For a long time, I drove cheap old cars. Old, anyway. I thought they were cheap, but they weren’t. I drove two cars over 200,000 miles, in snow country which rusts them out.
The New Car/Old Car question rests largely on Depreciation vs. Maintenance and Repair Costs. And, these are not much different. Let me show you what I mean.
Here are the True Costs to Own a new 2022 Subaru Outback, over five years, according to Edmunds.com:
And, here are Edmunds’ estimates of the costs of buying a used 2016 Subaru Outback today.
According to this, it actually costs more to drive a six-year-old car than it does to drive a new one!
This is due to the rather distorted used car market today. With a normal market, depreciation on the new car would be about $1000/yr higher, and about $500/yr lower on the used car. That would make the new car about $1000/yr more expensive to own, which is about what it should be.
But, that is not very much. $1000 a year, out of a total cost of about $8000 a year. Or, about $80 a month. Plus, you get a variety of non-financial advantages from a new car, including people’s perceptions of you, your own enjoyment and self-esteem, and also, time and worry saved from not having a lot of breakdowns and repairs. Perceptions are important. Or, we would all be driving Kia Optimas.
So, even for young people, I recommend buying new cars. Whether you pay a monthly car loan, or you set aside monthly savings to eventually buy a new car, it works out about the same, especially with today’s still-low finance rates. If a new car seems like a stretch, then buy a cheap new car, like a base model Honda Civic.
I might make an exception for a second car that doesn’t get much use. You can have a daily driver, and then a ten-year-old sports or luxury car, that gets about 2000 miles a year. But here too, you might be better off just getting a more expensive new car, than having a separate “fun” car.