There are two clear ways to go about solving the car ownership format question. New or used. Each has its own cost structure. Consider the total cost of ownership either by year or by the mile.
Total cost of ownership includes the capital consumed in ownership of the vehicle, (lease or depreciation) plus the costs to operate it, (Fuel, maintenance and repairs, insurance licensing) and possibly disposal costs of the car or its components. Bear in mind that you want certain comfort, convenience and safety from the vehicle and will not compromise much on those. The objective is to have the total expense over the time you own an acceptable vehicle be as small as possible.
The question of new versus used is an interesting one. Would a 3-year old Lexus cost less to own over the next three years than would a similar new one over the same three years. The question becomes would maintenance, repairs, other costs and possibly inconvenience, be more than the depreciation advantage?
The answer is unqualified. “Maybe!”
History has taught us that the used car would typically cost less. You might give up a little to differences in technology or style. These could affect fuel consumption, perhaps insurance and possibly safety.
If you buy the car to impress the people inside it, you will likely save money with the used one.
I have recently heard that the cheapest way to drive follows this rule. Never buy a new car and never sell a used one. I would likely disagree with the never sell a used one part, because vehicles become obsolete before they are ready for the wrecker and you may want access to newer technology or reliability. Nonetheless as an absolute rule, it is a place to start thinking.
Once you decide a used vehicle is okay to own you need to find one. You can approach dealers for vehicles coming off lease or those traded in. Kijiji, CraigsList and the Autotrader site may be fruitful too. Be cautious of the classified sites. Never send money before you have checked the vehicle
Unless you are in a hurry you will likely find something. If you have 90 days or so to look, there is little doubt you will find something that suits you.
If there is warranty left, you might wish to have the dealership check the car thoroughly. Be conscious of hidden warranty items.
If you buy privately, then you need to be a little careful. There are at least four things you should care about:
Vehicle ownership is a big cost for most families. Be sure you know what you are giving up in order to drive a flashy new vehicle. You cannot spend extra money on a car and have it available for something else. Money you save by reducing the total cost of ownership can be saved or provide for other lifestyle enhancements. Would you prefer the new car to the 3-year-old one if you had to specifically reduce your vacation budget by the extra amount you pay for the new one?
If the new car scent is what matters, you can buy that in a can.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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