Need help with buying a new car.

Remember that cars depreciate, and they do it fast. On average a car will lose 50% of it's value every 3 years.

Example

Brand new with 0 miles - $30,000

3 years old with 36,000 miles - $15,000

6 Years old with 72,000 miles - $7,500

9 years old with 108,000 miles - $3,750

12 years old with 144,000 miles - $1,875

15 years old with 180,000 miles - $950

18 years old with 216,000 miles - $500

After that if it starts and stops, the lights work and it turns you should always get $500 for it, save a few examples that keep their value (Jeep Wranglers, Corvettes, etc.)

That being said, no matter what you do you are going to lose money on the value of the car. You will also lose money on the maintenance of the car. Which goes up exponentially as the car gets older. And this is not something you can avoid. There are no "magic" cars that don't need parts replaced. There are more and less reliable vehicles out there, but no matter which one you choose you absolutely will have to replace parts, you absolutely will get stranded, and you absolutely will spend some cash money. . . . Unless it's a new car, then you have a warranty.


Let's compare two scenarios where you spend $8,000. A. You lease a car and B. You buy a car. And let's see where you are in three years.

A. The Lease

You are going to have to get some incentives to get the price down that much and you are going to have to get a cheaper vehicle. A well equipped Chrysler 200/Chevy Malibu/Ford Focus starts at $26,000. So your buy out will be $13,000 which means that you will need to get ~$5,000 in incentives. This is not that difficult and can be done. Just shop around and don't be afraid to walk.

Once you get your incentives and you get your lease your payment will be ~$200 a month. You will have a full warranty, free roadside assistance, free rental if need be, free satellite radio, free wheel and tire service, and a brand new car with all the latest safety features. You will also have brand new tires, brakes, and part.

In three years you turn it in and have $0, nothing other than a returning lessee incentive that could lower the payment of your next lease. And if you do go way over miles or screw up the interior you pretty much have to buy it at $13,000.

B. Purchase a Vehicle

For $8,000 we are falling to the range of a 6 year old car with ~70,000 miles on it. And you are going to own it until it has 105,000 miles. During that time you will have to pay for tires, possibly a timing belt, a 90,000 mile service, 6 oil changes, a few bulbs, brake pads, and pick two or more of the following (Shocks, Struts, Control Arms, Ball Joints, Alternator, Serpentine Belt, Battery, Starter, Fuel Filter, Tie Rods, Steering parts)

Conservatively speaking, during that time you will spend mandatory (Tires, oil, brakes, bulbs) $1,000, and possibly (the second list) another $1,500. Now if you add in the roadside assistance, satellite radio, and free rental that the lease gives you add another $1,000 over those 3 years. And we aren't even talking about catastrophic break downs, just routine stuff here. So if you compare apples to apples, you will Pay $8,000 for the car, pay ~$3,500 into it, and if you can sell it at 9 years old with 105,000 miles for $3,750. You are only "up" $250 as compared to the lease. But you were driving an older, less reliable car, with less safety features, and less security the whole time.

But keep in mind that one dropped trans, or one bad pot-hole that takes out your suspension can cost you thousands as you are not under warranty.


Many people will say "but what if you put on a lot of miles on the lease?"

Well, what if you put a lot of miles on a not lease? Either way the value of the vehicle you are driving is reduced.

What if you ruin the interior?

Well what if you ruin the interior of the car you bought? Either way you are losing money.

The only thing specific to a lease is when you have to pay for it, not that you have to pay for it. You will always have to pay for miles and damage, only with a lease there is a date where when that day comes you either pay for it or buy the car. With a used car the day is when you decide to sell it, not a specific per-determined date.

/r/personalfinance Thread