That New Car Smell

Used: A used car takes advantage of the depreciation problem. Most of the depreciation takes place in the first three to five years, so buying a car that old means you buy something that doesn't lose its value as fast. That normally means that you can buy more for less money compared to new. For example, a 2009 Ford Taurus Limited costs about $29,000 without any additional options. A 2005 BMW 530i, with all-leather, heated seats, satellite radio, navigation and more would cost less than $24,000.

The disadvantages to a used car can be problematic. You are buying someone else's dirt, scratches and stains... no matter how hard someone tries, there is still going to be evidence that someone owned this car before you. You could also end up buying someone else's problems. The warranty for the used car is probably expired, and we all know someone that has sold or traded a car because they were tired of repair bills. That can be a big problem.

Lease: There are not a lot of advantages to a lease. Unless you are a very specific driver, a lease is a bad deal. Remember, after the lease, you don't own anything; you just rented the car for a fixed period. But, if you are a car guy (or gal), and a new car every three years is just your thing, and you understand that you are paying extra to do your thing, then a lease makes sense. You get a new car every few years without the hassle of having to sell or trade in the old one.

On the flip side, you are paying for the depreciation on that car... and paying for it during the time when it depreciates the fastest. If you don't return the car with minimal mileage and in great condition, you'll be charged additional fees. After all those months of paying for the car, you have nothing to show for it. That's why Dave Ramsey calls it a fleece.

Conclusion

There's no doubt it feels good to buy and drive a new car. There is great comfort and pride in it, even though most people cannot pay cash for a new car, and end up financing a depreciating asset. New cars normally are financed over five or six years, which can lead you into a perpetual state of making car payments as you pay off yours then buy a new one for your spouse. A lease can keep the payments low, but you still have monthly payments and in the end, you have nothing to show for your money. Again, you get stuck into the rut of always having a car payment.

When it's all said and done, the used car is the best value. Yes, you can end up buying a lemon, which is why it is important to have a trusted mechanic look at the car first. However, you can buy more car at a better price by going used, and that makes it easier to pay cash for it and avoid going into debt for something that is guaranteed to lose value.

If you are one of those people that just has to buy new, and you are a car guy (or gal), that's your call... but drop me a line when you are ready to sell!

Be safe.