Now I realize I am going into dangerous territory here when I try to defend myself when I decided to buy a new car on a personal finance website. Especially when I wrote a guest post a couple months ago talking about the benefits of buying a used car!
Yes, I had done my research, crunched the numbers, and came up with the idea that a 1-2 year-old used car (specifically a Hyundai Elantra) was the way to go. I wanted something that was durable, fuel efficient, inexpensive and that was it. I compared the numbers on new cars and thought that I would have to see one get below 17K before I would consider it and since I wanted A/C, cruise and an automatic transmission, that wasn’t going to happen. So how then, did I get convinced to go with the idea to buy a new car?
How Did This Happen?
Well a few factors went into it, and I’m still not sure it was the right decision, but I am rationalizing it mostly with the idea that I paid a premium of a few thousand dollars as a treat for myself and some peace of mind. The very first thing I found when looking for used-cars in the compact/small sedan (can we really call some of these cars compacts anymore?) class was that any reliable brand name was going to cost you quite a bit of money, and there was definitely not the wiggle room that there was in years past. For a 1-2 old Corolla, Civic, or even Elantra, the lowest I could find was 12.5K, with a few private sellers going below that on cars that had substantial mileage on them. I talked to a couple of guys I know in the car industry and they said that the lack of negotiation room wasn’t my imagination. Apparently too many people read my post and have been buying used cars :). With used car sales going up across North America, dealers have way more leverage when negotiating prices. I learned this was especially true in the small car classes that are the domain of frugal individuals to begin with.
My Acknowledged Inadequacies…
Then I started to consider my rural position and vehicle repairs. I have a GM dealership in my small community, equipped with full-service GM garage. I believe in supporting local businesses when I can (for instance I do all my grocery shopping here, despite paying about a 5-10% premium to do so), but used GM products just don’t have a great track record to say the least. The nearest city is just over an hour away and it has dealerships and garages for all the major car dealers. I have always been self-conscious about my lack of automotive knowledge. I know how to change my oil or clean spark plugs, I even have a decent understanding of how a car works, but I am clueless when it comes to actually finding solutions to mechanical problems. Before I recently moved I had numerous friends who were mechanics that could help me out if I ever had problems so I didn’t worry about it. Now I’m at the mercy of whoever decides that I have a “transmission problem that will require extensive work.” So the theory is that a new vehicle will not only break down less, but will have 5 solid years of bumper-to-bumper warranty on it. Also, I know that I am a maintenance freak with my vehicles because I hate the inconvenience and powerless feeling of bringing my car in for repairs; consequently, I like knowing that the vehicle I’m driving has had the maintenance done exactly as the manual recommends and that I will get the maximum potential out of the car. A lot of the 1-2 year used cars were off of leases and had 30-50K on them. You have to wonder how people treated those cars if they knew they were only leasing for a year or so. You can do a lot of damage to an engine if you only give it a couple oil changes and don’t break it in properly over the first 50,000 km (even if the damage will only come into play after the 50,000 km that would still be left under most warranties).
Buy A New Car – Because Its “The Car Buying Season”
With Spring/Early Summer being the biggest car buying seasons of the year, every dealership out there right now is competing with “employee pricing” and “0% financing.” With all the dealerships putting their best foot forward I actually had more leverage here than in the used car market! I test drove all of the major players in the class including the Nissan Sentra, Toyota Corolla, Honda Civic, and my two finalists, the Hyundai Elantra (2012) and the Chevy Cruze (2011). I found they were both slightly smoother than the other 3, got at least as good mileage, and had great consumer reports reviews. To be honest, the Cruze made my cut-off mainly because of the GM being right next door. Even with the GM employee pricing and nothing special on the new Elantra (it wasn’t included in their 0% for 84 months deal, in fact the 2011 model wasn’t either, that’s how popular the model is right now) the pricing was very comparable. The “middle-of-the-road” models with the automatic transmission, A/C, and cruise were almost exactly the same price. While I was impressed that GM has finally released a competitive product in the small sedan category, the Elantra was just a much better fit for me. As an added bonus it came with a passenger heated seat (the Cruze only had for the driver) which was a big deal for my significant other. The Elantra just had a bit better mileage, a better warranty, and had better styling (check out the interior).
The 2012 Hyundai Elantra Was The Clear Choice
Even without having any special deal on, I thought the Elantra just made sense at the price I paid for the satisfaction it gave me. I ended up getting the car for $20,200 with mud flaps, a block heater, and a couple other goodies installed (I even got a “free” coffee mug thrown in by the dealer after claiming that I thought I seen it in the fine print haha). After a lot of “going back to see the manager” I also got a 2.99% interest rate, which was a lot better than the quotes of 6-7% I was looking at on a used vehicle. Although it kills me to pay interest on a car, I did my homework before I left and found that it added just over a thousand dollars to the overall price once my down payment and amortization period were factored in. I can live with that. With the extra taxes, interest, and difference in original price, I figured I paid about an 8K premium to own a new car. You can probably take a couple of thousand off for mileage savings (it actually does get the 40 mpg highway mileage that the EPA measure it at, and that’s before the engine gets properly broken in) in the next few years, and maybe a thousand in repair costs I’m saving. So I paid 5K solely for the enjoyment of having a brand new vehicle that I really like (after 3800 km I would highly recommend it), that has a great warranty, only had 5km on it at purchase, has superb consumer ratings, is one that I plan to drive until it dies, and I got to customize to exactly what I wanted including a great color (very important to the GF).
I am secure that I made decision that cost me more than it had to (even though it’s tough to see that money taken off every month), but was worth the benefits it provides to me. So for me, buying the new car made sense right now. Has anyone else out there taken advantage of the “new car season” or got a great deal on a used vehicle?