This is a guest post from Katrina Ramser, a freelance writer who contributes new-car reviews for various websites, newspapers and magazines. She also writes about swimming at SquidKid.
I love new cars. From the luxury mid-size utilities to the efficient little guys, all have that new car smell — clean, pure, new.
I can get wrapped up and taken away with an SUV’s strength and sleekness in the snowy mountains of Tahoe, or just bullying into a Whole Food’s parking space. And I seem to develop a more practical and sustainable look on life after peaceful time spent on long drives with a Toyota Prius, or the overlooked (but so charismatic once you get to know it!) Hyundai Azera.
And the vehicles just keep changing and improving with each passing year, hoping to catch my eye and dazzle me once more with their ability to stay young forever. What’s not to love about a new car?
Always the bridesmaid, never the bride
I can write poetry about each and every model and maker I’ve had the pleasure to have known. I am an auto journalist.
It’s my job to date and judge vehicles. I do have preferences, like a man might for a tall blonde, or how females fall under the spell cast by bedroom eyes. For example, if a car doesn’t have power seats, we’re off on the wrong foot. And when I meet a vehicle that has four-wheel drive capability, better than average gas mileage, and a clean and reliable past, I am swayed. I always remain objective, but I’m guilty of enjoying each and all of the vehicles I drive. I ask you again, what’s not to love about a new car?
But it’s just my job to date, never to marry. It’s a personal decision I made a long time ago to always be the bridesmaid, but never the buyer. I’ve never taken the new car plunge. Ever.
I’m wary of the price you must pay for such glorifying newness. When I was younger, I could not afford a new car. Now that I’m older and wiser, it’s more like I will not afford a new car. I’ve seen what they do to you, and I know some types of love are not worth the headache and entrapment, no matter the pressing desire.
Financial breakdown
Last year, I did my boyfriend’s bookkeeping, which included tracking and calculating the costs of the 2005 Dodge Ram 1500 that he bought brand new. Almost three years into Shane’s ownership contract, I discovered he spends an average of $1,000 a month on the vehicle.
The average monthly car payment is $475. Shane’s is $440 plus some change. He was required to buy full coverage, so insurance runs about $189 a month. He has an extended warranty of around $120. Gas in a full-size truck with his engine size costs roughly $190 for 20-mile there-and-back commuting. Registration evens out to $31 a month; car repairs, dealer tune-ups and washes come in at $49; and car accessories averaged $115 a month last year, as he bought a spray-bed liner and lumber rack because it’s a work truck. That’s around $1,000 per month, or $12,000 a year to own his new car.
He signed a 72-month (6-year) contract with the Dodge financial house, sentencing him to an interest rate I don’t much care for: 10.39% (the national average is 7.13% as of this writing). His credit was okay when he was financed for $23,416 — a nice down payment of $7,000 helped reduce that number. But he’ll pay an additional $8,285 in finance charges. That’s enough for a second car — maybe even two! But it’s all so typical in our society.
Coping with costs
With rumors of a recession in the wind, we’ve tightened the fan belt and made some adjustments. The car accessories budget should be much smaller this year since he doesn’t need another bed liner or rack. Shane’s now working in the same town where we live, so gas costs should also be smaller. And he washes the Dodge himself now, though he grumbles that it takes a good hour or so. We also realized (if not too late) an extended warranty is nothing but a pricy piece-of-mind gamble. As for reducing the interest rate by refinancing, we’re going to instead make a radical move to double the car payment and get the thing (and ourselves) debt-free.
Despite changes, we’re still looking at a lot of money to maintain the cost of living with the new car. We’ll call the whole thing a life lesson. It’s a lesson many never learn, never realizing a car payment is an option, not a rite of passage.
A new cars loses 25 percent of its value the instant you drive it off the lot. In four years, depreciation consumes most of its original value. The initial excitement dies, boredom sets in, and we’re open to temptation again. Usually after about five to six years we start looking around for a replacement.
Young beauties are to be had everywhere! They pass by you on the street, catch your eye walking into the grocery store, and flirt with you at stop signals. I’m talking about new cars, of course. Vehicles today are more insanely capable with each passing year, from the safety to the technology front. In some cases, they even drive themselves!. Cars are only going to get better. They are only going to stay younger.
Old faithful
We have created a society that doesn’t value old things. With each passing year, our love dies a little more for what we once claimed to esteem. Yet I remain faithful to what I drive. I can’t admire it in the same light I have for new cars, but I can love it for different reasons.
I have a hand-me-down 1995 Chrysler Cirrus, an after-thought gift from my upgrading parents. It’s a car the manufacturer never bothered to make again. There are serious issues with the engine that cannot be found to fix, despite whichever diagnostics machine I’ve hooked it up to (so much for some car technology). It still drives fine, but sometimes it stalls at stoplights. It costs me under $400 a year to insure. It is totally payment-free. It doesn’t guzzle gas. Maintenance has been reduced to tossing broken car pieces like antennas and paneling into the trunk. And with the type of job I have, I don’t even drive it too much.
In a sense, I have to keep writing about automobiles in order to be able to afford to drive at all. With the cost of gas reaching an all-time high, I must focus on landing more automotive-related jobs just for personal finance reasons. Sounds sort of sadistic to bank on what’s depleting, but I need to drive like the rest of the world, and I kind of think I’ve found a clever way to do it.
I don’t have to buy the merchandise to appreciate or even to recommend new cars. There is no denying what they are. But sampling fills me enough, thanks. After awhile, they just become another pretty face. Because what’s not to love about a new car?
Photo by jessicafm.
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We have been prepaying our used precertified Honda van off early and are mailing the last payment today. I see a message on the bill:
“Your financing contract is about to end. And a lot has happened since you first bought your Honda. We’ve introduced some great new cars and trucks to the lineup, and now would be the perfect time for you to check them out. So stop by your Honda dealer and see what’s new.”
Lol. Maybe that works for some people. For me New car: 20 grand. Not having a car payment: priceless.
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To Dan and Phil- Lots of people don’t know the difference between uninsured and underinsured motorist coverage (I have to explain the difference to personal injury attorneys regularly, go figure).
Powderpuff is right about gap insurance. It pays the difference between what your car is worth and what you owe on it. Owing more than your car is worth is frequently called being ‘upside down’ on your loan and is common within the first 2-3 years of a new car loan. You must pay off the remainder of the loan to your bank (usually within a short time, like 30 days) with no vehicle to show for it even if you don’t have gap insurance.
As to getting paid back after your insurance company takes their money- you need a new insurance carrier. The one I work for always pays back our policyholders first. Also, state regulations vary on waiving or reducing deductibles in the case of UM (uninsured) drivers. Here in CA you can select a deductible waiver option but state regs require the at fault party be identified and verified UM. I can’t recall OR regs off hand (I know JD’s in OR), but WA allows the deductible to be reduced but not waived.
Asking questions of your carrier is good, but not if you don’t know what questions to ask. Also, sales and service people in insurance probably don’t know the answers. Not their fault, they aren’t trained in the details of when coverage does or doesn’t apply. For example, if you ask them if you are covered when driving a rental vehicle or a friend’s vehicle they will likely say yes. In reality, the answer is- Maybe or It depends.
In fact, insurance is so complex that no one knows all of the answers to every situation and courts are constantly making decisions that change it.
I agree though, that a financial blog doing a piece on insurance is a very good idea.
As an aside, I told that story about my co-worker just to point out that my new car has probably cost me less than her cars in the same time period. Things could just as easily have been reversed if my car was less reliable or she’d had someone who knows cars inspect her used ones before buying them, therefore new vs used being a complicated equation.
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Many thanks for all the thoughts here, and for the help on this site.
After many years of cash poverty for school and training, I’m actually making a little money this year. I’m still living like a student, so I have cash available. I want to spend my new money on things, and this site has helped a lot when it comes to setting priorities.
One thing I want is a new car. My current car is an ’01 Accord, purchased in ’03 through Honda’s Certified Pre-owned program. At purchase I saved about a third of the cost of a comparable new Accord.
My experience is that even Accords need a lot of stuff replaced between about 100k to 120k mi, and that this is a time when I get tired of squeaks and maintenance costs. Does anyone else find this? Do you people who drive your cars 150k mi or more find that you get through this phase and go back to scheduled repairs only? Do you ignore squeaks? Saving a third of the purchase price but getting a car with 30k mi on it isn’t worth much if I’m going to drive the car to 110k mi and sell.
For my last car purchase, getting a pre-owned Accord rather than a new one meant I could pay cash, and I’ve gotten the benefit of a good warranty all along. But if I could have paid cash for a new Accord then I would have gotten all the options I wanted, and I wouldn’t be buying a new car now. Maybe. Honda has made the Accords a whole lot spiffier, so I’d still be tempted. But I wouldn’t have as much justification.
(BTW, my experience with the Honda Certified program has been GREAT. Their service department detected that my transmission was slipping before I did. They covered a free new transmission – it would have cost me $3500 to replace – and gave me a free loaner Accord while it was fixed. The whole experience was completely smooth and pain-free.)
After three Accords my heart wants a Miata (no MINI’s for me!) and I can probably pay cash for a new one by the time car-buying season rolls around in the fall. It’ll be hard to say no, and there aren’t a lot of used recent-model Miatas on the market, and Mazda’s pre-owned program isn’t as good as Honda’s. It seems silly to ask for thoughts on the financial wisdom of buying a new Miata
, but does anyone have any thoughts??
If I were to get a certified pre-owned convertible I’d get a Lexus (which has a good pre-owned program). But that would mean spending more money up front I could otherwise invest, and a car is not an investment.
And on another subject, any thoughts on how much I should spend to fix the squeaks and burned-out dashboard light and big dent in the hood of my current, completely reliable Accord?
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Well I have not had the privilidge of owning a new car. I did once purchace a car that was a lease return and it did not have the new car smell anymore…it was 6 months old. my not so new truck is 2 years old. Also the benefit to me was that I have never had a car payment. My 2nd car (which I still own is a 94′ celica with 188K miles. still runs great but I am nervous driving it. I have in the past drove it from florida to california twice, and numerous times from san diego to las vegas.
Daren Singh
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