Americans love cars. Not only have cars been a manufacturing staple in America for many years, but we love to drive them, shop for them and compare them. The ‘road trip’ is a rite of passage. Getting a drivers’ license is a major milestone in a young adult’s life. Pictures of cars are everywhere online – we can even buy them online and have them delivered to our houses at this point. Cars are just cool. All that said, though, there are many things to consider about buying a car before diving in head first. Is it worth buying a car? In this article, we’re going to talk about 6 factors to consider about buying one.
A Few Car Facts
Here are some interesting statistics about cars:
- At the time of writing this article (May 18th), there have been nearly 30,000,000 cars manufactured in 2020 (via Worldometer).
- Out of those 30-million, over 33% were probably produced in China according to prior year stats.
- According to U.S. News, the average new car goes for around $37,000 and the average used car costs about $20,000.
- The average driver in the U.S. drives just under 13,500 miles per year (via The Motley Fool).
We’ll get into some more specific statistics and facts about buying a car below.
Is It Worth Buying A Car? Here Are 6 Factors To Think About
Let’s get right to it. Here are some things to consider before you go out and buy a car!
- Do You Need A Car Or Can You Travel Another Way?
- What’s Your Financial Situation?
- What’s Your Living Situation?
- How Many Miles Do You Need To Drive?
- The Make, Model, Year & Mileage Matter A Lot
- Consider The Many Hidden Costs
Scroll below to get the details on each of these considerations.
Do You Need A Car Or Can You Travel Another Way?
This first point might seem obvious, but it’s worth noting – do you need a car, or can you get around some other way?
There’s no shame in needing a car but in consideration of the points below, you might want to opt for another way to get around.
Living in or near a major city offers many alternatives to owning a car. In NYC, for instance, the subway costs a few dollars per ride to get to any destination regardless of the distance and even less if you buy a monthly pass.
Trains are a popular way to commute in and out of cities, too. A round trip via MBTA commuter rail in the greater Boston area, for example, will most likely cost less than $25 per trip – which can be 60 miles at that price – and a lot less if you buy a monthly pass.
If you’re looking to travel longer distances, train services like Amtrak go all over America. The same can be said for numerous coach bus companies.
As for local travel, we’re firm believers that the bicycle is the ultimate form of minimalist transportation, in consideration of price, efficiency and flexibility.
Sure, driving a car has advantages over some of these methods, but those methods also have advantages over cars.
Read Next: Is A Bike The Ideal Form Of Minimalist Transportation? The Pros & Cons
What’s Your Financial Situation?
Unless you’ve got enough to buy a car outright in cash, you’ll need to take out a car loan.
Before we even get to that, nearly all dealerships will require you to put down at least some kind of downpayment at the time of purchase. Many sources advise that a buyer should aim for about 20% down on a new car and at least 10% down on a used car. Referring to the stats at the intro of this article, that’s $7,400 ($37k x 0.20) and $2,000 ($20k x 0.10) on average, respectively.
A larger down payment means less interest paid on an auto loan. Depending on your credit score, this can be quite a lot of money. According to Credit.com, a person with excellent credit pays 2.8-3.5% interest on average, whereas buyers with lower credit scores end up pay anywhere from 7% to as high as 19+% interest!
Plug some numbers into this auto loan calculator by Cars.com and you’ll see that the difference between a low and high interest rate on an auto loan can equal hundreds of dollars per month.
In short, definitely consider your credit and the down payment you can afford before deciding to buy.
On a related note, we personally don’t recommend buying new cars as a general rule – we explain the details behind this belief in our article “Most Popular Second Hand Items: Our Top 10 List Of Things To Buy Used“. Like all general rules, there can be some exceptions that we’ll get into below.
What’s Your Living Situation?
In many cases, there are several logistical considerations to make before buying a car.
If you live in a rural area or place with no public transportation options, buying a car may be necessary. Even in these situations, it’s worth noting a few factors when deciding on a type of car to buy:
- Road Conditions: Are the roads rough? Do you have a steep driveway? A car with low-profile tires or a low ground clearance aren’t the best fit.
- Weather: If you’ll be spending a good portion of the year driving on slick roads, ice and snow, a rear-wheel drive car will cause a lot of trouble. You may be best off with a 4×4 or all-wheel-drive car.
- Gas: With a lot of miles to cover, a more fuel-efficient vehicle will save money. Conversely, a less fuel-efficient model costs a lot to run.
For busier areas, there are more logistics to think about in addition to those listed above:
- Parking: Are you able to park at home or do you need to rely on street parking or a garage? These factors take up time and money, which make buying a car less attractive.
- Traffic: Lots of time sitting in traffic means lots of time not doing other things. Taking public transportation might take the same amount of time, but you can read, get work done or take a nap instead of sit there behind the wheel.
- Tolls, Fees, Etc.: Crossing bridges, tunnels and state borders usually involves paying a toll, which can add up to quite a bit of money over time. Public transportation saves you from this issue.
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How Many Miles Do You Need To Drive?
As said above, the average person drives about 13,500 miles per year. For reference, a brand new car will hit 100,000 miles in a little over 7 years at this rate.
This is the average mileage though. If your commute to work is 30 miles each way, you’ll end up driving 300 miles per week just to get to and from work. Rounding up to 350 miles per week to include weekends and the occasional longer trip, you’ll end up driving over 18,000 miles per year.
Driving this kind of mileage means more frequent maintenance like oil changes, brake servicing and other routine maintenance – plus a lot more gas too! In order to save money, you’ll be best off using mass transit like buses or trains, or buying a fuel-efficient, reliable vehicle.
What if you drive less than the average yearly mileage? You have some options at your disposal.
First off, a used car is a lot more practical to purchase if you’re only putting a few thousand miles on it per year. Even 100 miles per week amounts to only 5,200 miles per year. You can buy a used car with 60,000 miles on it and drive it for nearly eight years before hitting 100,000 miles. You’ll spend less on your car and avoid taking the depreciation hit (via CarFax) that new cars face.
You can also get a car without ‘buying’ one at all. Most new car leases have a cap of 1,000 miles per month (12,000 miles/year) before you begin to pay steep fees for the extra mileage. In exchange, you get to enjoy the advantages of leasing a car:
- Lower down payment required.
- Service and mechanical repairs are covered.
- You get to drive a new car.
- Lower monthly payment, especially when a dealership or maker is offering lease specials.
In turn, you’re basically renting the car, but this might make sense depending on the other factors discussed in this article. For those driving really low mileage, there are often special low mileage lease offers that can be extremely affordable.
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The Make, Model, Year & Mileage Matter A Lot
Not all cars are created equal.
In fact, there are several variables to consider even if you definitely plan on buying a car.
The first and most obvious variable to consider is the price. More specific than price, though, is depreciation – how quickly the car loses its’ value.
According to CarFax, a new car can lose 10% of it’s value in the first 30 days. It then loses 20% of its’ original price after 12 months and 60% of it’s original price after five years.
Here’s what this looks like for a $30,000 car:
- Worth $27,000 after 30 days
- Worth $24,000 after 12 months
- Worth $12,000 after 5 years
When deciding whether or not it’s worth buying a car, it makes sense to look for a car that holds its’ value – said another way, a car that depreciates the least. That’s all money you’ll get back when it comes time to sell or trade it in. Check out this list by iSeeCars about which cars hold their value the most and the least.
Maintenance costs and reliability must also be considered. Brands made in the USA by parent companies like Ford, GM (Chevy, Buick, Etc.) and Chrysler (incl. Dodge & Jeep) are much cheaper to maintain than imported exotic & luxury car brands. Japanese brands like Honda, Toyota & Nissan as well as Korean companies like Kia & Hyundai are also pretty cheap to maintain, despite being technically foreign – many are now produced in the states anyways. Here’s a list put together by YourMechanic of 10-year maintenance costs by brand, from most to least expensive.
The last, but not least thing to consider is the mileage. A higher mileage car has a cheaper purchase price, but this is offset by the cost of and likelihood of needing repairs on a car that’s gotten more use.
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Consider The Many Hidden Costs
When it comes to the true cost of owning a car, the price you buy it for is just the beginning.
As for whether or not it’s worth buying a car, we’ve already covered many of the costs you’ll face besides the purchase price:
- Type Of Car You Need
- Depreciation
- Maintenance & Repairs
- Credit Score & Your Loan’s Interest Rate
- Tolls & Parking
- Fuel & Efficiency
Here are a few other things to keep in mind.
The cost of insurance will vary greatly based on where you live, the type of car you’re buying and your driving record. These variables can make your yearly insurance cost vary by thousands of dollars.
The type of tire your potential car requires can vary a lot in costs, as can the replacement cost of damaged rims. If you’re in an area with lots of potholes, this is needed somewhat often.
Lastly, keeping your car clean is important also – not only for your enjoyment but for getting the highest resale value possible. This translates to paying for carwashes and detailing, or buying the cleaning products and doing it yourself.
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So, Is It Worth Buying A Car?
Whether it’s worth buying a car or not is ultimately your decision to make. Everyone’s needs are different and are so widely varied. It is our hope that we’ve provided as much information as we possibly can to help you evaluate your needs, weigh out your options and make the most informed decision on buying a car possible. I hope this has been helpful and we appreciate you reading!