problems not that visible to the average car buyer.

    and it’s also possible to bring the car to a shop, have it raised, so you can look underneath.

  37. We’re of the “buy a year or two old low mileage” mindest. We own a 2000 Toyota truck and a 2000 Toyota minivan, both of which we own free and clear. We only have to cover the costs of regular maintenance(my husband does most of it himself), and I know we’re thousands of dollars ahead compared to where we’d be if we’d bought new.

  38. K says:

    @Matt – I couldn’t agree more. I knew what model car I wanted and looked at used ones for months and the lowest price I found was MORE than price I paid for a brand new one with only 4 miles on it and a 3 year warranty. And like you said, most of the used ones had 40-50,000 miles in 1-2 years, so they had some heavy use. My car was $23k MSRP and I paid $16k after all the rebates they were offering. I think it’s a shame that so many people think that new cars are a waste of money before they even consider them. If you pay cash and keep it for awhile it is the best way to go in my opinion .

    [I bought it in 2005 and my previous car was a 1990 (also brand new at the time) to give you an idea of how long they can last if you take good care of it. I gave the old car to a family member and it is still running, so my price did not include a trade in.]

  39. Jason says:

    @17 and @22.

    Leasing a car is one of the biggest legalized scams ever. No disclosure of the “true” interest rate you are paying while you are leasing, nothing at all left over at the end of the lease period (except another least), and only getting a set amount of miles in the contract before having to pay more. As for the business expense, you can depreciate a van you pay for, too. And at current fire-sale prices for trucks and SUV’s, it might make a lot more sense to buy a van and drive it for 5-10 years, since vans don’t really ever look “dated” until they are extremely old.

    My car was bought new, paid for early and I plan on driving it 10-15 years. The next car will be a 2 year old something off lease from Toyota or Honda, although I will go new if the used prices are very close to the new ones — we encountered that before buying a Honda, the new one was $500-$1000 more than the one with 30K miles that was 2 years old. I didn’t want to inherit someone else’s problem.

  40. Carrie says:

    What if you are a one car only household? Having 1 car makes it really really important that the car always work, and we are considering leasing a new car just to have the extra sense of reliability a new car would provide. We also drive very little, about 20 miles a day to and from work. It’s $30 per trip to work by Cab when the current car is broken.

  41. Jason says:


    A well-maintained quality automobile will likely last 10 years before anything major will break, and even then, it’s still highly unlikely. I drove cars in the early 90’s that were manufactured in the early 80’s that were extremely reliable even back then, and things have only improved (for all manufacturers) since then.

    Purchase a Camry or Accord (or Civic or Corolla), maintain it like the manufacturer recommends, and you can very likely have 15 years of trouble-free ownership, and probably 12-13 years of payment-free ownership!

  42. Mike says:

    A very timely topic, well done!

    When my wife and I relocated two and half years ago we had no car payment. She had a very, very reliable newer car that was paid for and I had a horribly unreliable older used car that we figured would bite the dust before too long.

    Fast forward a year and a half after our relocation and the beater died a painful death and my wife’s car was totaled in an accident when she was t-boned by a sixteen year old trying to “gun it” across a divided highway. I still can’t believe that she walked away from that accident relatively unharmed. There is surely something positive to be said about a car with exceptional safety ratings.

    Six months after the accident I found myself wondering “where is the world is all our money being sucked away to”. All I had to do was look in the garage at $600 worth of monthly payments that we didn’t have when we relocated which I am now feverishly trying to pay off so that we can get our financial lives back on track. I loathe being in debt and never want to visit this situation again.

    Due to those developments, my wife and I recently went through the process of investigating whether or not it was worth it to trade in my car for a more fuel efficient model (I tend to drive at least 400 – 500 miles per months just for work). What it really came down to was that SUV trade-in values have dropped pretty quickly and enough that it wouldn’t have saved us an appreciable sum of money except on fuel.

    Part of the conclusion for me is realizing that maybe at this point, the only way I’ll ever realize the full value of my mistake purchase (even though I really love it) is if I get it paid off and then keep it for as long as possible. It seems fairly certain that I’ll extract much more value from my car than I’ll ever get for it in trade (I think/hope).

  43. Jason says:


    Another point — if you buy new, you have something like a 3/36 warranty (Honda/Toyota/Subaru/etc), a 5/100 (GM), or even a 10/100 (Kia/Hyundai?) on some cars. On a lease, you can still be responsible for repairs (if it’s not covered under warranty, for example you hit a curb on a snowy day and break something) and maintenance of the car. And you have to pay insurance, too.

    So you still have all of the risk of owning a car, and when you are done with payments, you can’t keep driving it, you turn it in on another one and keep making payments.

    A concrete example is mine. I purchased a Subaru Impreza in 2002. I paid it off in three years and haven’t had a car payment for three years at this point, and likely will not have one again, ever (I plan on paying cash for the next car). That means all I pay for is gas and maintenance, which are considerably less than the ~$400 I was shelling out when I was paying for the car. And paying a $30 cab ride once in a blue moon (or getting exercise and taking a $0 bike ride, or getting a ride from a co-worker for the occasional time your car is in the shop) is considerably cheaper than spending whatever the lease payment is for the next 10-15 years.

  44. Jason says:

    Carrie —

    One more point, too. You can purchase an extended warranty on new vehicles, although generally it’s a waste of money since modern vehicles are generally reliable for the first 10 years. If you are worried about paying for repairs, you can always set aside what you would have paid on the warranty, too, and have it earn interest. But you likely won’t need it — it’s another way in which the auto industry can earn a lot of money.

  45. KC says:

    Liv, you are right – getting used Civic isn’t as cheap as it used to be (like last year). But the great thing about them is you can go old (really old) and still get a great car, which is what I was suggesting for Angie. As for you, keep that 10 year old Civic, assuming the mileage is less than 200k and there is no rust or major problems. My husband had his 10 year old Civic totalled last year and we still are mad about that – loved that car and planned on having it at least another 5 years. He’s a doctor and can pretty much drive whatever he wants. The nurses and staff in his office made fun of him cause he was the only doctor there in a non-Eurpoean sports car (he was also the only one who’s car wasn’t leased). But he wanted a Civic cause they are efficient, reliable, and run forever. Keep your Civic, I doubt you’ll regret it. :)

  46. Carrie says:


    Thanks for your helpful feedback about leasing/maintenance. It does help me feel confident about my current decision, which is a used 2005 Hyuandi Accent with the 10/100 warranty.

    I have been generally happy with the car except the starter died and my warranty proved less than useless (We fix your car, Mon-Fri 9-5, it may take a week… and we may bill you. I paid for a mechanic to do it in 4 hours)

    After the annoyance of that incident I was unsure if leasing would be a better option, but it sounds as though it is not. I was shocked that a car less than 3 years old would have a problem.

  47. Jason says:

    Carrie —

    You would have had to deal with the same kind of nonsense if you had a leased vehicle or not.

    I’m not saying that some stuff won’t break, but if you are worried about paying for cab rides, take what you would have put into the lease and sock it away so you can pay for the cab rides. I’m betting you’ll end up with a nice stack of money once the car is paid for. And I know at my office there are lots of people who have a similar commute to me, I can either just ask for a ride, or if I’d need to ride with for a few days, I’ll buy them lunch or a tank of gas.

    You could also ask for a loaner car, or in many cases rent a car directly from the dealership. There are lots of ways to get around being out of a car for a couple of days that don’t involve a lot of cab rides.

  48. Stephanie says:


    I have the same problem. We are a two-car household with weekday commutes in different directions and no public transportation. Add to that that we live in St. Louis where every dealership, mechanic and brake shop is always packed, and only a few are open on Saturday (forget Sunday or evenings!).

    The age of the car doesn’t matter so much. Even routine tasks like replacing worn brake pads or flushing the antifreeze require that I either spend an entire Saturday afternoon in some dingy waiting room, or schedule a time during my workweek at the dealership, which usually results in me renting a car for $30/day so I can go to work (there are no free loaner cars).

    Frankly, I end up spending the $30/day rental fee because my personal time is important to me. It’s one of the costs of working a full-time job with a long commute.

  49. Macinac says:

    I watch for distressed new cars. My current one was hail damaged on the dealer’s lot. I got it for 40% off, yet it has the full new car warranty.

    My previous one was a case of over-inventory. The company (Nissan) was bringing out a new model, while the dealers had an oversupply of the old ones. I got it for 20% off.

  50. Katharine says:

    I LOVE deals on end of season new cars. I got our brand new 07 mazda in June of 07 (it has 8 miles on it) with tons of options – thats what the hubby wanted for well under what edmunds.com priced it at (btw for all the posters talking about buying, edmunds.com is your best friend!). It takes legwork and effort and yes I went to 3 different dealers but I got that car for 2 k less than a 2005 with the same options going used at several dealers.
    Then I just got another 07 Pacifica this January. Trust me – Chrysler was begging us to take it. Sadly my paid for Saturn was totaled because while I’m ok with financing 1 car, i’m not thrilled with 2 – though once i’m done with the other people’s insurance the Pacifica will be paid for (partly and honestly because i got a major deal).

  51. Kevin says:

    Stephanie – small world, I’m in St. Louis area as well. I do have the advantage of car-pooling with my wife when she works, but you’re right, the lack of public transit really stinks.

  52. Ruby says:

    Just for the record, car dealerships do not lease cars. The manufacturer – GM, Honda, etc. – leases the cars. A dealer typically has no other responsibility in the lease transaction than providing a space for the car to stay until it is leased, and a place to drop it off when the lease is up. And as for disclosure about interest rates and mileage allowances, it’s up to the buyer to ask the right questions – and if you don’t know the right questions to ask, then you didn’t do your homework.

    I was also surprised to see that no one else here mentioned buying dealer demos. These are usually limited to 12,000-15,000 miles, and you can often get a current year vehicle for thousands less than a brand new one. I bought a demo 2008 Jeep with 13,000 miles recently that had been a dealer demo, and paid just a little over half the sticker price. I literally bought almost twice as much Jeep as I could have bought if I’d bought one new. And yes, I often have to use 4WD, so yes, I really did need a Jeep, lol.

  53. Georgia says:

    We bought 1 new pickup in 1966 for $2,100. and drove it for 20 years. Only work on it was a set of tires. Wonderful.

    We usually bought used cars & I keep excellent records on them – every cent I spend on them. And if they cost me less than $100 per mo on average for maintenance & repairs, I keep it. I couldn’t buy another car for that low a monthly payment.

    Drove a used 1979 Buick Electa Ltd for @ 9 years. Had 95k on it when I bought it and had 363k when I sold it. There’s a real good story behind that vehicle sale.

    The other car was a 91 Chev Lumina. It was about 6 y/o when we bought it. Had @85k miles on it. Had 313K when it died & I was grief stricken (was the same day James Doohan died).

    Keep good records of all moneys spent on your vehicle, average it out every month over the lifetime of the car, and if it averages low, keep it. It can really pay.

  54. SwingCheese says:

    An enthusiastic second for the Ford Focus. I, too, have a 2001 Focus (purchased in 2005), and all I’ve had to do is replace the tires (once) and replace the brake pads (once – just this summer). In other words, normal wear and tear. Plus we use it for our in-city driving, and the mileage is incredible! I have to travel between two schools five days a week, plus all other extraneous city driving, and I can easily go 2 1/2 – 3 weeks on a single tank of gas. I love my Focus!

  55. April says:

    I think it really depends on the family and the family’s needs. In late 2006, we bought a 1999 Town and Country minivan for $6500. It was the most we’ve ever spent on a vehicle and the newest vehicle we’d ever had. It had 90,000 miles on it.

    We only bought this “new” car because our old Town and Country — a 1994 with 285,000 miles on it was killed in an accident. The insurance money helped with the new T&C purchase.

    Regarding safety features being a reason for a new car — we were hit in a head-on collision going 65 miles per hour. Our airbags deployed, our seat belts held, the car crumpled exactly as it should. We had many broken bones and injuries, but the car performed brilliantly. It’s not necessary to buy a new vehicle to have safety. It’s necessary to research options and find out how a vehicle has actually performed in crashes.

    In our family, my husband does all our car repair. He can fix anything — can rebuild an engine, transmission, etc., with enough time. For our family, old cars with less than 100,000 miles are a good buy. I know that’s not the case in many families, but my parents make the same auto choices and neither of them know how to work on a car. They DO know the phone number of a trustworthy mechanic, so the same strategy works for them. But I might not recommend it to just anyone…

  56. Aggie says:

    To make my purchase decision, I studied carefully the US Government’s MPG website. I listed all of the models I liked, then started listing thier blue book value for 2-4 year old models. I then spent several weeks test driving those models at various car dealerships.

    The models I loved the most online, usually turned out to be horrible choices for my needs. The Chevy Cobalt and Aveo had good mileage, but no space in the back for tall people. There was little leg room. The Prius, my favorite choice for gas mileage, was way out of my price range, even used. The hybrids were of similar situation, the 1,000.00 I would save per year in gasoline costs wouldn’t near cover the additional 5,000.00+ of sticker price. (calulate your yearly mileage and gasoline use– then look at MPG VS initial cost+tax+tags+ yearly insurance AND the average number of years you keep a car.)

    The best way to save money is to drive them into the ground. Every car you buy is a 10,000 to 30,000+ purchase– so look at how many you will purchase per decade. Makes it look very different– if you buy three in a decade… that’s a lot of money.

  57. Slinky says:

    I’m buying a new car this week. Previous car was a ’91 Dodge Dynasty, at least 5th hand. Since I’m getting a standard I wasn’t big on inheriting someone’s screwed up clutch along with anything else they messed up. That combined with the complete lack of a used car in my preferred model in my area made me go new(ok, so there were 4, but they weren’t good deals and only one had a manual trans).

    The thing is, I can afford it. I’m on track to meet all of my financial goals within acceptable time frames. I’ve budgeted for the emergency fund, the retirement, the wedding, the house, the student loans. Sure, I could do some of it sooner if I bought a cheaper used car, but I bought a car I’ll love for the 10-15 years I’m going to be driving it.

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