Wednesday, May 7, 2008

New vs. used vehicles

I don't know about you, but I've always read that you should never, ever buy a new vehicle because you lose thousands of dollars when you drive it off the lot. To this way of thinking, only people who are trying to "keep up with the Joneses" will buy new vehicles, simply because they're the only ones who don't care about depreciation - only status symbols.

Well, after crunching numbers for almost a full week, I have to respectfully disagree. This has been the hardest decision of our married life, but we have decided to buy a brand-new Hyundai Entourage. Let me explain ...

While we had hoped to save up and buy a nice used van in a few years, we were recently faced with some significant safety and rust issues on the body of our current van (which would have been completely paid off at the end of May). The repairs needed to keep this 9-year-old van safe and running would run into the thousands of dollars. Since the Kelley Blue Book on it is only $1400, there's no way we'd get that money out of it in a few years in a trade or outright sale. And we're not in a position to put thousands of dollars into a sinking ship right now. (Is anybody ever in that position??)

So, suffice it to say, we have been looking at vehicles.

Have you looked at vehicles lately? We had sticker shock, to say the least.

Where we come from, you used to be able to get a decent used van for around $10,000. Everything is more expensive here, especially since Maryland inspection requires vehicles to be in nearly-new condition to pass (a one-time inspection). But we were still not prepared to find 2- to 4-year-old vehicles with anywhere from 30,000-60,000 miles going for no less than $18,000 and no warranties to speak of! (No, we weren't able to find private sellers with anything worth buying, either.)

So we ventured into a few new car lots and priced new vans. Hmmm ... anywhere from $22,000-40,000 brand-new with significant warranties. Starting at a $4000 difference with no mileage and a good warranty? Sounds like it might be a deal, at least compared to the used vehicles.

But I was still suffering from sticker shock, so we went home and ran some figures. And then I had an idea ... Why not see how much it would cost us per year and find out what the most economical solution would be?

We average about 15,000 miles per year. My brother informed me that any new vehicle should easily get you to 150,000 miles, if you so desired. (I know most people trade them off long before that, but we're not most people. We have had old, not-very-well-made vehicles get over 250,000 miles - ones that supposedly burnt up engines at 150,000 miles.) So that meant we could potentially own this vehicle for 10 years (maybe more if we were fortunate).

So I took the price of our favorite new van, which also happened to be the least expensive, and spread it out over 10 years, including the interest on the loan. [Yes, this will have to be financed. It's not realistic for us to buy this one with cash, so I'm aiming for the next one - which is realistic.]

Then I figured the price of the used vans, taking off the number of years' worth of mileage they already had on them.

Are you surprised that it is actually cheaper per year for us to buy the new van? And are you really surprised that we actually paid more per year for the last used van we bought? I know I was! And that's not figuring in the great warranty we got, either.

Now I'm not telling you it will be this way everywhere. If we lived where we used to, it probably wouldn't be this way. But where we are right now, and with what we have to work with, this is the best deal for us.

Whew! Now that I've admitted my little secret, I hope you won't think any less of our frugality. We have prayed and lost sleep over this decision and finally feel that we have come to the best decision for us right now. Now it's a matter of trusting God to give us wisdom to make it last as long as possible!

I know I shouldn't obsess about what others think of our decision, and I'm not really. I posted this mainly to challenge you to think twice about frugality. The best frugal choice for your family might not be the first choice that comes to your mind. I'd encourage you to explore your options, no matter what you're looking to purchase. If nothing else, you'll know you got a great deal!


jemilyea said...

You've done an interesting, thought-provoking study. I went and looked up interior pictures of this van. Nice! You will enjoy it, I know, especially with the sliding doors on both sides. Does your van have the a/c in the back, too?

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