Years ago I resolved to never buy a brand new car, and that has been one of the smartest financial decisions I have ever made. So many people have the mis-perception that having a car payment is a necessary way of life, and that is just not true.
The number one argument against buying used is that the repair costs add up to the amount that would have been paid for a new car. I don’t know a single person who has had that happen.
Here is a table of average auto repairs from Auto Warranty Group.
The worst case scenario if EVERYTHING on a car breaks is $12,652 of total repairs. Let’s say a good used car is drivable for five years, or 60 months (which is a short length of time for a car loan these days). That is only $211 per month of car repairs for five years even if EVERYTHING breaks. By the way, I don’t know anyone who has had everything on the list break on one car in a 5yr period.
What about the actual cost of the car – right? That has to be added to the $211 monthly outgo to have a realistic picture of what driving a used car would cost. Obviously that number depends on how much is paid. The average American car payment is between $380 & $460 per month (new AND used car loans). Let’s just say we’re buying an average car so we’re going to see how much car we can get and still be on the low end of the average car payment per month. After actually buying the car AND paying for EVERYTHING to break here is how much we can spend and still stay ahead of the average American car payment:
Personally I don’t even want to be on the low end of the average American car payment because $380 per month for 40 yrs is a large retirement. People look at me crazy when I tell them what my personal car buying strategy is and I just simply tell them I’m still winning the gamble I’ve chosen to take driving used cars instead of new. More on my personal car buying strategy in another post.