"This old thing? Oh, I only keep it around because it gets good gas milage."

“This old thing? Oh, I only keep it around because it gets good gas milage.”

If we got together and made a list of reasons why the average person buys a brand new instead of gently used car, it would probably look a little something like this:

  • Reliability
  • Actually frugal since they intend to drive it into the ground
  • Uh, I dunno
  • New cars aren’t *that* much more than a used car
  • Stop asking me, geez

Let me add another reason, one that exists but nobody ever mentions.

Vanity.

Yes, even though the PF world constantly likes to point out that we’re not the same as the rest of those dumbasses who do stuff like finance vacations and regularly exchange money to kill brain cells, the fact is we’re hardly the epitome of smart decision making.

I can forgive mistakes that are from screwing up an analysis, or even because your wife told you that “God dammit, there’s no way I’m driving a used car.” But what I hate is when we conveniently leave out facts that will make us look bad. But that’s exactly what we do when it comes to cars.

I guarantee you that some of your decision to buy a new car was motivated by having a new car. Hell, I’ll go further and say I’m pretty confident in saying that damn near 100% of the decision was motivated by vanity. We associate success with driving a spiffy set of wheels. That’s the way it is, and will always be.

Answer this question honestly. If I gave you a chance to buy a car from 2005 with only 10,000 kilometers on it for the price of $5,000, would you do it? Or would you spend six times that on something new?

I don’t think many would. They’d hem and haw, making up excuses about how they don’t know if it’s been maintained, or that the deal is too good to be true.

But Nelson, a new car is more reliable! And depreciation doesn’t matter, since I’m going to drive it into the ground!

Man, my straw man arguments are stupid. There has been very little progress made in making engines and tires better in the last ten years. A car with 10,000 kilometers on it that’s been sitting in a garage for 10 years and one that’s only been driven for six months are virtually identical, with the exception of fancy tech doodads. Cars do not deteriorate just by existing. You have to use them.

How about the depreciation myth?

That one is even easier to bust. Assume a more realistic scenario, between a car that’s three years old with 50,000 kilometers and the equivalent brand new one. Assume the used one costs $20,000, while the new one costs $30,000. The first has a projected life of 12 years, while the second will survive 15.

Here’s what your car is worth, assuming 10% depreciation per year

Year Used Car New Car
1 $18,000 $27,000
5 $13,122 $17,714
10 $7,748 $10,460
12 $6,276 $8,472
15 N/A $6,176

Some observations:

  • After their projected lives, the two cars are worth within $100 of each other
  • Used car guy paid $13,724 in depreciation, or about $1,100 per year
  • New car guy paid $23,824 in depreciation, or about $1,600 per year
  • New cars suffer their greatest depreciation in the first three years, meaning we were probably a little generous

Okay, how about reliability? I won’t argue that, in general, newer cars are more reliable than older cars. But there are ways to mitigate those costs, by either using backyard mechanics or other lower-cost options like Mr. Lube. Besides, the difference in repairs in the lives of those two cars above will be next to nothing. The first guy will have a bunch of repairs starting at about year 6, while the other guy will have his start at year nine. Each will put up with 6 years of fixing their car once or twice per year. All the first guy did was push his repairs further into the future.

That leaves us with variations of “X model is practically cheaper to buy new rather than used.” Sure, that’s true for certain models, mostly Toyotas and Hondas. People buy them because they’re perceived to be the most reliable. Think of them as the buy-and-hold of the car world.

Here’s a novel concept. Instead of you buying one, buy American. Most U.S. models are almost as reliable as their Japanese cousins, but come with a much lower price tag as used vehicles. Stop being so inflexible with your model and you’ll save money.

If more people came out and admitted they wanted something new because of vanity, I think I’d be cool with it. But instead we come up with other reasons that dance around the truth. So from now on, every time I see somebody write an “analysis” of why they bought a new car, let’s just go ahead and put vanity at the top of the list.

Tell everyone, yo!