Please talk me out of buying a new car!

[Meadbh]

My Honda Accord (which I love dearly) is almost 14 years old and is in good condition except for rust. I recently had some bodywork done and was advised that its safe lifespan is limited, that I should not invest large amounts of money in it, and that I should start researching my next vehicle. No panic, though.

This weekend I've been surfing the web and doing the spreadsheets. I would like a new, reliable, fuel efficient vehicle, preferably a hybrid, either a Honda or a Toyota. My goal is to spend no more than I spent last time, adjusted for inflation. Right now I can get a $2000 rebate from the Federal government for purchasing a new 2008 hybrid, or a lower rebate for other fuel efficient cars. I can also get a $2000 rebate from my Provincial government. But these programs will end later this fall.

With the rebates, a 2008 Toyota Prius or a Honda Civic Hybrid are within my price range, ignoring the resale value of my old car. Replacing my old car with an identical new Accord would cost about the same (no rebates). I would pay cash as I do not believe in borrowing to finance a depreciating asset. Buying now would mean depleting my cash reserve. Cash flow would be tight for several months. I do use the car for business, so I guess there may be some tax relief next year. My job is pretty recession proof.

If I wait, I will still have a serviceable but aging Honda and an accumulating cash reserve. Next year there will be more hybrids to choose from. The rebates will be gone, but as hybrids become commotized, prices may fall, especially if there is a recession.

I plan to stay away from dealerships until and unless I decide to buy. I want to keep emotion out of this as much as possible.

Should I buy now or hang on till my old car really needs to be replaced in 1-2 years?

 

[W2R]

Sorry - - I would say to buy now. My reasons are:

• In your position, there is no point in driving a car that could conceivably be untrustworthy.
• Should it break down and need major repairs, you would have little choice but to buy a new car immediately and you might not get the best deal under those circumstances.
• And lastly, there are those rebates which will expire.

I would suggest buying the new car now.

 

[audreyh1]

Yeah - sounds like you should buy a new car.

Audrey

 

[mews]

Do good research, when you get the car do good maintenance, and then 14 years from now, gosh, another decision!

 

[samclem]

Factors to consider:

- If I recall correctly, the battery pack in today's hybrids are warranted for 8 years or 100,000 miles, and the replacement cost is $2500 to $4000. So, if you hang onto the car for as long as you did your last car, this is a bill you'll likely be paying. It's possible that by waiting a model year or two (assuming it is safe), the batteries may get better, or at least you'll have kicked this expense 2 years farther down the road.

- You'll get less for your present car if it's not drivable (which it sounds will be the case in 1-2 years).

- Will the cost of the hybrid/fuel efficient car go down once the govt rebates end? It's quite possible. If a given car is worth $20,000 to the consumer (based on a comparison of value to other available vehicles) , and the government is offering a $2,000 rebate, then the manufacturer would be dumb not to price it at $22,000. In this sense, these rebates/tax credits are really for the manufacturer, despite the check being paid to the consumer. Now, Prii are a whole different breed, and i don't pretend to understand the way the demand curve works for them--it's certainly got nothing to do with rationality.

- Turbodiesels (40+ highway MPG) will be coming in large numbers to North America from Europe, and many of the domestic manufacturers are ramping up production of small, fuel-efficient gas and diesel cars. Prices could be lower in two years.

- What will you be selling to buy this car? Stocks are down now--would you be selling shares at today's low prices when they >>might<< have recovered somewhat by the time the rust eats up your Honda?

- You're still "driving for free" (except for repairs). That's hard to beat. Once you spend that money for the new car, it's no longer working for you.

Obviously, if your present car is not safe, replace it. But, if you can get another year or two out of it, that's what I'd be inclined to do. And, it's also by far the most environmentally responsible thing to do.

 

[Khan]

I suggest keeping the present vehicle, while researching new vehicles (including test drives).

My 1989 econobox lasted 18 years.

 

[Meadbh]

Thanks for all the great input! Keep it coming!

In your position, there is no point in driving a car that could conceivably be untrustworthy. Should it break down and need major repairs, you would have little choice but to buy a new car immediately and you might not get the best deal under those circumstances.

You are so right W2R.

- If I recall correctly, the battery pack in today's hybrids are warranted for 8 years or 100,000 miles, and the replacement cost is $2500 to $4000. So, if you hang onto the car for as long as you did your last car, this is a bill you'll likely be paying. It's possible that by waiting a model year or two (assuming it is safe), the batteries may get better, or at least you'll have kicked this expense 2 years farther down the road.

Yes, the life cycle cost of a hybrid is yet to be determined.

- Will the cost of the hybrid/fuel efficient car go down once the govt rebates end? It's quite possible. If a given car is worth $20,000 to the consumer (based on a comparison of value to other available vehicles) , and the government is offering a $2,000 rebate, then the manufacturer would be dumb not to price it at $22,000. In this sense, these rebates/tax credits are really for the manufacturer, despite the check being paid to the consumer. Now, Prii are a whole different breed, and i don't pretend to understand the way the demand curve works for them--it's certainly got nothing to do with rationality.

My thoughts exactly. The economics of supply and demand. Actually, the Prius is currently creating a little Eco Chic Bubble. The leader of the Liberal Party, whose campaign platform is built on the Green Shift, is frequently seen driving to election rallies in his Prius. I might not even be able to get one!

What will you be selling to buy this car? Stocks are down now--would you be selling shares at today's low prices when they >>might<< have recovered somewhat by the time the rust eats up your Honda?

I might have to sell $2-3K of stocks. The rest I have in cash. So not a material issue.

You're still "driving for free" (except for repairs). That's hard to beat. Once you spend that money for the new car, it's no longer working for you.

Absolutely true. Time value of money!

 

[aaronc879]

Sometimes those old cars can last longer than you expect. I sold my old '90 Acura Integra in '03 because I thought it was "near death". My aunt liked the car and offered me close to what I was asking so I sold it to her. It's still running strong over 5 years later. I say run it until it dies completely(get AAA if you don't have it). Then buy a car that's 2 or 3 years old. Buying almost new instead of brand new will give you a bigger discount than the rebates. I learned my lesson. I will never again sell a vehicle that is still driveable.

 

[hankster]

Why not upgrade to a 4 or 5 year old Honda or Toyota? You still get good fuel economy and you let someone else take the depreciation a$$-whoopin' for those first several years. Pay cash and enjoy a better "rustless" ride.

 

[old woman]

If the floors are rusted through send the car to the junk yard. That would make it unsafe in a crash so it wouldn't be right to sell it or drive it. If the car is sound in the frame drive it until it is dead. If it is worth someone buying it then you should keep it.
I wouldn't buy a new fuel effecint car for the next couple of years until the demand is normal and they are better.
If you get a car that takes more gas it still isn't a lot more money over the life of the car. Saving 10 a week seems good at the time but is only 500 a year or 5,000 over ten years so spending 10K extra isn't wise.

 

[FIRE'd@51]

IMO, buying a new car when your old one still runs reliably is never a good financial decision. The cost of depreciation, higher taxes, and higher collision insurance on a new car will likely be considerably more than the extra repair bills on an older car. If you just like having a shiny new car, with all the attendant worries about [-]idiots[/-] people denting and scratching it in parking lots, etc., then it might have some utility value to you. For me a car is simply transportation from point A to point B. As long as I have confidence that it will start when I turn the key in the ignition and get me from point A to point B, I will keep the old car.

 

[virginia]

I agree with waiting. I think SamClem hit the nail on the head. Hybrids may drastically improve over the next two years. If you HAVE to before that time, you can buy. At least wait until the 2008's really go on sale.
And also with AaronC - Are the rebates only for new vehicles? I suppose they certainly are. You could save (I bet) more than 2k by waiting until next Jan/Feb to buy the vehicle.
I'm with you - (I know this Honda discussion has been on the boards before) - my Civic has been SO reliable. I don't want to buy another Civic, or Accord, because they look the same, BUT they are such great cars that I can come up with another car that could match it for the price and the efficiency.
I have been having the same discussion with myself, only my Honda is only 8 years old. I'm thinking that I could drive it another 7 or 8 and buy a new car right before retirement!

 

[FANOFJESUS]

Keep it longer, if my 14 year old chevy corsica is going strong you should be better off than me in that honda.

 

[Rambler]

If it is on its deathbed, buy a new one while it still runs and while you can get a $$ or two in trade. Otherwise wait until it really is on its deathbed. For a honda or toyota, if it isnt burning oil yet, it probably isn't gonna die just yet. You mentioned that the repairs you had done were cosmetic/rust related. Are there scheduled maintenance items coming up soon that will cost more than the car is worth? For example, If you had to replace the timing belt, the brakes, and the tires all at the same time, you would be looking at somewhere around $2000...probably more than the car would fetch in a trade. If so, drive it until the maintenance comes due, then trade it. Just one more point: I would not want to be roaming around in the snow with a car whose reliability was questionable to me...how do you feel about its reliability with winter coming on quickly?

R

 

[chinaco]

The decision depends. You obviously can afford the vehicle.

We just purchased a new car for DW to replace a 12 year old vehicle. We could have driven it for a few more years... but it was beginning to have regular maintenance issues. Nothing major (like engine or transmission) but every visit to a dealer to get something repaired seemed to be $400 or $500... sometimes $800 or $900. Plus the gas mileage was not great. So we bought a new compact car. It had a rebate from the dealer and I got it for invoice price (2008 model). We paid cash for it and traded in the old car (which had several problems that had not been fixed). According to kelley's blue book we got a fair value on the trade.

We did not get a hybrid because of the extra cost (payback to break even). I am still a little concerned about reliability of the batteries (although some cover the issue with a warranty).

The next vehicle we buy will probably be a hybrid. The other car we have is 6 years old. We will probably drive it another 5 or 6 years. By that time, the next generation of fuel efficient (plug-in) hybrid technology should be fairly well road tested. Hopefully, the the cost will come down a bit.

 

[Walt34]

I agree with W2R.

I suppose it depends on how important reliability is to you, and what the "value" of a new car is to you.

There is also a value in not having to make a rushed decision if your current car suddenly needs an expensive repair - right now you have time to think and be picky.

If you're comfortable with it buy one that is two or three years old and let the previous owner take the beating on depreciation. I haven't practiced that myself though, having had not-very-good experiences with used cars. Evidently many people sell cars that age for very good reasons. Others sell them because they decided they didn't like the color. That's a dice roll, even Rolls Royce has made lemons.

 

[lazygood4nothinbum]

My goal is to spend no more than I spent last time, adjusted for inflation...Buying now would mean depleting my cash reserve...Next year there will be more hybrids to choose from.

just to note a possibly conflicting goal of saving money but waiting for new hybrids to come out, i've never noticed a newly introduced car to hit the market at bargain pricing.

 

[ziggy29]

I would also note here that with certain types of cars, especially Hondas and Toyotas, the increased popularity of buying "almost new" instead of new means that the depreciation curve in the first 2-3 years isn't nearly as steep as it used to be. There are some types of cars and SUVs which may depreciate 1/3 in the first couple of years, but the econoboxes from Honda and Toyota depreciate *far* less. If you can get a particularly good deal on a new one in the face of a bad economy where dealers and automakers are desperate to make sales, buying new may not be the "financial disaster" decision that it's always assumed to be.

With a pretty secure and "recession proof" job, I'd be a little less worried about depleting cash reserves, with the idea of course being to replenish them right after buying a car.

 

[travelover]

I would also note here that with certain types of cars, especially Hondas and Toyotas, the increased popularity of buying "almost new" instead of new means that the depreciation curve in the first 2-3 years isn't nearly as steep as it used to be. There are some types of cars and SUVs which may depreciate 1/3 in the first couple of years, but the econoboxes from Honda and Toyota depreciate *far* less..............

Agreed. It has been mentioned before, but domestically made cars depreciate more in the first few years than Honda / Toyota, yet have very nearly the same quality these days. I'd suggest looking at Cars.com or Craigslist for some late model American cars. When you take in the whole picture, you may find that your savings on the purchase price will more than pay for fuel economy differences.

 

[tuixiu]

I'm also in the buy camp. You've obviously shown the discipline over 14 years that the car is utilitarian in function as opposed to a wasteful status symbol etc.

 

[Moemg]

I'd usually vote drive until it drops but since you only have one car to depend on I'd say buy a new one .

 

[Bimmerbill]

If you are the kind of person who drives it until it dies, and it looks like you are, then buy a new one. You will have trouble finding a used Honda that's not almost as expensive as a new one. I ended up buying a new Honda Pilot (leftover 06) in 07 because it was cheaper than any used Pilot I could find.

Plus, the new car will be much safer than your 14 year old car.

 

[cute fuzzy bunny]

You'll get clobbered trying to buy a hybrid right now. Wait until the price of gas settles back down to pre-bubble prices and people start wanting humongous vehicles again.

Otherwise you're going to pay over sticker, if you can even get one.

If your car is unsafe, buy something new. But if its still okay to drive for another 6-12 months, then stick with it until you can get your deal.

The tax credits may get renewed.

 

[Animorph]

I'd buy, but look for reduced rate/0% financing to avoid selling stocks or depleting cash reserves.

My DW's last car purchase was near the end of 2002. No way I wanted to sell investments at that time. She was able to get 3.5% financing with no hassles. I tracked investment gains on that money after that. She had 100% investment gains by the time she finished paying for the car four years later. That was a really cheap car.

As far as replacing a marginal car, if it is worth your time and inconvenience to possibly save money for the next few years then keep the car. Only you can make that trade off.

 

[Nords]

My Honda Accord (which I love dearly) is almost 14 years old and is in good condition except for rust. I recently had some bodywork done and was advised that its safe lifespan is limited, that I should not invest large amounts of money in it, and that I should start researching my next vehicle. No panic, though.
This weekend I've been surfing the web and doing the spreadsheets. I would like a new, reliable, fuel efficient vehicle, preferably a hybrid, either a Honda or a Toyota. My goal is to spend no more than I spent last time, adjusted for inflation. Right now I can get a $2000 rebate from the Federal government for purchasing a new 2008 hybrid, or a lower rebate for other fuel efficient cars. I can also get a $2000 rebate from my Provincial government. But these programs will end later this fall.
With the rebates, a 2008 Toyota Prius or a Honda Civic Hybrid are within my price range, ignoring the resale value of my old car. Replacing my old car with an identical new Accord would cost about the same (no rebates). I would pay cash as I do not believe in borrowing to finance a depreciating asset. Buying now would mean depleting my cash reserve. Cash flow would be tight for several months. I do use the car for business, so I guess there may be some tax relief next year. My job is pretty recession proof.
If I wait, I will still have a serviceable but aging Honda and an accumulating cash reserve. Next year there will be more hybrids to choose from. The rebates will be gone, but as hybrids become commotized, prices may fall, especially if there is a recession.
I plan to stay away from dealerships until and unless I decide to buy. I want to keep emotion out of this as much as possible.
Should I buy now or hang on till my old car really needs to be replaced in 1-2 years?

Gosh, rampant consumer lust burning a hole in your pocket is such a scary sight...

We're thrilled with our 2006 Toyota Prius, which we bought over four months ago. I highly recommend a Toyota or Honda hybrid.

Since you have the time & motivation to do the research, I'd join PriusChat.com and repost this there. You'll get good advice and you'll get a feel for the Prius market (as well as other hybrids).

I think the new-car rebates are money-wasting red herrings. You may get a few thousand bucks from the govt but you'll give it all back in depreciation. It's at least a wash to buy a 2-3-year-old hybrid from a desperate seller.

Hybrid batteries are warranteed for at least eight years, as much as 15 in some U.S. states. Even more encouraging, the battery life of the earliest hybrids is exceeding the warranty and replacement rates are extremely low. So I wouldn't waste time worrying about the hybrid battery. In fact the Prius 12v battery is far more fragile than the hybrid battery.

The hidden bonus of a Prius is the ownership cost. The car's regenerative braking means that the mechanical brakes don't even take over until the car slows below 7 MPH (or in a panic stop) and brakes on these cars are lasting in excess of 100,000 miles. Maintenance is minimal. Repairs are well below "average" rates of similar non-hybrid vehicles.

The cars are selling at or over bluebook value now, but you have the time to wait for a good price. Craigslist and AutoTrader.com, waiting patiently for the desperate seller who's moving next week or who's trying to pay Christmas credit cards...