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Buy New Car vs. Keep Old Car

Possible new car purchase?

When it comes to the buy new car vs. keep old car dilemma, the financially prudent answer seems to always lean towards the latter. Of course, a new car is a significant drain on one’s monthly cash flow, but when is the right time to finally buy a new car? I have never considered buying a new car quite as seriously as I am doing right now. This past Independence Day, I spent $350 on rest and pampering… for my car! (some recent repairs include: $120 in December 2009, $350 in May 2009, and $400 in November 2008).

The cost and headache of spending a holiday weekend on car-related issues has made me wonder: should I buy a new car? Has the time come to finally let go of my beloved Honda (who has served my Dad, then me, faithfully for 230,000 miles, and counting) and get something with side-impact air bags and a CD player?

Recently, my parents also suggested that I should buy a new car, mostly for safety reasons. I demurred, although driving 60 miles a day has made me somewhat more inclined to consider a new, more comfortable ride with updated safety features.  CB raised a good point – given that my car is so old (even though it’s still in very good condition for its age / mileage, knock on wood), I should do some research into the type and cost of car I want.

Estimated Cost of New Honda

My family has had pretty good luck with Hondas, so I pulled up the numbers on Edmunds’ Auto Loan Calculator to see how much a Honda Civic DX would cost.

Even with a $10,000 down payment on a 36-month loan, and at a very favorable 5.0% interest rate, I would be paying $234 a month in car payment.

New car vs. Old car in dollars

Keep Current Car: the cost of driving and maintaining my car total $400 a month, or $13.11 per day.

  • $150 – gas
  • $90-$100 for liability only
  • $150 – repairs / monthly contribution to Repair Fund

Buy New Car: if I were to buy a new car, my repair expenses would decrease, but my other car-related expenses would increase.

  • $150 – gas, maybe somewhat lower because of more efficient gas mileage? my current car gets around 29 miles per hour. I’m not sure what new Honda would get.
  • $234 – monthly payment (according to Edmunds calculator)
  • $130? – car insurance would go up because I’d be insuring a new car and I’d need comprehensive / collision coverage
  • no out-of-pocket repair costs for the first 3 years (or so I’d hope)
  • I would also be out the $10,000 for down payment

Safety concerns?

It seems that keeping my old car would be in my best financial interest. However, am I compromising my personal safety by not purchasing a new car? As cars get older, their safety features becomes outdated. Even though my Honda is rated very well for its year in terms of safety, and it has never been in a major car accident (again, knock on wood), a new model would of course have more up-to-date safety features. If I somehow end up in a match with a Hummer on the freeway (knock on wood, again, that that never happens), I will very much like to have side-impact air bags and new 2010 construction.

So, questions for readers: How did you decide to keep your old car or buy a new car? How did you reconcile the safety concerns with financial concerns when it comes to possibly buying a new car? If you were me, would you buy a new car?

  • Kate - Well, normally I would say Option C: buy a newer used car (less depreciation), but with new car loans in the 3% range (or even the 0.9% range), it's a better deal for a new car often. And there are more incentives. We just purchased a new car b/c my new(er) car was unsafe. My peace of mind is worth the car payment. So, ask yourself: do you feel safe driving it? What is that level of comfort worth? Can you afford it? ReplyCancel

  • amberto - I am all about keeping cars as long as possible. We don't have a car payment right now and I'm hoping we can stay that way for a long, long time. However, cars die. And 230,000 is a pretty good life for a car. I'd say it sounds like buying another car would be a reasonable thing to do. However, I would not buy a brand new car. Buy a newish used car. You'll pay less than buying it right off the lot. ReplyCancel

  • stellaky - We went through this decision somewhat recently as well. It's very hard to estimate how much you will need in repair costs – $150 a month may not be enough if your engine goes out or you need a new transmission. We decided to trade in my boyfriend's 13 year old Honda with 210,000 because we could still get $1,200 as a trade-in toward a new car – whereas if we waited until it broke down to the point it was worthless, we'd loose that trade-in value. And, after having to spend $400 on a new radiator, and $70 to tow it to the shop – we didn't want to have to shell out more money for a more serious repair.

    We opted for a lease on a new honda civic. Lots of people have lots of bad things to say about leases, but he chose this option due to the low payment — it's hard to find anything below $199/mo. If I were you, I'd save that $10,000 and instead lease a new civic (or even something cheaper – I've seen some lease deals for $149/mo!). You can always buy the car off lease after 3 years for around $12,000, which makes for a very reasonable used car purchase. Also, you don't pay tax on the entire purchase with a lease, you only pay by the month. It's a great option for younger people short on cash.

    As far as insurance goes – I'd look around. We both pay less than $80/mo for full coverage (liability and comprehensive) – I would expect your insurance to go down rather than up – just due to the safety improvements on a new car. It's an easy 5 min call to your agent to be sure. ReplyCancel

  • Vanessa - May I suggest buying a Honda that is not "Brand New"? You can buy one that is a year old with little or no miles, it would be a more cost effective purchase. There are still brand new 2009 cars on the lot that dealers are itching to get rid of. ReplyCancel

  • Leslie - Option 3: buy a $10,000 used car that is cheaper and more safe than your current car. You don't have cash any more, but you also don't have a monthly payment or high maintenance costs. You can get a lot of car for $10,000!

    We got a GREAT 2000 Corolla EX (Toyota) with under 60,000 miles for $8,000 even. We had to look for a little while, but we were determined to get something safe and within our budget. Decision to get a new-to-us car was made when the old car wouldn't start one day and repairs were more than the car was worth and we knew even with repairs it wouldn't pass inspection.ReplyCancel

    • WellHeeled - A quick look on Honda's Certified Used Cars website shows that the cheapest Civic Sedans I can get are around $14,000 with 50,000 miles – which is better than brand new car, sure, but I'm not sure if $2,000 or $3,000 is worth buying an used car. ReplyCancel

  • Cass - I am also a firm believer in keeping cars as long as possible. I have had my Toyota Camry for 11 years, and she has 240,000 on her and shes still running strong with the occasional repair. I'll drive her until she falls apart. I agree with the above commenter who suggested buying a new to you car. As soon as you drive your NEW car off the lot it depreciates significantly in value. Your better off buying a car 2 -3 years old like a lease return. Just my humble opinion though :)ReplyCancel

    • WellHeeled - Usually I'd agree, but at least with Hondas, 2-3 year-olds are really not much cheaper than new cars ($2K to $3K at most). If I go private party sale I can get them for cheaper, but I like the peace of mind I get with dealer certified vehicles. ReplyCancel

  • Benjamin Bankruptcy - Don't do it! My personal philosophy on cars is buy a sub $3000 car and drive it until it dies. Do work on it yourself, change the oil, spark plugs, brake pads etc because it doesn't matter if you screw it up and you don't need log book services for resale. The safety related conserns are valid but overblown, car makers over cook the improvements in safety because it appeals to your emotional side, i need to buy a new car to protect my family etc.

    Lets say there is a safety component and that's valid. How do you improve the safety of your car so it's equal to that of a new honda? Research shows the greatest improvement that can be made to driver and passenger safety would be to make it compulsory for people to wear motorcyle helmets while driving, like seatbelts are now compulsory. That would cost you about $50. The helmet negates the need for airbags because it's better than an air bag (ever seen a nascar or fomula 1 driver without a helmet and with airbags?) . Now we can go from making an emotional decision about safety to a rational decision about safety.

    $50 helmet vs $15000 for a new car so I don't mess up my hair? Where you just trying to rationalize the purchase of a new car?


    • Enjoy Life - Hi WellHeeled! I am a long time reader – and first time commenter. I totally agree with BB. Seems like on this one you WANT a reason for a NEW car.

      From my perspective – you want a new NEW car. Your older Honda with 230K seems to be fine to me…Try to wait a bit longer before buying…

      Also, my .02 – I would strongly suggest doing some research and finding a well cared for, single user/family car – through a private buyer. In my family, we have gotten and offered great deals on good cars that have been very, very well cared for – but for some reason just no longer fit the family. My dad once sold his truck that was almost brand new because we had a great opportunity to live overseas. My mom sold her Honda that was in great shape because her needs changed for the size/function of a car. I know you always do a LOT of research – so I am sure you could find at least a couple possibilities.

      And if you have the 10K for a down payment – then either find something for 10K or under, or wait until you have the 18K for the one you want…

      Good luck. ReplyCancel

      • WellHeeled - Welcome! Thanks for reading and for delurking. I actually have enough cash to buy a new car, but I don’t want to tie up all that cash when I can do a little bit of financing. No debt is good but at the end (a certain amount of) cash is still king at this point in my life. I will think about the private buyer scenario – I’ve just heard so many horror stories about that, that I’m hoping to avoid the headaches by going with a dealer certified program. The price difference between a brand new Honda and a 3-year-old dealer-certified Honda is between $2K and $3K. Those are not insignificant differences, to be sure, but on the other hand I’m not sure that type of savings is worth it. The last thing I want is to deal with car troubles that came from someone else’s driving experience.

        I am doing research into potential car buying right now not because I plan to buy a new car, but because it’s better to front-load the research than to panic and buy the first car I see in case my old car breaks down.ReplyCancel

  • Money Reasons - I would buy a newish used car like amerto too. But for now I'm keeping my old car (I bought it new in 2003), it's not pretty, but it gets to to work and back…

    I know that your car is pretty old, so either way you go, I wish you luck! Hey, the savings you are creating by teaming up with your boyfriend could justify getting a new car, but then again, there is that dream vacation to think about too :) ReplyCancel

  • StackingCash - Most PF people will tell you the cheapest way is the best way but I disagree. When I was younger I had to buy cheap cars. Those were replaced rather quickly. They became unreliable even after repairs and maintenance. I was able to purchase a 2001 Acura CL Type S brand new for 33k, which was a great deal of money way back then. It turned out to be a great deal. My wife drives it now and loves it. The luxury and performance of the car has given us 10 years of enjoyment of owning a "nicer" car and I anticipate it will give us another 10 years. It has changed my perception of value. I now think a new luxury car adds to my life as much as a nice vacation. The challenge is if you can afford it. As long as you weigh your pros and cons regarding the car purchase, you will make the right decision. Just don't be cheap about it like most people, life is too short. ReplyCancel

  • Car Coach - Great (and detailed) comparison! ____I'm also all about keeping cars as long as possible (can you believe it?). My last decision was easy though…it was a saftey issue for my wife. Her old Honda was on it's last legs and I was afraid it was going to breakdown somewhere and strand her. So we got a new Honda! As you can see, I share your Honda love! ReplyCancel

  • Sarah - I agree… buy a "new to you" car that is 2 years old or so. I was able to buy a 2006 Civic in 2007, with a $5k down payment and a 5 year loan and keep my payments under $300. ReplyCancel

  • Little House - What about purchasing a lightly used car? Say a 2008 Honda Civic, instead? You might save on the car payment because the total cost would be reduced by a few thousand dollars and your insurance payment might only be a few dollars more. Often used cars come with a 1 to 3-year warranty, so out of pocket expenses would be low. Something to look into.ReplyCancel

    • WellHeeled - I didn't think of a used Honda because the cost of a 2-year old Honda isn't that much lower than a brand new one, and I didn't want to deal with driving with someone else's problems. But maybe I should reconsider that and look into pre-owned / warrantied Honda programs a little closer. ReplyCancel

  • Amy - I was in a very similar situation toward the end of 2008. I had a 15 year old Mercury with around 150,000 miles on it (your Honda has much more impressive mileage!) and the poor thing was one foot in the grave. I had shelled out around $2000 that year for repairs, and I didn't even fix things like the ailing air conditioning. I was also commuting about 50 miles to graduate school in the evenings in addition to my daily commute to work. In October of '08 I got a new Honda Accord at a 3.5% interest rate (got a sweet rate b/c the financial crisis had just hit; that dealership was so empty!) and was able to haggle the price down a couple thousand before the added down payment. Even with the monthly payment and the higher insurance, it is worth the piece of mind knowing that my car won't up and die and strand me somewhere due to its old age. My repairs and upkeep are minimal, and any problems are covered by the warranty. I also like the safety of the side airbags and other new-for-me features, like keyless entry, which can actually wind up being a safety feature if you are walking to your car alone at night. Even if you don't go with a brand new vehicle, like amberto said above, dealers have great pre-owned cars and good deals. Definitely look around online to see the prices at which similar models sold – I found that by bringing my printouts of these prices to the dealerships, they were less likely to drive a hard bargain and I could really name my price. Good luck on your decision! ReplyCancel

  • Serendipity - Hmmm. This is very interesting. I recently bought a new ( to me) car last year and I'm hoping to pay it off around summer of next year if all goes well. I decided to do this for a variety of reasons. The current car I had was a 1998 Toyota Corrola, which got great gas mileage but hit the 240,000 mile mark and just needed alot of work all of a sudden. A new starter, a new ignition, new oil pan, new rotars. The final straw was when I broke down on the side of the road. My fuel line went out and so did my engine which would have costed 1200 dollars to fix. That's a down payment on a car! It was so frustrating so I went car shopping and bought one.

    I really regretted buying a car because I felt guilty. I had other debts to work on, savings, etc. But, now I'm happy I did what I did. I needed a new car. The only thing I would do differently is probably buy a cheaper one so I didn't have to finance as much as I did. My credit score has gone way up though, which is a plus. And I'm pretty happy with my car and I'm trying to take much better care of it then my previous one.


  • Serendipity - I might buy a new car if I were you, but what about one that you can find for 10,000 so you don't have a car payment? I'm sure you can find a used vehicle with little milage for that amount, as well as it being a newer car. ReplyCancel

  • Heather - How about a compromise? Buy a new-to-you *used* car! If you can afford a $10K down payment, you can likely afford a decent car out-of-pocket. You'd eliminate the monthly car payment and keep your insurance & registration costs more affordable while updating your safety features & (one would hope) keeping your repairs at minimum. ReplyCancel

  • laura lou - I went through this 2 years ago, and decided that a honda certified used car was the way to go. I did tons of research, and figured out that I could buy a 2 year old car for significantly less, still have a warranty left, and let someone else take the depreciation that happens so quickly when driving off the lot. You should also check out Toyotas – they have 0% financing for the first 60 months I believe. You'd obviously have to weigh the pros and cons of any potential recalls due to safety issues, but it would be worth looking into. If I was looking now, I would consider the Prius. While you can't get the carpool stickers here in California anymore, it would still be economical. There is no longer a premium on them, and they are practically a steal from what I'm reading. Also run insurance quotes for models/years/mileage you are interested in to get a ball park figure. I did that prior and was able to see what I could afford payment wise after knowing that information. You might also consider financing over 5 years (watch for dealers who try to finance over 5.5 or 6 to get you a desired payment!). I did that, and I am paying more towards my principle each month through honda financing. I will pay it off sooner, but wanted the flexibility to have more time in case I lost my job or had to take a pay cut (which happened, thank you state of California!). ReplyCancel

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  • Financial bondage - new car payments are one reason most Americans are broke and living paycheck to paycheck. I don't ever want a car payment again. ReplyCancel

  • yvonne bleiman - I have a Mercedes E 320 2001 with 57,000 miles. I bought the car 5 years ago and haven't spent a cent on it–I got it at a good price. Now I am having to spend money on it–$900 for a catalytic converter; $900 for a transmission shift module (rain came in sun roof and part was not booted); $350 for 50,000 mile tune-up. There is a possible $600 cost for electric windows if the rain spoils the switches–in near future according to service adviser as water "corrodes" over time; and possible $1300 transmission control module if the rain ultimately corrodes that; $150 for a slow transmission fluid leak; $400 to repair two front-end broken springs.

    I am a fool not to take about $14,000 I can get on a private sale and leave this lovely car behind me? I will never be able to afford this luxurious type car now–what is a "luxury" car for $25,000? ReplyCancel

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  • carpartswholesale - It actually depends, really. If your present car is already in really really bad shape, as in the kind that leaves a big hole in your budget, then I think it's high time that you change your car. The accumulated value that you spend on your old car would pretty much equal the cost of you getting a new anyway. So why not just cut to the chase. However, if your car is like mine and it has served you loyally throughout these years (aside from the occasional and forgivable clunks and poofs here and there) then you can very well afford to hold on to it. Mine has been with me since my first year of college and it has some sentimental value to it that i dare to hold on to until the time my car is ready to take its dirt nap. ReplyCancel

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  • auto pre purchase - I agree with those who suggested to buy a new-ish used car. You want your "new" car to somewhat feel new, and not be completely decades behind in technology (read: should have power windows). I like to keep cars (and shoes) for as long as possible, but a lot of people keep cars for 2 years or so and you can find great deals on those! ReplyCancel

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  • auto warranty - I think it really just depends on the owner's preference, and whether or not the idea of putting more money into an already paid off, used car is better than buying a new car and committing to another few years of car payments. ReplyCancel

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