New Car or Used Car - Co$t In the Long Run?

Popular wisdom says that buying and owning a used car is cheaper than buying or leasing a new one. Is that really so? Assuming we?re comparing similar cars (that is, we?re not comparing an $80,000 Mercedes to a Honda Civic), is the long run cost really that much different? I ask, because I think, based on our experience, I don?t think the difference hasn?t been that much. We have owned both new and used cars, and our experience seems to have been that as our cars age (and even more the hidden unknown/undisclosed problems of the used cars we had) the maintenance costs and things that don?t work seem to rise with the age of the car. Leasing a new car, our only maintenance costs are oil changes, and we get the ?utility? (the happiness/convenience/satisfaction) (whatever value you put on that) of having a car that?s new and usually trouble free. On a monthly basis, how much should a car cost (combining car cost and maintenance cost), say for a Honda Civic?

You Asked And Answered Your Own Question ! If It Works For You, Run With It !


IMHO leasing is always more costly, because you acquire no asset value for your payments. Remember to include the “money down” amount when comparing lease costs to purchasing costs.

Buying a late model used car can be less costly than buying a new car, but you need to actually run the numbers based upon your usage. A two year old car will cost less to purchase, but it’s lifespan will also expire two years earlier. How you plan to use the car affects mow much that means to you.

The way I use a car I believe it’s more cost effective to buy new and keep it 'til it falls apart. Your scenerio may differ.

WE have had this topic a number of times. Consumer reports has done several detailed articles on it.

In general:

  1. Leasing is the most expensive way to have a car at your disposal, unless you own a business and need a new car every 3 years or so.

  2. Driving a new car requires that you basically drive it until it’s worn out to recoup your initial investment. Many here do just that, since it is not always easy to find a good used car that has been well maintained.

  3. Buying a 3-4 year old used car that was relaible to start with and has been well maintained is generally the least expensive. Reasons; much lower depreciation for the remaining life which would be only 3-4 years less than a new car. Also lower insurance costs, lower cost of money tied up, and you can use after market parts sooner. As Tom and Ray point out, the extra repairs incurred do not compare with the extra $500 per month payment you have to make on a new car. Even a $3000 tramsission job would only be 6 car payments.

As others have pointed out, a car that is reliable and PAID FOR is the least expensive to own.

However, some used cars are true money pits; avoid any Audi, Volvo, Jaguar, Mercedes, and poor quality lower priced cars such as Aveo, soon to come Fiat, and others. Consumer Reports does a good job ferreting out cars to avoid.

The least exensive ownership is a 10 year old low mileage good car bought from a senior and WELL CARED FOR! The intial cost is low and ongoing maintenance and repairs reasonable. I have bought 2 such cars in the past and the cost per miles was very low. Finding such a car takes a great deal of patience and car knowledge, however.

If you really want to be a cheapskate, buy the best “beater” you can find for under $1000. Make sure it is safe with good brakes, tires, etc. Don’t fuss about adding a quart of oil every 500 miles or so. Carry only liability insurance. If the air conditioning doesn’t work, suffer along without it. For long trips out of town, use public transportation or rent a car. You can often find beaters from ads on bulletin boards in neighborhood grocery stores.

The route one takes on automobile purchases depends on how you intend to use the car. I went the beater path at one time period in my life by financial necessity. I now like the convenience of something better. One way to escape a lot of depreciation is to buy a car from a rental fleet. I bought a Ford Taurus this way and it was very satisfactory.

“is the long run cost really that much different?”

Yes, it can be very significantly different, depending on how you define long term. When it comes to price of purchase, I created some rule once, it was very unscientific, but at the time it seemed that 5-10 cents per mile the vehicle was expected to last relatively trouble free. So I would buy a car for $1000, expecting it to get me 20,000 miles or so down the road, that is a couple years, a year and a half, or so, then I would start looking, whenever I found the next good deal car (it can be quite a challenge in my usual price range) I would buy it and sell the old one for $500, it is very easy to sell a running car for $500. If you do this a few times, you get the picture, it can really be cheap transportation.

I bought a car for $400 once, drove it like crazy, very bad irresponsible teenage pizza delivery driver for 20,000 miles, sold it for the same $400. True I spent $200 putting new tires on it when I got it, but still, cheap transportation.

My only new car experience, I found the costs associated with the new vehicle (especially insurance and taxes) prohibitively high. Add to that the fact that the new vehicle actually caused me more problems (broke down and stranded me) than any of my vehicles before or since. It was a terribly expensive learning experience.

 "our experience seems to have been that as our cars age (and even more the hidden    unknown/undisclosed problems of the used cars we had) the maintenance costs and things that don?t work seem to rise with the age of the car."

IMHO there is some magical balance in recent automobile history that is the right balance of technological advances, with minimal technological intrusion. It is the technological intrusion that costs too much to fix, the “conveniences” that quickly become very inconvenient when they stop working, and cost hundreds to repair. So if your used cars are new enough to have intrusive technology, they definitely do cost more as they age, but possibly if the used cars are older, they are still simpler and more mechanical, easier to DIY problem solve. Some of the cars I have owned from the early 1980s actually had a troubleshooting flow chart in the back of the owners manual.

WHEW! sorry, that was a lot of ramble…point is, you can spend as little or as much as you want to, it all depends on what you expect from your car, I expect little more than to get there cheaply and alive. I am probably in the minority.

One not-so-obvious way a new car costs more is the associated costs.

You buy a nice, new car…you’ll want to carry theft and collision insurance, right? If a shopping cart dings it, you’ll have the ding smoothed out and repainted by pros?

Meanwhile, the owner of a jalopy only carries collision (in a perfect world…real world, he might not carry that), and if his car gets dinged…well, that’s “character!”

Your only maintenance costs are oil changes?

The cost of keeping up a previously neglected car compared to a new car would be higher.

I am one of those who prefer a new car and drive it until it is not economical OR reliable, whichever occurs first. I have read too many tales of poorly maintained cars. My 2002 Sienna has well over 172,000 miles. Last year, only failures were the 2.5 year old battery, and one of the wing windows had a screw fall out. Oh, yeah, hit a rock and had to replace the fuel protector but that is not the car’s fault.

Blackstone a year ago showed motor in good shape. I do worry about transmission, but keep the fluid drained and filled, looks good, shifts very nicely.

I paid in the ball park of $28,000 and when I signed up for annual Mexican insurance found a market value near $5000, I think, that comes out to a bit over 13 cents for depreciation a mile if I have figured it correctly.

Driving a beater only works in some cases. Several years ago, I left my home in rural Mexico and returned after 59 days, having driven 11,000 miles. I would not try it with a $1000 car. Yes, I realize some would, and might even make it, but I will not take the risk.

Last year, we were gone exactly one month, and drove around 5,000 miles, Ditto, no repairs needed. Only problem on trip was a KY highway patrol who pulled the false probable cause stop routine when he saw the Texas plates. The highway patrol commissioner got a really nasty letter out of that.

If you have time to work on your cars…then a beater is fine. I don’t have enough time…not even close. Between family and work…I barely have enough time for sleep.

Keeping a beater running can be a problem. I know I’ve owned them…You may go months before they need something…then you have to spend a weekend working on your car…so you have to cancel that camping trip you had planned with your buddies 3 months earlier.

Buy either new or just slightly used and keep it for 300k miles…That’s what we’ve been doing. We are far better off then many of our friends financially who like to buy new every 3-4 years or who lease. For used cars I tend to stay away from anything over 30k miles unless I know the history. Even a good mechanic couldn’t tell if the engine hand only 2 oil changes in the 30k miles unless they tore into the engine. I try to buy used vehicles that have less then 20k…I’ve hadn’t had a problem doing that…in fact they usually have around 10k or less.

There is absolute cost of owning a particular automobile, but there are other costs to the owner. For example, a real estate agent who drives clients to visit properties would not want a beater. A person who commmutes 100 miles to work every day would have needs for a dependable car (if you miss work often enough because of car problems, losing a job is very expensive). An over the road saleperson may figure in the cost of a new car every year as part of the business. On the other hand, when I was a poor graduate student living on a graduate assistant stipend, all I needed was a beater. The beater hauled me and and my few possessions 350 miles to campus. Once there, I could walk to classes from the rooming house where I lived. I took trains and buses to go home and back during breaks.

Apparently, at the university where I am employed, there must be some value in driving a BMW or a Mercedes Benz. We have a number of faculty and administrators that drive these cars to show that they have arrived. Until this past year, I “arrived” very well in my 1978 Oldsmobile. When the floorboard rusted through, I decided to drive my minivan to campus.

Agree, Mike. For your lifestyle a car must be reliable, and if it needs a repair, which most cars do at some point, there must be a good shop that can do it well and quickly. The cheapest car to operate we ever had was a 1977 Dodge Colt, but the parts became so hard to get when Chrysler dumped Mitsubishi, that the car was laid up for 3 weeks for an engine part (alternator bracket).

Prior to owning Japanese cars, I had the best luck with bread and butter Chevies bought with low milage), the last one was reliable until I sold it after 19 years. Both it and the Impala owned prior, had only 4 time-lost malfunctions in 10,000 or so trips. That’s better than most new model cars in their introductory year.

My brother-in-law is the sales manager for two radio stations, and he leases cars in 4 year cycles, since appearance is important, and he knows zip about cars. His company gives hime a generous monthly allowance (tax-deductible) to make sure de drives something decent looking and reliable.

Needless to say, I would not want to buy any of his cars at the end of the lease.

marksez, there are two costs that you probably aren’t aware of that make buying used cheaper than buying new. These costs are concealed since you don’t pay them in an itemized fashion. They are depreciation and interest.

Assuming your are financing your purchase, with a new car, the higher purchase price means you pay more interest, although this isn’t always true. Sometimes you can get lower interest rates on new cars than you can get used, so take this on a case-by-case basis, but if all other things are equal, financing a new car means more of your money is being given to the bank than if you finance a used car.

The depreciation curve for a new car is shaped like the drawing below. If you buy a car new, you are buying it at Point A on the curve. If you buy a used car wisely, you will try to get one that is in great shape and near Point B.

Buying a new car is a lot easier than buying a used car. It is easier to find decent financing and you don’t need to get a new car checked out by your mechanic before you buy because of the factory warranty, so it is a matter of opportunity cost.

How much is your hard work and time worth to you? If you are rich enough that it isn’t worth your time to do what needs to be done to buy a used car, buy a new one.

If you need some authoritative proof of what I am saying, I recommend the following book:

If you decide to buy a used car, and want to know the best way to do it, I recommend the following book:

That steep part of the curve, the first 3 years, is about 45% of the purchase price. That can buy a whole new engine and transmission, if necessary and still be no more than buying a new car.

In the long run it is always cheaper to buy a slightly used car. Why? Depreciation. Bentleys (though not your average used car) are a good example of this. A new Bentley here in Canada can cost over $230,000 dollars. A used one from 2004 (albeit with 100,000 kms) costs 74,000. Less than half! A bentley from the 90"s costs about 16-30K. From 200,000 to 30K. The $170K+ in lost asset value is way more than you will spend on car maintenance in your entire lifespan.

Bentleys are an extreme example, (they depreciate way more than most) but my own car is a 2003 Cavalier. It had 90,000 kms when I bought in in May 2010, for $2800 canadian dollars with taxes in. A new 2010 Cobalt today (which replaced the cavalier in 2006) was quoted at $15495. So far…Ive probably put in close to a grand over 6 months. I had to buy new seatbelts (dont ask) and new wheels and tires for winter combined with a few other items, and my total maintenance is $1520.20 A few of these fees I would have had to pay for a new car anyways (liscense plate renewal etc) some I would not have had to, like having my muffler pipe re-welded or changing all the fluids right when I bought the thing, but otherwise I am not convinced my expenses in a new car would be lower. My biggest expense so far was winter tires and wheels ($339), which presumably I would have had to get anyways.

It seems pretty clear from the responses that leasing is more expensive than buying but if may be a better fit for some depending on their personal goals, needs and wants.

If you would use the concept of value received for money spent instead of cost alone, owning a new car could be a better deal in the minds of some and even leasing could be a wiser way to spend money.

If your goal is to save the maximum possible cost, then you buy used and whatever is cheap and then do as many repairs and as much maintenance as you can with your own hands.

IN fact further to this, let us assume that my costs are typical for the car that I drive, AND lets assume the new car needs no maintenance. I have incurred these costs over 6 months. (Ive owned the car for 7, but this month, so far my only cost has been $20 in gas (cause I was away for a while))

assuming I spent $1520 every 6 months, it would take me 61 months of driving this car (5 years and 1 month) just to get to the purchase price of the new cobalt. I had never thought about it before, but I am now convinced I will never ever buy a new car. Thanks for helping me!!