Buying a New Car vs. Used Car vs Public Transportation - (W5:D4) Debt Free Millionaire Podcast

Debt-Free Millionaire

NEW DEBT (TRANSPORTATION) (W5:D4)

First, before you buy a car, think about where you live. Do you need to buy a car, or would public transportation be more economical for you, at this time? Not everyone needs a car. Is your business far away from the subway? Most people in New York either walk or take the train to work each day. Is it crammed and an inconvenience? Yes, but a car costs at least a few thousand dollars, and places like New York have taxes on your vehicles and high parking spot rates. It’s not worth having a car for 95% of New Yorkers, and many large cities in the United States. Now, if your work is far enough away from public transportation, or you have special reasons to get a car, then only get what you need in a car.

No one needs a new car off the lot, though people get into debt to buy them everyday. Most new cars lose about $5,000 in value the moment they drive off the car lot (and when the return policy does not apply anymore). Then they drive them until the next newer car, with fancier features, comes out, and they buy those, putting their slightly used cars back on the market. Those slightly used cars lost over half their value in the two years that person drove them. Now, they are just right for you to buy. After they lose their greatest depreciation, driving off the Car Dealership Lot, they are priced right where they should be. Give them a few more years, and they are right where a person in debt should be looking. A car for someone in debt, needs only to cost $1,000-3,000. Unless there is something specific that you need, you can find one for very little investment.

Prices are different if you buy them at a new car dealer, used car dealer, or private individual (for sale by owner).

New car dealers use the offer to trade in the old car to entice people to buy a new car for less. They take those cars and either sell them at auction to a used car dealer or, if they are in good condition, sell them on their lot. When they buy them directly from a seller, they pay or trade it for $2,000-3,000 less than if you were to put in the effort and sell it to the next user. Then, they take that car and sell it for $2,000 more than you would have paid for it from a private individual.

Now, how do you find out how much you can sell it for? Kelly Blue Book or www.kbb.com. This site takes the age and condition of the car and prices according to the market around them. If you are selling in San Francisco, CA, your car will most likely go for more than Kansas City, MO. It takes into consideration the make, model, condition, mileage, and options found in your car, and allows not only the car dealerships to see the price, but all customers. They want to be an open book, as to the true price of a car. They break the value down into three categories: Buying from a private seller (largest return); buying from a dealership (medium pricing); and trade-in value (least amount).

Sports Car - No one needs a sports car for everyday driving. They don’t handle well on the road, they carry less, and can be expensive to fix. At the same time, I wouldn’t give up a inexpensive used one, if you find it.

European made - These are the most expensive cars you can buy, and also cost the most to repair (and require frequent repairs). European cars are normally sold for top dollar, based on the pricing in Europe - including all their taxes, and then when you need to repair them, their parts are mostly imported from Europe, and need a European car specialist to repair them. Either way, they are very expensive to own. These days, wherever a car sells the most, that is usually where it is built. Volkswagen has moved its production to the United States, which has lowered its high prices, though some of its parts are still imported. BMW is also building in the U.S., but their price tag has never been known for being economical.

American cars, on the other hand, are more affordable in price, and more reliable in repairs. They are considered the middle ground between sporty, appearance, and reliability. An American made car is always a safe bet and moderately expensive to fix. The top brands include Ford, GM, Chevrolet, Jeep, and Oldsmobile (though many of their cars have been exported to Canada, Mexico, and even Europe, so their price comparably has gone up faster with some models).

Asian cars - On the other hand, Asian cars are the least expensive, yet the longest lasting cars, on average. Both Toyota, Honda, and Subaru are brands that are known to last a long time. Their cars and parts are all made here in America, and so are priced for the United States. In 2021, Toyota now tops GM as the number one maker in the United States and yet it originated in Japan.

So, when you are buying a car:

1. Don’t buy new, you lose $5,000 driving it off the lot.
2. Don’t buy a sports car or European; they’re normally gas guzzlers and can be expensive to fix. Right now with fuel prices high, these are not a good idea.
3. Buy used, after researching them on Kelly Blue Book, for price and reliability.
4. Buy a car that will last you a long time; when you are debt free, then save up and buy your dream car.