WDW Financial

Thinking About Buying A New Car?

Thinking about buying a new car? Here are some quick tips:

Buy, don’t lease.  Unless you love cars as one of your life passions and are willing to and can afford to consider them as one of your luxury items, you’re better off buying a slightly used car and driving it for a long time rather than continuously having a car lease.

Buy 2-3 year old cars.  Program cars, lease returns, but not former rental cars.  Something with reasonable mileage for its age.  You’ll save on the massive amount of depreciation that happens in the first few years of car ownership.

Finance or pay cash?  This is less clear, but if you’re talking about using cash that would otherwise be sitting in a savings account and you have enough other savings/investments to get through an emergency, then pay cash.  That money is making almost nothing sitting where it is.  If, however, you would have to pull that money out of investments to pay cash, then it becomes a question of rate – what rate will you pay versus an estimate of what your investment account would make, which is not guaranteed.  Rates are very low right now, so this would tend to lean someone towards financing.  But, there’s not a bad decision here.  If you have a strong gut feeling on this piece of it, go with your gut.

Drive your car as long as you can.  Yes, there’s a point where every car becomes a repair shop nightmare, but if you can put up with 1 or 2 days in the shop per year, you will likely save a lot of money over time.  Goal?  At least 150,000 miles and 10-12 years old – that should be achievable for most cars these days.  Be content with what you have.

Picture of David J. Duggar

David J. Duggar

David graduated from the University of Texas at Austin with his Bachelor’s and Master’s degree in Accounting. David spent four years with the accounting firm of PwC prior to joining the firm in 2000. David and his wife, Shannon, have a daughter and a son. David spends his free time enjoying travel, the outdoors and live music.

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