The following post was excerpted from Personal Finance For Beginners In 30 Minutes, Vol. 1, by Ian Lamont. All rights reserved.
Autos dominate our lives. We depend on cars for work and pleasure. We plan our cities and new homes around them. Even when we’re relaxing in front of the television, advertisements for new cars are constantly paraded in front of our eyes.
Thanks to relentless media exposure and little-understood financing and sales practices, not to mention the perception of autos as important status indicators, most people replace their cars on a regular basis. A rent survey found that a typical new car-owner will keep a vehicle for nearly 6 years.
For many, there is no question that when they get their first vehicle — or buy a replacement car — it is going to be a new car. This is an accepted piece of wisdom.
If you follow the six-year buying pattern listed above, you probably will have purchased three new cars by the time you turn 40. Or, you may have fallen for the dealer pitch that urges customers to “lease a brand-new car for just $199 per month!” Of course, you have to read the small print to see that leases come with all kinds of gotchas, ranging from big down payments to restrictions on annual mileage. And you don’t actually own the vehicle in a leasing situation. That means there’s no trade-in when the lease is up.
While cars are a necessary, fixed expense, a fetish for new cars can lead to real financial pain. Fortunately, there are alternatives:
If you buy a new car, keep it longer. Recently manufactured cars tend to be vastly superior to the cars of decades past, in terms of resistance to wear, corrosion, and major mechanical failures. The old rule of thumb about the need to replace the engine or the car after it’s been driven 100,000 miles has been thrown out the window in the latest generation of vehicles (as recently noted by the New York Times in an article titled “As Cars Are Kept Longer, 200,000 Is New 100,000”). This is party due to better materials and on-board technologies, but it’s also because of an intense desire on the part of manufacturers to stay globally competitive.
What this means for you, the consumer, is a new car can be driven for 10 years or more if it’s properly maintained. Heck, drive that sucker into the ground before you replace it!
Consider used cars. It’s not necessary to buy a new car. You’re often paying a premium for a new vehicle from dealers who will do anything to close the sale with a slew of extra charges, features, and fees that you don’t need. Good used cars can be had for less than $10,000, if you do your research and shop carefully.
Photo credit: Kenneth William Caleno, licensed from Shutterstock
“How to cut car costs” was excerpted from Personal Finance For Beginners In 30 Minutes, Volume 1:
How to cut expenses, reduce debt, and better align spending & priorities.