Cars are a scam.(Update)
Cars are a scam. New cars are even worse.
In an ideal world it we would all be able to ride a bike, or walk where we need to go, or have access to a fast and convenient form of public transit. However, for many people, cars are a necessary part of their daily lives. The point of this article isn’t to argue the environmental downsides to cars, we all know them. Instead, I would like to focus on how cars are financial sinkholes that require an almost constant stream of cash.
1.Unavoidable expenses
It doesn’t matter what car you drive, you will have to pay for fuel, preventative maintenance, replacing parts as they wear out and insurance. This is stuff obviously not included in the price of the car, yes there are warranties but I will get to that.
The price of traditional fuels will never stop increasing. Sure it may be down to under a $1/L today but just 2 months ago it was $1.20. I have no proof, but I’m sure the oil industry picks a target price, then raises the price over that, just to drop it down a few weeks later to a price greater then it was originally. Two steps forward one step back.
Unless you are mildly retarded, you realize that your cars engine doesn’t just require fuel and pixie dust to move. It also needs oil, filter, tires, etc. This costs more money. Every 3 months (5000km) you get dinged at least 10 beans if you do it yourself with shit components up to fifty clams at quick lube joints. I just switched to synthetic (more money) in the hopes of longer oil life and easier winter starts. I had to buy new tires last winter (4 @ $120) at a price considered CHEAP nowadays. As well this summer I had to get some brake work done, since uncontrollably veering into other lanes while stopping is not safe. It’s not that my car is a complete POS, it’s just that every 100,000km you have to start replacing stuff.
If this constant stream of money leaking out of your wallet wasn’t enough tack on insurance, mine is a thrifty $55 a month ($600+/year) compared to the typical ~$1000/year here in Saskatchewan. Keep in mind that this province has the lowest insurance rates.
2.Depreciation or New vs. Used
Instead of fixing stuff on an old car, why not just buy new? You get a warranty if anything breaks, no real maintenance other then oil changes since all the parts are new, and the joy of knowing you are the only one who has ever puked in the trunk. Hold on a sec. When you buy new, sure you get a warranty, you also have to pay more tax, more money, higher insurance and deal with the highest rate of depreciation in the life of that car. Is the cost of owning or leasing a new car less then buying used? Well let’s take a look.
Since I live in SK. the majority of cars on the road are domestic. GM. Ford etc. Let’s compare the cost of buying a NEW loaded Pontiac Grand AM, pretty decent car, with one five years older. A quick look at the GM website shows a base model Grand Am to cost $27480 which includes 3yr/60,000 km warranty on parts labour towing tires and 5yr/100,000 warranty on the drive train.
Checking the Auto Trader I found that most 2002 Grand AMs were going for around $9500 and under 100,000km but with no warranty.
This is a difference of $17980 and this doesn’t factor in the higher insurance you are bound to pay! So you are telling me that a warranty is worth MORE then that? Maybe, if you buy a car that needs that many dollars of repairs / upcoming maintenance. I’m pretty sure you could build a Grand Am out of parts for less then that. Sure you may have to replace the tires then get a tune up and maybe some brake work, but there is NO WAY it is going to cost you that much.
What about reliability? A used car is less reliable right? No. If you buy a new car, a 5 year old car or a 16 year old car (like me), there is still just as much a chance of you tearing off your oil pan, running over a beer bottle, or getting t-boned by a semi. Other then that you have to suck up the damage and pay for it out of your pocket keeping in mind your warranty is really just a $3600 a year emergency fund.
With a used car there is DEFINATELY a honeymoon period (especially if the car is 10+ years old ) where you are probably going to be fixing something every 2-3 months, however after about a year all the bugs should be sorted out and you are still going to be ahead financially.
I think the real reason people buy new cars is more for the ego boost of driving a new car. How long does the enjoyment of a new car last? I’m going to say a month before it’s the same 16km commute you were doing with your older car.
The best advice for buying a car, is look for a fuel efficiency car with a track record of reliability and low maintenance that is about 10 years old. At that point the depreciation has flat lined and you can probably pay for it with cash.
You will never be able to buy a car that will run flawlessly, not use a drop of gas, and never depreciate, the best you can do is try your best to minimize your losses.