New cars can be exciting. There’s that new car smell. Your toddler has not yet smashed Cheerios into every available crevice. You don’t have to worry about repairs leaving you stranded with no way to get around. And you just feel cool driving down the street in a shiny, brand-new ride. (Is that just me?)
If you’ve been driving your current vehicle for a couple years (or more), you may be ready to head to the dealership to trade up for a newer model. It might be in your financial best interest to hold off, though.
Writing for Business Insider, Brittany Knies says a car should be practically driven into the ground. And she makes a pretty compelling case. Knies has been driving her Pontiac G6 for 10 years with no plans to give it up anytime soon. Although she can afford a new car, she chooses to forgo it because sticking it out with her current car makes too much financial sense. Here’s her top benefits of driving an old car:
1. No monthly payment
Considering the average monthly car payment on a new car is $479, purchasing a new car can put a major strain on your bank account. Once you pay off a car loan, you can save a lot of money by continuing to drive that car as long as you can. While some may say the hassle and cost of repairs renders the choice unwise, it can definitely work out in your favor.
For example, my 1997 Honda Civic needed a new transmission after I’d been driving it for a good ten plus years. So, I wondered whether the investment would be worth it. I paid $2,000 for the repair. In the long run, I got three more years out of the car without any other major repairs needed. That works out to $55 a month, a lot cheaper than the average monthly payment.
Knies says she used the money she saved on car payment on buying her own home and travel. Two things that are way more important to her than owning a new car.
2. Savings on Fees
Knies says her annual registration fees and taxes are $50. If she were to buy a new car for the same price as she bought her current vehicle, she’d be paying $150-$200 more. Tax savings are always welcome.
3. Less Worry About Damage
When you get a new car, you may have the urge to protect it as if it were your baby. Every tiny scratch or dent is devastating. After all, you just drove it off the lot, and it was in pristine condition! Not so with an old beater. If someone dings you while trying to parallel park, oh well.
4. No Interest
Part of the reason the average monthly car payment is so high is because of hefty interest rates. In some cases, the interest rate can be so high it ends up doubling the price of the car. Just because you can afford the monthly payment doesn’t mean it’s a good deal. In Knies’ view, the longer she can make her current car last, the more money she can save. That extra cash can ultimately help her buy a new car outright, allowing her to skip the cost of interest altogether.
5. A New Car Loses Value…Quickly
You should never think of a car as a financial investment, because you’re going to see little to no return on it. Consider this. The second you drive a new car off the lot, it loses 10 percent of its value. Knies recommends you view your car as a way to get from point A to point B, not as a status symbol. If you suck it up and drive a less-than-glamorous car now, you’ll be able to afford that vacation you’ve been eyeing later. Not a bad sacrifice!