Committing Personal Finance Sin – Why I Bought a NEW Car

Photo by Resedabear

Photo by Resedabear

Wow, a month off, a new site, a new perspective on a lot of things. Man, it feels good to be writing again.  That said, I solved one of my biggest issues that I needed to solve over the summer, getting a new car.  When I say new, this was not a “new to me” car, this thing had 4 miles on it when I drove it off the lot.

Some of you that have been reading for a while will remember my post, “Dude, I Totaled My Car” and know that I really needed a friggin vehicle in a bad way.  I really wish I was able to live like some of the commenters of Matt’s post at FCN, and sustain myself without a car.  However, that wasn’t feasible for me.  So here is how this all went down and how I ended up with a 2010 car a week after it came out, surely a personal finance sin if ever there was one.

The Advice Along The Way (good advice I didn’t listen to)

I talked to several bloggers, several friends, and even a friend’s father that is a certified financial planner.  Without exception, everyone suggested that I get a used vehicle.   Now, some people were more receptive to the idea of a new car (Mapgirl being one of them), but for the most part, it was “find a used car.”

I listened to the personal finance hour’s episode on buying a car, I read Ramit’s post about why he bought a new vehicle, I even took some tips from The Millionaire Next Door.

A week prior to purchasing my NEW vehicle I spoke with Baker from Man vs. Debt.  When I started telling him about my plans to purchase a new vehicle he plainly said (and I paraphrase, because it was gchat and wouldn’t make total sense out of context), “It sounds like you WANT a new car.  There are good late model cars out there, it just takes hard work to find them.”  I agree with Baker, I did “want” a new car, but primarily because it was the process of this search that was slowly killing me.

The Process (it sucked)

The process of buying a car should be kind of fun, after all, it’s a big purchase, its something that a lot of people associate as an item that “defines” you.  I don’t really buy into that, but whatever.  I am here to say, the process sucks.  I mean, it really sucks.  Especially if you are looking for a used car.

Maybe its just me, I don’t trust used car salesmen, and a clean carfax report wasn’t going to make me feel any better.  Ebay, well that just took too long and I want to at least see the car before buying it.  Carmax, well that is actually a good option, but all of their vehicles were quite expensive for what you were getting.  I decided at the beginning of the process that if I was going to finance anything, I may as well just get a new damn car.

I tried craigslist.  I really tried craigslist a lot.  I called a ton of people, I saw a bunch of cars.  I trusted no one, and didn’t like a lot of the vehicles I tried out for the money they were asking.  Why would I spend all of the insurance money I received for my Jetta ($4200) on a car that was much inferior to that car?

Finally, I went down to a dealership and practically bought a 2002 Civic.  Something didn’t feel right about the car, but the money was acceptable, and I was a dude that was at the end of his rope.  They pulled a fast one on me and threw away the warranty on the car as I was about to sign the papers.  I walked out.

“Brian, you aren’t going to be happy or comfortable in a late model used car with over 100K miles on it.  Get yourself a new f***ing car.”

A friend who I trust said, “Brian, you aren’t going to be happy or comfortable in a late model used car with over 100K miles on it.  Get yourself a new f***ing car.”  He was right.  I knew which cars were in my price range, and what I would be satisfied with.  Knowing it was towards the end of the year, I wanted to see if I could find what I wanted (2009 Hyundai Sonata) as a used car.

Sure enough there was one around the corner from me.  If I went that route I could have saved a few thousand dollars, however it already had almost 30,000 miles on it from the past year.  I was still close to buying it.  Then I called to find out about all the warranty’s (which is one of the reasons I was going Hyundai) and found out that the 10 year/100,000 mile warranty was void for second owners.  Also, the vehicle was already halfway to voiding out the 5 year/60,000 mile bumper to bumper warranty.  I said screw it, and was off to find a new 2009 car.

Because of cash for clunkers, I wasn’t able to find the exact model I wanted, in the color I wanted (pearly white is a shitty color for a car, if you want a Sonata in pearly white, call any dealership, that’s all they have left).  J. Money from Budgets are Sexy stated advised that if I was going to buy a new car and go into debt to do it, I may as well get all the bells and whistle I want and not compromise.  I followed his advice, found myself a 2010 in the model I wanted, color I wanted, extras I wanted and then started haggling.  The next day, I bought the car.

Why I Went New (and why what was best for me broke the personal finance mold)

I really took to heart what Ramit said in his post a few years back.  I am paying for value.  Also, since this process sucked something big, I didn’t want to have to do it again two years from now if my tranny on my used car blew up.  For the following reasons I went new.

  • Dollar for dollar this car is much more likely to last me 10+ years of driving.
  • A new car is cheaper to maintain, especially under warranty.
  • Time was of the essence.  2.5 months without a car and relying on my friends all summer made me expedite this process.  If I had six months to search for the “perfect used car”, maybe I would have purchased used.
  • This is a big enough car that I can feel safe growing into it if my family were ever to expand beyond myself (ie, I won’t need to replace it because its not big enough for transporting kids).
  • That smell really is something magical.
  • I know everything about the history of my vehicle.  This will be important if I ever have to resell it.  I know where its been, whats been done to it and I don’t have to worry about  previous owners.
  • I was also able to get decent financing.  Had to put 0 money down (which may not be advisable based on your situation) which allowed me to max out my Roth IRA for the rest of the year (something I was going to do in the next few months anyway) and invest more money in a marketplace that is likely to rebound huge in the next year or two.  This also allowed me to keep extra cash on hand in case of unexpected emergencies in a bad economy (if I bought used or put a big down payment on the car, that money would just *poof* gone).

To the Naysayers (I want to hear from you guys)

This may not have been a great financial decision for me.  I went $19,000 deeper into debt on a new car.  However, I don’t think this was a bad decision.  It was just a decision that was neither good nor bad.  Before you hit me upside the head too hard, it should be known my financial goals are still intact.  I am still able to save close to $1000 a month.  I still maxed out my Roth IRA for 2009.  I am still able to contribute 20% of my salary to my 401(K).  As for depreciation, I didn’t buy a Benz, I bought a Sonata.  It will depreciate a few thousand the first year, and I am not reselling it anyway.

So what now?  I want you guys to bring it in the comment section.  Give me your thoughts and perspectives.

26 Responses to Committing Personal Finance Sin – Why I Bought a NEW Car
  1. Flexo
    September 10, 2009 | 7:58 am

    Buying a new car can be a good idea — you have more time/miles with the car in its “very reliable” stage, you don’t have to continually put money in the car to maintain it other than oil changes, and if you keep it until it dies, depreciation is completely irrelevant.

    For someone who says they’ll keep a car for ten years and then doesn’t, either by choice or by necessity, then they might end up on the losing side of the deal financially. But a long period of reliability is a major factor for me and probably you, too. I bought a new 2004 Honda Civic in 2005, I now have 109,000 miles on it, and I’ll continue to keep it until it starts costing too much money to maintain… And in the mean time I’ll be saving up enough money so that when I do buy another car, it will put me into little or no debt.

  2. Craig
    September 10, 2009 | 8:58 am

    Good to hear your story as it helped me with my own personal car buying experience, and a lot of the techniques and advice you used and learn I used as well. Will be helpful for anyone else looking to buy a car.

  3. Angie
    September 10, 2009 | 9:13 am

    Not sure I’d trust that a Hyundai will actually last 10 years, but hey good luck on it! For the price it is worth the risk. I think I’m looking into a downgrading my vehicle to a used one but am very skeptical of all the dealings and hassles you mentioned. Althought I’m hoping there won’t be too many issues with buying a 30k vehicle. I don’t want to finance so that’s my push not to buy new. If you are going to finance new is the way to go since you won’t have to get used car APR on your loan. Congrats!

  4. Brian
    September 10, 2009 | 10:47 am

    @Flexo I completely agree, and i really enjoy knowing that my car is in that “reliable” stage instead of wondering what the previous owners may have done to it. The long period of reliability was crucial as the process of buying a car sucked, and i don’t want to have to do it again, especially when i have to worry about financing and the like. When i can pay cash for the next car (and i am not in desperate need for a car) i will hopefully be wiser about it.

    @Craig Glad to hear our talks were helpful for your own experience. Now its a race to see which one lasts longer considering they are a week apart.

    @Angie Well lets cross our fingers that the Hyundai will last. They have been rated highly lately as their quality has improved. You will see one pissy blogger if it dies in just a few years. It is hard to find a vehicle in that 30K range that is worth the price, especially (depending on the make and model) a few thousand more is likely to get you a new car of the same type. What is it you are driving now that you are looking to downgrade from?

  5. mapgirl
    September 10, 2009 | 4:24 pm

    LOL. I have a lot of K-pride, but I’m with Angie. I’m not sure your car will really last 10 years. You should have come around to check out my 8 year old Altima. I’ll be 9 years this November. It’s got dings and scratches, but the engine still runs really well. It’s a beater now with almost 150K mi on it, but the engine works like a dream. It’s everything else that’s going to pot. (interior, exterior, suspension, you name it.)

    Even so, I think my car will last another 2-3 years.

    Now the question is, before you become a ‘pissy blogger’, what does ‘die’ mean to you when it comes to the car? I was pretty pissed off when I had to replace my clutch at the 90K mark instead of 100K+. But a new clutch does not equal ‘dying’.

    A friend of mine has a newish Acura TL. It was 1 yr old, used and he got a great deal on it. But there’s a mystery transmission or engine problem that the dealer can’t figure out. Now, THAT would piss me off because of all the time and trouble of going to a dealership. I want a car that is headache-free, which my car has been for the last few years. I’m almost scared to buy a new car because my old car is the devil that I know. OF COURSE IT NEEDS WORK. It’s old! But a new car should be minty fresh for the first 5 years of ownership. You know?

    Anyhow, now I know who is the next designated driver for happy hour in his shiny shiny new car!! LOL

  6. Jessica
    September 10, 2009 | 10:37 pm

    I don’t plan on purchasing a car anytime soon, but if my current car (Hyunda Tiburon) dies within the next two years and I don’t have a drastic increase in my pay, I’d mostly likely purchase a slightly used car due to how quickly they depreciate. However, I’ve never had to purchase my own car before so perhaps I’d change my mind and go with a new car when it came down to it.

    I was wondering how you picked the car given your financial considerations?

    In any case, I wanted to share my Hyundai experience. Having driven 2 Hyundais now (Sonata and Tiburon), I’m not the biggest fan. The car I drive now was purchased used (2003) by my dad from a friend of his, and it’s been in a car accident (my fault). I’ve got some serious paint peeling issues, my radio/cd player takes a long time to start when it’s hot– I live in south Texas so it’s hot a lot, one of my windows won’t roll down (though not long ago it decided to work for a few days), and the button to open the trunk no longer works. It also makes a weird noise whenever I turn past a certain degree, but that issue is definitely related to the accident, or actually, the less-than-perfect repair following the accident. I suppose most of these are more nuisances than serious issues, but still annoying. I do feel a little embarassed by my car when I have to drive to a client’s office. At least my engine hasn’t had any problems. But yea, I don’t know how the newer models are.

    I also wanted to mention that my parents often purchase used cars, BUT they’ve bought them generally from close friends that happen to buy new cars every couple of years. So in this case, they trust the seller and have a good idea of the car’s history.

    For my next car, I’d probably consider a Toyota or Subaru but again, I haven’t researched it very much since I won’t be purchasing one anytime too soon!

  7. Brad
    September 10, 2009 | 11:14 pm

    LOL, I won’t lecture you as to why you shouldn’t have done this because you already know my opinion on the matter. I am completely sold on letting someone else take the hit in depreciation since cars lose approximately 70% of value in just 4-5 years. However, I agree with you on the fact that buying a “reliable” car takes time and patience. I think Baker was right in that you just WANTED a new car and at least you did read opinions of others before taking the plunge.

    I hope that you can get that sucker paid off quadruple fast to at least save money as far as interest is concerned. Personally, if I woke up with a $20,000 car payment I would keep a few thousand in my emergency reserves but then take the $1,000 a month and pay on top of the monthly car payment. You could pay it down pretty fast that way.

    Either way good luck Brian! 😀

  8. Britt
    September 11, 2009 | 11:05 am

    Absolutely horrible financial decision, but… an excellent life decision!

    Obviously, you thought your decision through. You didn’t act on emotion, and your financial goals are still intact. Although it may not be exactly what I would do, I can’t fault you for it.

    Also, who am I going to buy my used cars from if nobody ever buys a new car?

    In addition, excellent point about car maintenance. You could have gotten the best used car you could find and then take a bit hit when the engine falls out a week later. With a new car under warranty, no need to worry about that…

    Have fun in your new car!

  9. Brian
    September 12, 2009 | 9:51 pm

    @ MapGirl with your K-pride you should be ashamed of yourself with such a statement. Hyundai really has stressed durability lately in their vehicles. Time will tell of course, but they are much more durable and reliable than they were 5 years ago. And as far as being the DD, forget that. Craig’s car is a week younger than mine, and therefore much shinier!

    @ Jessica As i stated above, i really hope the newer models are a bit more durable than the early 2000s. Its unfortunate you haven’t had the best experience with your car. As far as the financial considerations, i wasn’t too concerned. For the past 6 months, i was saving $200 a month in anticipation of buying a new car in 3-4 years. At that point i would have probably enough cash to buy it without having to finance, so shifting that $200 into a car payment made me comfortable affording any car that i wanted really. I went with the Sonata because it was in the same class as the Camry and Accord as far as ratings, size, etc, but came at a large discount compared to the others. Couple that with the warranties, and even the return policy if you lose your job, and Hyundai just seemed the way to go.

    @Brad Yeah, going to actually have to build an emergency fund now (after my post a few months ago about how they weren’t necessary). I will try to speed the process of paying the car off as early as possible. However, i don’t want to throw too much money at the car and not invest when the market is still climbing its way back up. I know that makes you cringe, but a year or two of debt while my money is making more in the market than the interest i will eventually pay is a smart move in my opinion (lets hope it just works out that way).

    @Britt Thanks. I respect the first line in your comment. While i view it as an not good, but not bad financial decision, i do view the purchase as an excellent life decision. Only time will tell if it was really bad for my finances, but i walked into the situation with my eyes wide open. I can’t be upset with anyone but myself if i get burned for some reason (although i feel comfortable with my “good debt”).

  10. JerichoHill
    September 15, 2009 | 6:02 am

    Before I disagree with what you did, let me agree with it.

    At this point, you were time-constrained and suspicious of used cars, as well you should be. You rightly recognized that any used car would not be a long, long term solution. And it’s highly important to have a car you, and any potential lady friend down the line, feels comfortable in.

    I’m not going to critique the financing, you don’t have a system setup that allows you to buy cars straight cash (Ramsey’s method). I’ve had such a system since I was 15…so every time I got a car (at 15, at 20, at 28) I buy better (quality). That’s fine. You might have looked at a credit union.

    I don’t have a problem with new. I bought my Rav new. I could care less about the hit because to me, a car is not an asset that I count as Net Worth counting. It’s something that gets me from A to B reliably.

    Now, what did you do wrong? You didn’t bomb online dealerships in the area to get a better deal. I don’t think you did all the research you could have done. And you did position yourself into this situation, which can be helpful to recognize and avoid it next go around…ABP…Always Be Planning.

  11. Cap
    September 21, 2009 | 3:55 pm

    Good job thinking out the entire process. Agreed that its neither a good/bad decision. Finding a reliable used car is a bitch. Those that have spent days/weeks car shopping can relate to searching for cars into Craigslist and finding ALL purple links because you’ve seen and contacted practically every cars for sale within your regional area.

    A friend of mine is slugging thru her PhD program and needed a reliable used car for the next 4-5 years. We’ve been searching for the past 1-2 months and finally found a fairly new, reliable (hopefully), one-owner, ’06 Camry with 70k highway miles on it for 10k cash (from savings). The entire search process was a real bitch work, but it was necessary for my friend since she has only a set amount of budget. At the end, a ’06 used car for 10k is pretty new & relatively still pretty pricey, but it sure beats paying 19-21k for it brand new.

    Good luck with your new car and definitely hope it’ll serve you well for years to come.

  12. Financial Samurai
    September 28, 2009 | 10:51 pm

    Hmmmm…. Brian. Donno about the $19 G expenditure. I’ve got a 1/10th rule at Financial Samurai, where we spend no more than 1/10th our gross income on a car. Millionaires do this, and are probably more conservative, why shouldn’t us?

    That said, I think $19G’s for the Hyundai is pretty reasonable and frugal. Good warranty for sure. Enjoy your new car!

    I’ve actually had 8 cars in the past 10 years! I’m clearly a car addict, but I learned a lot. It’s also easy to trade cars when they are pretty cheap. All my choices were fine except for the $80,000 Mercedes Benz G500 SUV I bought! Ouch! Never again.

    Hope you enjoy reading “8 Cars In 10 Years. I Have A Problem But You Won’t!”

  13. Financial Samurai
    September 28, 2009 | 11:14 pm

    Brian, I forgot to mention, I currently drive a 9 year old Land Rover SUV with 110,000 miles on it. It’s probably worth no more than $7,500. It’s quite a decline from the $80,000 SUV, but honestly, I couldn’t be happier. It goes from point A to point B fine, and I never have to stress about someone scratching it or anything.

  14. Lee
    October 6, 2009 | 10:36 am

    Hi! I surfed on over from Financial Samurai.

    Ordinarily I hate doing this (posting links at the first comment), but I think it’s something you should read having just bought a nice new car. I did the same thing back in 2003, and there are a few mistakes I’d love you not to make in the years that follow.

    Enjoy your motoring! I’ll be back :)


  15. Courtenay
    October 9, 2009 | 6:54 am

    Congrats on the new car purchase, especially since it’s a Hyundai. :) I bought my blue 2004 Hyundai Tiburon brand new off the showroom floor 5 1/2 years ago and it has never given me any problems either mechanically or electronically. With regular maintenance, smart driving and no car payments I’m expecting to be driving my Hyundai for another 5 1/2 years or more.
    For me, as with others, buying new makes more sense when you can do it because there is no mystery as to what is going with, or has happened to, the car. I know there are some very honest private sellers whose vehicles have been well taken care of but I like knowing that I have an awesome warranty and a car that only I have driven so if there should be an issue I know why it’s there. The only vehicle I ever bought used was a 1984 Kawasaki motorcycle and, if/when I ever get another motorcycle I will probably buy that new as well.
    Good luck with the car and good luck with the rebounding market offsetting some of the interest too!

  16. Angie
    November 12, 2009 | 7:47 am

    Just a reminder for tax time. Sales tax on new cars are deductible for 2009. I think they repealed the part of that requires you to itemize. Well something to look into. I was reminded the other day and remembered you had bought a new car.

  17. Brian
    November 12, 2009 | 8:15 am

    I appreciate it Angie. Have been absolutely expecting the deductible since i bought it (just one more reason to buy new instead of newer used).

  18. MLR
    December 10, 2009 | 7:18 pm

    I recently made a similar choice as you due to the same circumstance (accident).

    I had a 2004 Hyundai Accent. The quality was GREAT. At 95,000 miles I never had an issue, but I also did all of my regular maintenance. And I’m not speaking in hyperbole, it was a great car. You mentioned Hyundai’s from the early 2000’s had quality concerns but have since gotten better. I think Hyundai’s started gaining respect for quality in the early 2000’s and have only gotten better. It’s the 90’s Hyundai’s you need to worry about!

    I got $4,500 for my Hyundai. I bought a 2010 Ford Focus SEL.

    Did you try emailing all of your local Hyundai internet managers? I did that with the Ford and they went from a MSRP of $20,790 (heated leather seats, sunroof, premium sound, SYNC [voice recognition for phone and mp3 player along with traffic, news, and weather], Auto tran, etc) down to $19,070. That’s $600 below invoice. Edmunds has true market value (average of what people pay) at $19,990. So I got it for $600 below invoice and $900 below what most people pay. Then I got another $3,500 in rebates. Grand total: $15,570.

    Oh well, I made a “financial mistake” that I can more than live with.

  19. Brian
    December 12, 2009 | 6:33 am

    @MLR – the e-mail thing got bogged down. Finally two days before, i called a bunch of dealers and said, i am buying this car, i know you have it in stock.. what your number. I got a number that i liked, and started to shop it. Once dealers heard the number they said, “if you can get it for that, take it” as if they were calling my bluff or something.

    I agree, MLR, this was a financial mistake that i can live with as well.

  20. New Car
    December 30, 2010 | 4:56 am

    its better to buy a used cars instead taking huge loan and buying a new car.

  21. Draytek Routers
    June 24, 2011 | 12:35 pm

    Excellent website, really glad I found this. Need to some solid information about draytek routers.

  22. jansen
    September 2, 2011 | 11:05 pm

    Given the current set of economic circumstances that we are facing, would you consider updating your article or do you think its conclusion still remains valid?

  23. larsjaeger
    October 17, 2014 | 3:26 am

    this siet is good…and and a lot of the techniques and advice.

  24. larsjaeger
    November 3, 2014 | 9:45 am

    Well something to look into. I was reminded the other day and remembered you had bought a new

    July 4, 2015 | 9:57 pm

    It’s appropriate time to ake some plans for the future
    and it is time to be happy. I have read thos post and if I could I
    wish to suggest you some interesting thyings or advice.
    Perhaps you can write next articles referring to tis article.

    I want too read more things abou it!

  26. Gregori
    July 23, 2015 | 8:03 am

    Every people have right to give our peraonsl opinion,sometimes they are right or wrong, but my opinion is I think every middle class family are using these cars so we all are with you sir please move forward and give some nice car model’s like us people. I am always with you.I like the wallpapers….

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