Some time back, I posted some things I thought would help a person keep a car running for a long time. But then I thought, what are the economic reasons for doing that.
1. When you buy a new vehicle, generally you are charged sales tax on the difference between the sales price and the trade-in value, at least here in PA. We pay 6% sales tax. So if you buy a car at $45.000 with a $15,000 trade-in, you will pay tax on $30,000. In PA at a 6% rate, that is $1800. What do you have to show for that $1800? Absolutely nothing. You are better off using that money to keep an older car running (if you have kept it in good shape). Have all the fluids changed, replace drive belts, timing belts, water pumps, etc.
2. New car or truck? Large and rapid depreciation. Vehicles are one of the major things you buy in life that takes away your money through depreciation. Generally, real estate goes up; vehicles go down. In five years, depending on what you buy, you can lose 50% of the value or more. $45.000 could mean you lose $22,500. Trade it in? You know are faced with more sales tax. It is a losing game.
3. Insurance on new and complicated vehicles is going to be higher than on an older vehicle, particularly if you get to the point (10 years of ownership or thereabouts) when you can drop collision coverage. Less outlay, more money in your pocket! And if you do get a dent, a scratch or some rust, you are less likely to be moved by emotion to get it repaired than a new car.
4. New cars have a 3 year, 36,000 mile warranty ( there are exceptions) so after this time, you are now faced with possible repairs on very expensive systems. With new cars, you have screens, computer control of most everything, lane keeping, stop/start, etc. Repairs can be EXPENSIVE on systems like this. It is one reason not to buy a used Mercedes or BMW where systems are staring to age out.
5. Take the money lost on depreciation and sales tax and you quickly realize that paying a few thousand dollars on a well maintained, well running car to do preventative maintenance to get another five or more years is really a no brainer.
Any thing I missed on this?
…K…
