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Should I Buy a Newer Car? The Big Question Lately…

This is always a big question. Your vehicle is getting older, the miles are racking up, you know it’s not going to last forever, and of course….the newer cars look so much better than your 10+ yearold car. It inevitably leads you to ask yourself the question, “Should I buy a newer car?“… 

The First Great Deal Four Years Ago

Liz and I are in this boat right now (errr…car…you know what I mean! ;)). We’re contemplating buying a newer vehicle. But first, let’s dial this story back a bit – to when we bought our van.

About four years ago, I let my dad know that we were in the market for a van (we had a 6 month-old daughter and knew we’d eventually have another kiddo as well). When I gave him the heads-up, I figured he’d find something for us eventually (you know, like 6 months down the road)…not the next day!!

Turns out his neighbor had a 2008 Toyota Sienna and was in the market for a newer one. He always likes to help young families out and was willing to sell us the van for trade-in value ($6,500 vs. the $8,500 that the dealerships were charging). While we weren’t really looking for a van just yet, we couldn’t pass up the opportunity.

And you know what?

We’re so glad we bought that one.

It has been an awesome van for us over the past 4 years. The repair costs have basically been nothing and the value of the van is still $6,500 or more. 

It was such a great buy!

Should I Buy a Newer Car? The Next Opportunity Has Come…

When my dad’s neighbor sold us that 2008 Toyota Sienna, he ended up purchasing a 2013 Toyota Sienna. We always told him that whenever he was looking to sell, let us know. We’d be interested again.

Well…that time has come.

Should I Buy a Newer CarHe recently told my dad that he plans on buying a newer van again, and it sounds like he’s willing to sell us the 2013 Sienna. Buuuut….our van has been so great. I wonder if we should even get rid of it?

  • I looked up the Kelley Blue Book trade-in value of his 2013 van, and it’s between $11,000 and $14,000. This is the price he’d likely sell it to us for.
  • And like I said, our van is worth about $6,500 still.
  • So, we’d have to cough up $5,000-$6,000 to make the upgrade…which we don’t really need… 

Sooo…should I buy a newer car?

Is it worth it?

Ours still runs great and has no issues.

Should we really spend $6,000 right now? What do you think?

Related: 14-Step Guide to Find a Great Deal on a Used Car

Our Financial Situation

I guess for you to properly advise us, it would probably help to lay out our financial situation. 

  • We’re completely debt free (no mortgage, no nothing)
  • Our kids’ college and private school is fully funded
  • Our retirement savings is roughly $250,000 
  • We own a rental house free and clear. It’s worth $170,000 and nets us $10,000 a year.
  • We have $25,000 in our emergency fund
  • On average, we invest $2,000 a month into our retirement accounts

Our neighbor likely won’t sell the van until the spring (4-5 months from now), so we have time to save up the $6,000. Buuuut, this would mean we’d slow down our retirement investing from $2,000 a month to about $1,000 a month.

Soooo, what do you think? Should I buy a newer car? I’d say we’re good to go, but it’s always good to hear the opinions of others!!

What About You? Are You Ready to Buy a Newer Car?

I think a lot of people are asking themselves this question right now. They might have an older car with high miles that’s starting to look a little shabby. And, rather than having a car that might start breaking down on them all the time, maybe they should upgrade before those problems even start! It certainly makes the car easier to sell!

Related: The Complete Guide to Sell Your Car Yourself (even if you’re under water on it!!)

[Oh, and a little sidebar… If you want to buy a newer car, I ALWAYS recommend doing it with cash. No exceptions. If you can’t pay cash for your car, then you can’t afford it and should run away from those dealerships!]

If you’re asking yourself the question, “Should I buy a newer car?” like we have been lately, check out the scenarios below and what I’d recommend you do in your situation.

Scenario 1: No Emergency Fund, Still in Consumer Debt

Even if your car is dying, left on the side of the road. You’re not ready for a newer car.

  • Plan A may have been to buy a newer car (but you shouldn’t!).
  • Plan B is to fix your existing one (either via a mechanic or a buddy you can barter with!). 
  • And you know what? There are plans C, D, E, and F too! Things like, riding your bike, walking, getting a ride from a coworker till you can afford a car, borrowing a car from family/a friend. 

Don’t justify your way into a car with a payment. It’s only going to make things worse for you down the road.

Related: Top 10 Cars For Digging Your Way Out of Debt

auto financing - cars at dealershipScenario 2: Out of Consumer Debt, No Emergency Fund Yet

For the most part, this situation is the same as the above. I’d be willing to lighten up a little bit though.

Instead of funding your emergency fund with 6 months’ worth of expenses, maybe you load it up to 3 months and then save up quickly to buy that newer car with cash.

Again, don’t be tempted into a payment because you think you can pay it off quickly. It’s just not worth the risk! 

Scenario 3: Out of Consumer Debt, Have Emergency Fund, Not Yet Investing For Retirement

Alright, now we’re starting to get somewhere. 

  • You’re completely out of consumer debt (credit cards, medical debt, car loans, student loans, etc.)
  • You’ve got a 6 month emergency fund stashed away for a potential rainy day

The only downside is, you’re not yet investing in your retirement. Or at least, you’re not investing the recommended 15% of your income.

If your current car is still running fine, I’d recommend sticking with it and putting money into your retirement instead. Even if you have a screaming deal lined up for a better car, I’d still recommend sticking with the car you’ve got. You never know, that newer one could be a lemon and take you WAYYY away from your financial goals.

Now, if your car is nothing more than a paper weight at this point, then I wouldn’t mind if you put some money toward a newer one. Be sensible though. If I weren’t investing in my retirement yet, I’d spend no more than $5,000 on a car.

Related: Top 10 Cars to Avoid If You Want to Be Rich

tips for buying a used carScenario 4: Out of Consumer Debt, Have Emergency Fund, Investing 15% in Retirement

If you’re in this camp, good for you! You’re doing an amazing job with your finances!

Now all you have to do is save up cash to buy that newer car! If you don’t have the cash, don’t make the purchase. Sure, it might take you a year to save up, but during that time you can…

  • ask around for deals,
  • do your research on the exact right car for you, and
  • you can get rid of all those initial emotions that come with buying a newer car (you know, all the ones that make you do stupid things! 🙂 ).

Should I Buy a Newer Car? Where Are You At?

Are you in the market for a newer car? Or did you just pop over here to read about our current quandary?

Whatever the case, be sure to leave a comment below so we can keep the conversation going! I love hearing from my readers!  

Money Save Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

8 Comments

  1. So, my details first, like you, completely debt free. I am retired so my money is more of a total that can be divided among savings, emergency fund etc. The total amount in cash and equivalents is 3,471,304. I have a 2009 Subaru Forester that runs great. It is just that I do find myself looking at cars when I take my daily walk. My problem is that you don’t a quire money by spending, as we know it is saving that drives us. (Pun intended) back to the car, As much as I know it is very easy to afford, it is the mindset I had while working and now the same thoughts after being retired 6 years. Long story short, the Subaru still runs good so until it doesn’t move anymore I will wait and then go buy one in cash like you suggested. Thanks for the post Derek, Paul

    • Hi Paul! Congrats on being a multi-millionaire!

      Yup, the best plan is to save up intentionally and buy the car with cash for sure! Try not to look at cars so much, especially if you don’t want to buy one!

  2. You are going to need a new(er) vehicle at some point…..are you saving for it now? I didn’t see it listed.

    Our financial advisor has laughed at us for having a “car account”. Every month we put money in it equal to a car payment. Plus, it is additional cash if needed for a true emergency on top of the emergency cash account. But, it is a dedicated car account and line item.

    But I have a question: with interest rates at some dealerships at zero, would it be better to “finance” it at 0%, rather than take cash out? Or maybe finance only a portion of it?

    US: retired, early 60’s. 10 months left on the $710/mo mortgage so not worth paying off. Pension and money in the bank. 2011 Honda CRV with 119,000 miles and 2015 Mitsubishi Outlander Sport with 81,000. Looking to travel extensively as soon as we are able (thus, do we need a new car?)

    • Hi Dottie!

      Yup, we’re going to start saving up cash now to buy it in March – so roughly $1,500 a month.

      Regarding the 0% financing. The dealership is still making money on you. Instead of selling a car to you for $8,000 at 2.9% interest, they’re likely selling you that same car for a price no lower than $8,500 at 0% interest. It’s often best to just stay away from the dealerships. Find a private party that’s selling their nearly-new car for a good reason, find a good mechanic to check it out, and save thousands of dollars!

      Your specific scenario: I don’t think you need to buy a newer vehicle soon, especially if both vehicles are solid. BUT, if you have a ton of money and a solid income, then don’t worry too much about whether you “NEED” a vehicle. Get the one that works for you for the long-term! Take good care of it and it should take care of you! Oh, and never buy a new car. They’re not worth it. Go for a 4 year old car. That way they have some history and you can buy it at half-price of new!

      Best of luck to you. And have fun on your travels!!

  3. Hi,

    Great article. This is a topic that always sparks great conversation.

    My wife and are in in our mid-40s and drive 2006 Honda Accord with 160,000 miles and a 2012 Lexus RX 350 with 120,000. Both cars run great and while it’s certainly easy to look at newer cars and think “I want that”, we pause and realize
    “We don’t need that”. Thankfully for us, it’s not an affordability issue. Our only debt is our mortgage, which should be paid off in a few years and we have a savings rate around 50% (retirement and taxable).

    I always try to evaluate want vs. need. At somepoint we will definitely replace the Honda, but right now it is still running really well, therefore we will be holding off.

    • Soooo, what if there was a vehicle for sale at $10,000 that would otherwise be $14,000 and you could drive it for 5+ years essentially for free (since you could then sell it at that point for $10,000)? Would you do it?

      While we don’t “need” the new van, it’s just a great value and will likely give us a great ride for many years to come!

  4. Impossible to answer your question without some key pieces of information: how many miles are on the ‘08? Miles on the ‘13? How many miles do you drive annually? Anticipated maintenance costs on both vehicles and when – tires, brakes, other..?

    • Miles on the ’08 = 161,000

      Miles on the ’13 = 92,000

      Miles we drive annually = 8,000 miles

      Maintenance costs on the current van are probably $1,000 a year. The newer van is probably $500 a year.

      Got some advice for me now? 🙂


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