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?
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 :)
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