I am of the philosophy most of the time, buy it new pay it off in 5 and drive it for 10. Our 2 03 vehicles are doing good, one used one new, waiting to put off car payments as long as I can.
Jim, you are a very unusual young man. If I were 20 and could afford any car I wanted, it would NOT be a Ford Fusion. I’d consider buying one now if I needed a car, but then I’m a lot older than 20. The 2014 Corvette would be at the top of my list. But seriously, at your age, think about the Toyota/Subaru sport coupe (BRZ? FRZ? something like that) or the new Ford Mustang, even the V6 Mustang with the automatic has a little pazazz and excitement.
If you can find a suitable used car with a known maintenance history, one owner, private sale, no accidents in great shape, then that would be the best economic decision. Going new means that you have control over the maintenance history and you alone will be responsible for how long it lasts. But at 20, I don’t really see a car as a long term relationship, you life will go through too many changes.
Really consider older cars that you can get cheap, have fun with and then dump at the end of the year. Those are the vehicles that really make memories.
if you got the cash:
I very much agree with @keith.
Aside from a cash purchase, think about financing. Think about renting your top choices to see which car you really like and fits your lifestyle-which will change.
Biggest problem with that suggestion is the cost of insurance for said Mustang, even v6 trim.
Well Jim could start with an older Miata and get the sports car out of his system, then a Jeep CJ to get the off road experience, then maybe an older Mustang with a V8 for the HP experience. Then move on to an older BMW 5 series for the German experience. Get older cars that at least run good at the time you buy, enjoy them for a little while then dump for another. Get the minimum insurance.
Others should/may make suggestions too for vehicles you should own before you have to settle down.
As a geezer of 71, I would vote for a Mazda Miata. However, when I finished my first round of graduate school and was ready to purchase a new car, I purchased a stripped down 1965 Rambler Classic 550. It was almost new–had 7000 miles and the balance of the factory warranty. I paid $1750 for the car which new cost about $2400. This was in 1965. At that time, I did dream about owning an MG Midget at the time, but I realized that the Rambler more suited my financial situation and the need for reliable transportation.
I don’t know your immediate needs. If you are in school, maybe a good reliable used car would fill the bill in providing transportation. You could then invest the rest of the money. If your needs really require a new car (you commute to school or work or make long trips to visit family), the Fusion or Camry makes sense. You obviously aren’t into flashy or sporty cars and that is fine. I’m a firm believer in buying a vehicle that suits one’s needs and not one’s fantasies. I kid my wife about buying the Mazda Miata, but a Sienna minivan fits our needs. I play in three different musical groups and need a vehicle to haul my fellow musicians and their instruments.
I would suggest using the money to buy the vehicle that fits your needs and invest the remainder. A few years down the road, you may be glad you did.
If you are looking for car a vs car b there are probabilities, but not guarantees. Throw your dice and take the chances is the bottom line.
One of the best things I did was buy a used car under the manufacturer’s certified used car program. Most manufacturers have them, and these are usually low milage vehicles coming off a lease.
Previously, I always bought new. However, a few years ago, I bought a 2008 VW GTI for $17,000 with only 15,000 miles on it. A new one compatibly equipped would have been around $28,000.
The car was in brand new condition and came with a 2 year warranty. Even better, the warranty only went into effect after the original warranty expired. In effect, I had a four year warranty which is a year longer than a new one would have been.
Find the car you’d like and check out the certified used car program. You’ll get a like-new car and save yourself a substantial amount of money at the same time. It’s an absolute no-brainer. Most dealers now put their entire used car stock on line, so it’s easy to search for what you want.
Being 20 insurance costs have to factored into this equation. Personally I’d buy a 6 or 7 yr old import with decent mileage for 5K or so. Take the 25,000 you just saved and invest it. At let’s say a modest 7% return in 3 yrs you’ll earn back the 5K you spent on the vehicle. Insurance costs would also be considerably cheaper and since you have cash I wouldn’t even bother with collision on a 6 yr old car. All that $ you save on insurance will easily cover the odd repair you make in say 3 yrs of ownership. Then after 3 yrs it’ll be time to try something different. No one knows enough about vehicles at 20 to pick one to keep for a decade or more.
I wonder, is the OP a foreign student with money to spend? I find it hard to believe a 20 yo that is a resident USA, has that much money in this economy-I could be wrong, but a young person has many more options than just spending money on a depreciable asset.
Like I said, in my experience, over the long haul of 1-15 years, there is no cost difference between buying new and used. For used you will have a lower initial fixed cost for the car but also will lose the benefit of the first 30-60K miles of wear plus the warranty. Throw in the uncertainties of current costs for used, unkown service history, driving styles, and so on and it really is not worth it in the long run. Also, there is no great benefit to paying cash in todays market. New car finance rates are very low from zero to 5%. On average last year I made 16% on investments. That’s a 10% gain or more over the finance costs. Why would you not take a 1% finance charge and invest the money?
@Bing I pay cash for my used cars, because there’s nothing like the peace of mind that comes with driving a car that’s 100% paid for.
Nobody can repossess it and I have the freedom to choose basic or comprehensive insurance.
@db4690 Yep, for a while anyway this is a free country and you can do what you like. Nothing wrong with paying cash if thats what makes you feel good and you know the trade-off for it. Its your money and you can do what you want with it.
On the other hand, just out of school, my district manager had a fairly new Chevy that was just giving him all kinds of trouble. He asked me to pick him up at the bank one afternoon. He just turned over the keys to them and made it their problem. Its not something I would ever have done but it was one solution he had by not paying cash.
@Bing i know many people who GLADLY pay cash for their cars (new and used) and have absolutely no regrets. Most of these people have never done it any other way and never will. As far as I’m concerned, the only thing you should finance is a house.
I’m curious Bing. What was the final result with your district manager’s effort to throw his car problems at the bank? The bank didn’t buy the car. Why would they make it their problem?
" As far as I’m concerned, the only thing you should finance is a house. "
I agree. Paying cash for a car, as I always do, makes for a wiser shopper who negotiates a good deal. Even though I’ve got money to cover the check I always get a little thrifty when I am about to sign it over for a car. That’s a good thing.
Now, if we could eliminate federal withholding tax (it never was a good idea) tax payers would hold the feds to more accountability and less spending. People would think twice when writing a check for thousands and thousands of dollars every year. That’s a good thing.
Both car financing and withholding taxes lead to spending more than what’s practical or desirable.
Regarding house payments, a friend of mine didn’t even believe in those, either. He started with a very affordable house and worked his way up to a very nice, expensive house, paying cash for each. Looks like my 25 year-old son is on track to do the same. He already paid cash for a new car and is saving and investing like crazy.
It does feel good to pay cash. I wouldn’t have it any other way. To me making any payments on anything is backwards. You are supposed to pay and take your merchandise, not take your merchandise and then pay, back axxwards.
CSA
@csa I agree that paying cash as much as possible is the way to go. Last year we had just $240 in interest and bank charges.
I get my Sears statement and it says they charge 29% interest on outstanding balances!
Our daughter took a money management course and the teacher told her that managers of charge accounts and credt card copmpanies call people who pay off the balance each month “deadbeats”! They don’t make any money on those cardholders.
If you must finance, take out a homeline of credit with your bank; it only charges 1% over prime!
@Docknick One of my credit cards called me to complain that I don’t use it enough!
And when I do use it, I pay off in full as soon as it’s due.
". . .and credt card copmpanies call people who pay off the balance each month “deadbeats”. I’m now proud to be a deadbeat. I’ve even been known to say “If you give me a discount, I’ll pay cash. Otherwise, I’ll use my credit card”. The credit card companies charge merchants a collection fee. If I pay cash and get a discount, both the merchant and I are happy.
@rodknox The guy just quit making payments and gave the car back to the bank. He did it in the next county though so out of our territory anyway. Same as a repo except they didn’t have to go get it. He was nice enough to drop it off and give them the keys. I’m sure they just sold it and took their loss. Not something I would do though.