What would you do “in my shoes”?

Hi everybody,

How are you. I was wondering if someone could give me advice about the issue of purchasing a new versus used car. I’m looking to buy a car within the next few weeks. Considering my circumstances, what would you do if you were “in my shoes”?

1.) I live only three miles from my job
2.) I am definitely a “slow” driver who is easy on the gas and brakes
3.) Although I am not super good about doing preventive maintenance, I’ve learned hard lessons over the years, and have since educated myself on the “essentials” of maintenance (i.e., oil change, filters change, brake check, tune-ups, fluid checks, etc.) and I responsibly maintain the car on a consistent basis.

4.) I was recently approved for a $15,000 vehicle loan via my Credit Union, but buying a vehicle for $15,000 at a 3.24% rate will set me back $272 per month over five years – a figure that is over my budget. I have set a maximum of $220 per month unless I am persuaded to buy a new car by the responses to this message.

I’ve had some pretty crappy experiences with used cars in the past. In 2001, I spent $8,000 on a 1996 Saturn with 30,000 miles on it, and it had WAY too many major problems with it right away. I must have spent over $12,000 over the years fixing the damn thing.

Any advice would be greatly appreciated.

Thanks much,
rbracch

Go with a decent used car.
There are very few new cars in your price range, after you factor in extra costs, like dealer freight, taxes, PDI, etc. Also, new cars depreciate quickly. You may not be spending money in repairs, but you are still spending money because you are 'losing' 30% of the car's value in one year.

Yes, used cars depreciate too, but at a slower rate.
Have a mechanic do an inspection on any used car you are considering. Also, consider an extended warranty on your used car. These are issued through a third party and are essentially insurance policies which will pay for many (but not all) major repairs your car may have. They are usually offered through used-car dealers but may be available seperatly. Here is a link to one such compnay. Its Canadian, but will give you the idea.

http://www.lubrico.com/

Finally, if I were REALLY in your shoes (you did ask :)), I would commute to work on a bicycle, or a cheap little used scooter (think Japanese Vespa), and use public transit in the winter. I would rent a car on the odd weekend or when I really needed one, either through a rental company or companies like AutoShare or Zipcars, if they exist in your area.

http://www.autoshare.com/how.html

http://www.zipcar.com/

Magic has a good point - when you're 3 miles from work, there are options other than owning a car outright, but I'm a big fan of cycling.

If you do want a car on a strict budget, I would play devils advocate and suggest something cheap and new. There are several brand-new cars available for less than $15K, the cheapest I've seen is the new Chevy Aveo. They are offering the hatchback, with dealer incentives and cash rewards, for $9,500 Canadian dollars. That is crazy-cheap for a car that, while it won't turn any heads, remains a) under warranty, and b) keeps maintenance costs minimal for the term of ownership. If you don't care much about appearances or a high-performance drive, this could be your best option. Also check out the Kia and Hyundai stable - the Accent is a decent little car, and the Rio was just revised for 2010.

In my shoes, I'd get a bicycle (see above post) or a $2000 cheapo until I could afford something decent without digging deep into a line of credit with a variable rate.

Good luck!
A.

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http://www.lubrico.com/



It has been suggested by others that this particular warranty company is not very reliable. They place onerous and excessively fussy obligations to maintain the warranty, thus giving rise to a lot of unpaid warranty claims. So use caution when buying such a warranty.
Read the fine print of the contract and do not be talked into anything you are not sure about.