Beaters, New Cars, And Used Cars- Where Is The Value?

Beaters, New Cars, And Used Cars: Where Is The Value?

New Cars Usually Lose You Money
if you can spend money and not worry about it, not losing any quality of life, getting a new car isn’t a bad idea. But financing a car is not a good idea. There are much cheaper, more reliable ways to build credit, and you’ll pay way more for the car than you have to owe to interest.

Think about this: a car that costs $13,000 new—rare, but not without the bounds of possibility—can be financed for something like $537 a month at an interest rate of 2.9%. If you put $1,000 down and paid that for 23 months, you’re looking at $13,357 before you own the car, assuming no additional fees are tacked on at the dealer.

So you don’t own the car for two years, and in that time you put 36,000 miles on it, given the 18k annual average, eroding its resale value so you can’t sell it for the price at which you bought it. Meanwhile, you could buy the same car outright used a few years down the line for under $5k.

Crunching The Numbers As Regards Averages And Used Cars
Think about this: the average cost to upkeep a car is a shade under $8,500 a year. That’s $708 a month, and includes incidentals, taxes, maintenance, regular car payments, and insurance. So in two years, you would pay $17,000 and have a vehicle worth less than half that.

Now imagine you could cut $537 out of that $708 monthly fee. Now you’re looking at $171 a month including insurance, taxes, and incidentals; that’s $2,052 a year. So for a car that costs you $5k outright, in two years you’ve paid $9,104 and gotten about the same utility as if you had purchased it new, but the value you lose is less, and you can still sell it.

The more expensive the car, the greater the disparity between the actual value and what you pay. On a car that is $30k, it’ll take four or five years to pay off; often the term will be something like 48 months, and your interest will definitely add to that. Meanwhile, you’ll still have to pay insurance, maintenance, taxes, and incidentals.

Beaters Aren’t Always A Bad Deal
Your best value will come from a beater. A beater vehicle like a Subaru that’s an early 2000s model can be picked up for $400, fixed up for $1,000, and run for three or four years.

If you’re spending $1k a year to keep your car, and you only spent $1,400 to get it running, you’re looking at $4,400 to $5,400 total—but instead of paying that at the start, that’s what you paid over several years. However, there’s no prestige, and you need to be a little bit handy with a “beater”. Still, when you pick something up dirt cheap, who cares if it gets dinged up?

Weighing Your Options
So what’s your best choice? For those with money to blow and prestige, it’s obviously best to go with a new car. For those looking to maximize vehicular utility and value with the least amount of sweat equity, “used” is the way to go; and in the neighborhood of $5k.

For those who don’t care how they look, and want to maximize their savings, there’s nothing wrong picking up a cheap beater. Just keep in mind: you don’t have to be rich to own a car—you just have to know what you want. $1,400 spent on a beater is less than annual maintenance costs on new or used models. It’ll break down on you soon, sure; but you save.

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