Friday, March 28, 2014

Why I am buying a brand-new car



Some financial experts and amateurs tell us that it’s one of the worst things we can do for our budget: buy a brand-new car instead of one that is just gently used. And I myself have subscribed to that belief all along. Even my Partner (who is $1000s in the hole from neglecting his Line of Credit for years) told me just a few weeks ago, new cars are not worth the expense because they depreciate as soon as you drive them off the lot. If a financial emergency comes up and the car needs to be sold in the first year or two, you will not receive the amount that will still owe on the car.

Maybe I am high on the new car smell from the cars that I have been test-driving. Tomorrow I am putting in a credit application for a brand-new car. Not a 2013 model. A 2014, brand-new car. I know, it is a risk. If my financial situation changes in the next year or so (it has only been getting better, so I hope that it continues to), I might be stuck with a debt that I cannot pay. And I am willing to take that risk, for several reasons.

I am sure there are a few entries on this blog complaining about all the car repairs I have had to put on all the beaters I have owned.
-The black 1993 Buick Skylark that I bought in 2003 for $1500, had power windows that would not roll back up after rolling them down, so I had to keep them up all the time. Luckily that car had air conditioning. It also had a wheel that broke off while driving on the 401 highway. Not the safest car. Costly repairs.
-The light blue 1995 Chev Cavalier, purchased in 2006, was only $600. I was lucky to get more than two (probably really unsafe) years out of that car, which I used to get myself and my infant/toddler son to and from work and daycare. I dared not take it on the highway. It finally died (after $1000s of repairs).
- The red 1998 Ford Escort, for which I paid $2000. I loved this car, it was sporty and peppy, but it had a problem with the air conditioning compressor and left me (and once with my son) stranded on the highway, waiting for CAA to take us home. The timing belt went, which I paid $2000 to repair … I put $1000s into this car too to keep it on the road.
- The black 2005 Toyota Echo: only a few months after replacing the timing belt on the Ford, one of the students needed to get rid of her Toyota and I went back into credit card debt to purchase it from her, which I never regretted. Why am I replacing it? Well, I’m not really, Partner’s old Ford died a painful death last September and we have been sharing the Toyota ever since. I was happy to go car-free and get back on public transit, but three months after getting my bus puss, the winter from alternate hell began and made it impossible for me to walk my son to school, then walk to the bus station. I ended up driving the Toyota most days while Partner car-pooled. Then his ride moved out of the city, and the hunt for a second car began. Because my cards and LOC are paid off, I convinced him with little effort to buy the Toyota from me (on an easy, interest-free payment plan), and I would use the money to pad the car line in my budget, and get myself something new.

But brand-new new? Why am I clearly disregarding one of the main rules of responsible personal finance?

Selection
After having owned four used cars in the past eleven years, I know exactly what I want, and after scouring the used car sites for a few weeks, I cannot seem to find it. My list includes: low kilometres, manual transmission, ABS brakes, air conditioning, and a colour that is NOT black, white or silver. I don’t care about all the other bells and whistles, but from that list there, I will not budge. Until I bought my Toyota in 2011, I had never owned a car with less than 200 000 kms. I want manual transmission because it is easier to maintain. I need ABS brakes because they are safest. I want air conditioning because my little black Toyota does not have it, and I cannot bear another summer without it. Plus, I just booked a road trip to NY State for July, and we do not want to have to keep the windows open on the highway, like we had to during last summer’s vacation. I want a red car, or blue, or neon green, because it is visible and safer on the road, especially since I am looking at small cars, and have to compete with all the trucks and SUVs on the road. So far on the used car sites I always have to give up one of my criteria, usually the manual transmission, or the kilometres, or the colour. I do not want to have to budge on any of that criteria.

Warranty
With all my experiences of roadside breakdowns, it will be really nice to have the peace of mind of a five-year warranty, plus roadside assistance for three years. I think I will use the monthly payment from Partner for the Toyota for a separate car emergency fund, since I plan on keeping the car for more than five years.

Longevity
It will be really nice to be the sole owner of a car, knowing exactly where the kms have been. I want to be able to teach my son to drive on this car in eight years. Since I plan on keeping the car indefinitely, it doesn’t matter that it will depreciate within the first couple of years.

Finances
But of course. Even if I buy a used car I will have to finance, unless another student walks in here wanting to sell a car that has all the criteria I demand. Financing a used car means accepting 5% interest over 84 months, while the new car is only 2%, making the payments practically the same amount for vastly different products. I would rather have something new for the same amount of money. Even the insurance payments will be about the same. I don’t plan on making car payments for 84 months, but accepting that term keeps the monthly payment under $250 a month, and I can top it up to pay it off faster – which I plan to do. But the option is there if the budget is tight to make the lower payment.

Convenience
We could probably still get by with only one car, but it is tricky. We work at opposite ends of town and Partner is more easily stranded because there is no public transit at his end of town. I can jump on a bus to get to and from work, but I also have to drop my son off and pick him up from school, which constrains my work schedule. In July, he will be at day camp where I work, and to take him on the bus will cost me $5 a day for 15 days, and it will take about an hour there and back (15 min walk to the station and a 40 min bus ride). The car ride is only 15 minutes. I was going to rent a car for July and found that it will cost around $800, which is totally manageable, but I would rather have something sooner. Like, tomorrow :)

No comments:

Post a Comment

Thanks for commenting! I will have it published as soon as I can ~ Karissa