Why we bought a new car instead of used, when it went against everything we knew...or so we thought!
Updated: Jan 11
Nicole and I are known to be frugal people. Spending unnecessary money literally pains us. So, the thought of buying a new vehicle was pretty much off limits. We have two vehicles, both of which were bought used several years ago, a Honda Civic and a Nissan Rogue. The Civic is fantastic on gas mileage and commuting, but not the best for braving our 26% grade driveway, handling the mountain roads, camping, or big enough to handle our two obnoxious dogs. The Rogue has been fantastic for us, overall. It's taken many mountain roads that it probably shouldn't have, it can make it up our driveway (most of the time) and is a decent all around SUV with all wheel drive. However, it is a bit small when we have all of our camping stuff and the dogs. And, we camp a lot. I believe when it's all said and done, we'll have logged around 12 camping trips for the year totaling 60+ days living out of the car. So, fitting our camping and back country needs is an absolute must for us.
Our Nissan Rogue on one of many camping trips
As the years have gone by, more and more issues have popped up with the Rogue. We've fixed many of them ourselves (as much as we knew how) and others by a mechanic. But the cost of owning the vehicle has gotten to a point where we needed to explore other, more reliable options. We initially were set on buying a used vehicle. The plan was to buy something that was 5-10 years old and fit our budget. The vehicle needed to be 4 wheel drive, bigger to handle the dogs and all of our camping stuff, handle well in the winter and rugged Colorado dirt roads and lastly, get up our driveway in all seasons. We nailed it down to a few vehicles, but overwhelmingly felt that the Toyota 4Runner would be the perfect all around vehicle for our needs.
So, we started browsing for a used vehicle. Most of the options that fit our price range had over 150K miles on them and were 12-15 years old. We noticed if we went up $5K, our options expanded, but we were still looking at vehicles that generally had 80K miles plus on them and were 8-10 years old. So, we then looked at options for 4Runners that were just a few years old and to our surprise, realized we were able to find some new ones for only slightly more or an equivalent price point to used. Albeit, it would involve us driving or flying across the country to purchase new. We weighed our options, talked to friends and used car advocates, trying anything to talk us out of what we initially thought would be a terrible decision. But, we kept coming back to buying new being the right call. We considered these seven factors to be the most important in our decision making process:
1. Reliability - The Rogue had been a solid vehicle, but as the years went on, our concern of it breaking down and us being stranded started to become much more of a concern. We have spent a few thousand in repairs over the past few years and did not want to keep putting money into a car that will just continue to have more issues. That played into one of our decisions when we thought about buying used as well. If we bought a 10 year old vehicle, would we just be trading in one 10 year old car for another?
2. Resale Value - You always hear the stories about driving off the new car lot and the car value dropping $5-10K. That is generally a true statement. In researching vehicles, we found that the Toyota 4Runner was one of the best vehicles for keeping it's resale value. Additionally, if you go on AutoTrader and look at used vehicles between year 2019 and 2021, there is exactly 1 vehicle under our purchase price and its Carfax indicated it had previously been in an accident. Conversely, there were 142 used vehicles that were of the same trim style as the new one we were looking at, with more mileage and a higher list price. What that said to us was that we could literally buy this vehicle, keep it for a year or two and then sell it and make our money back. Not bad for a "depreciating" asset.
3. Warranties - This played an important factor in our purchase decision. We knew if we bought a used vehicle that was even 5 to 10 years old, the warranties would likely be depleted. However, a new one would give us a 60,000 mile Powertrain Warranty, 36,000 Bumper to Bumper and 25,000 of all maintenance completed free of charge. Additionally, the vehicles we could acquire that were 5 to 10 years old, were already 70% plus of the cost of a new vehicle. Why would we pay 70% of the purchase value, while not getting the warranties that come along with? Plus, as the car ages and mileage racks up, inversely, the maintenance costs increase. So, more than likely, we would be paying a bit less for a car, but more on maintenance and of course, no warranties.
4. Saving on Maintenance - As indicated above, the maintenance costs played an important part in our decision making process. Although there were no guarantees, we figured buying a newer vehicle would likely and hopefully cost us much less in maintenance, especially over the course of the next 5 years. Where as, the past handful of years, we have put entirely too much money into repairs on our Rogue.
5. Remaining Value of Rogue - This was a smaller consideration, but also a factor in our decision. Could we get a year or two more out of our current car, or maybe more? Sure, possibly. We figured, let's sell the car now while we can get some value out of it, versus waiting until the end of it's life and selling it for scrap metal.
6. Negotiation - This may have been one of and if not the most important factors in our decision to ultimately buy a new car. When we opened up our search for a vehicle, we looked nationwide, which I'm certain most people don't do. Also, we negotiated strictly via e-mail. This was used to our advantage. When you go into a car dealership, they already know you are interested and they have you there. They just need to convince you to buy a vehicle. Through e-mail, they didn't have us. They knew we were searching in other areas and the only way to get us to commit to buying was offering the right price. We received multiple quotes and used them to our advantage, leveraging in our negotiations with other dealerships. This ultimately allowed us to drive the price down. We heard from at least four different people, the following: Sales Rep - "I've never seen us take this big of a loss on a 4Runner", Finance Manager - "This is the first time I'm seeing the numbers, wow", Competing Sales Rep - "I can't believe they gave you that deal, I would have never let one go for that price, but I guess they wanted to move a vehicle, so I get it". When it was all said and done, we ultimately found a vehicle for about $5K less than the cheapest quote we received out here in Colorado. We used a United Airlines voucher of $100 we had and it cost us about $36 out the door to fly one way to Virginia, along with $21 to park our other vehicle for five days at the airport and less that $200 in gas to drive back home. Not a bad deal to save $5K.
7. Pay in Cash - This was a deal breaker if we weren't paying cash. The only way we would have financed a vehicle is if there was a 0% interest offer, then sure, we'll borrow money for free. Other dealerships may have came close to the price point of the dealership in VA, but they were 100% against the deal without financing. Although we could have financed the vehicle, we would have had to spend several hundreds in interest. For example, one dealership would only agree that we could pay off the loan after making four car payments and the interest that came with it. We worked hard to save up money for a new vehicle and did not want to take on another loan to pay for it.
Our new 4Runner in Shenandoah National Park
In summary, we weighed all the pros and the cons of buying new vs. used. The biggest cons were the up front costs of buying the new vehicle and the logistical issues on such short notice. The pros were many: saving on maintenance, more reliability, a better all around vehicle, getting a vehicle that held its value well, the ability to sell our old car while some value remained, and the several warranties that came with the purchase. In short, the pros far outweighed the cons. To add a little flavor to the trip to Virginia, we decided we would take some extra time to drive back. By doing so, we were able to visit a few more National Parks and see parts of the country we hadn't seen before. We don't plan to do this yearly, obviously, but this could be a new tradition - shop for a car nationwide and fly to wherever we need to go to get it, then drive it back. Buying a new car isn't something I would advise everyone to do; it depends on your own specific financial situation. Obviously, having the capital is important and I would rarely ever recommend financing a vehicle. My personal belief is that the only debt you should have is mortgage debt and extremely low interest debt; essentially where you are paying almost nothing to borrow. Just know that Take the Leap Financial Coaching is here to help you get your finances in a place where you can feel comfortable in making these big life purchases with confidence.