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  • Writer's pictureAtoZ Financial Freedom

Should I Buy a New or Used Vehicle?

So, you WANT to replace your car. You notice I used the word want there? That is because for most people it is a want and not usually a need.

Which is FINE to want a different/nicer vehicle!

I WANT a Ford Raptor but what I actually NEED is a $2000 car that gets me from A to B. What I have is a nice 2014 Ford F150. I don't need the F150 but I like it and it is 100% paid for and fits within Dave Ramsey's and A to Z Financial Freedom's financial guidelines.

My wife is the next one up to get a nicer/newer vehicle. I am trying to convince her to get a BMW, Mercedes, etc. SUV. We will see what she wants when the time comes (AKA when we have the cash to pay for it 100% up front) and what she really likes then within our budget.

So, let's use that as an example and take a look at the new vs used for a nicer BMW or Mercedes SUV.

First up BMW X5 SUV.

Here is a new one from a local Phoenix dealer.

Price Tag: $60,195 (note:2019's were still available and the same price or more)

Here is a 2 year old (2017) used one with 39,000 miles from car max

Price Tag: $32,998

Here is a 3 year old (2016) used one with 38,000 miles from car max

Price Tag: $29,998

Here is a 4 year old (2015) used one with 52,000 miles

Price Tag: $25,998

Look at those vehicles side by side. Not a lot of differences in the exterior or interior amongst the years.

From the 2020 to the 2017 you've lost nearly $30,000 in that time.

From the 2017 to the 2015 you have only lost about $6,000. There was also a 2014 on the car max site for $26,998 with 51,000 miles on it too. So, 2017 to 2014 is about the same $6,000 loss.

Now let's look at the Mercedes GLE350

Here is a new one from a local dealer

Price Tag: $63,620 (note: 2019's were still available but more)

Let's go over to our trusty car max and look up what they have to offer

First up a 2017 Mercedes GLE350 with 34,000 miles

Price Tag: $31,998

2016 Mercedes GLE350 with 37,000 miles

Price Tag: $28,998

2016 Mercedes GLE350 with 58,000 miles

Price Tag: $29,998

So, it happened again

From a 2020 to a 2017 or 2016 you have lost nearly $30,000 in that time. But 2017 to 2016 and you have only lost like $2,000.

We can do this for nearly any car. My f150 I purchased used with 70,000 miles on it for $25,000. The original price tag was $55,000. I bought it in 2017 so it was 3 years old. The person before me lost $30,000 in that time. The current KBB value on it is $22,000 with 108,000 miles. So, I've lost $3,000 since I've owned it. I can afford that.

So, should you buy new or used? That really comes down to how much can you afford to throw out the window in two to three years?

Can you afford to throw $30,000 away or $3,000-$6,000 over two to three years?

If $30,000 does not impact you in the slightest financially then go ahead and buy the new vehicle. For most people that would mean you have a NET WORTH well over a million dollars at that point.

I know I can't afford to lose $30,000 but $3,000-$6,000, while I don't like it, doesn't bother as much to have a nicer vehicle.

The other guidelines on cars until you reach the 1 million dollar net worth level

  • Your cars value should not be more than 50% of your annual income

  • If you can't save and pay cash, you can't afford it

  • If you can't pay the maintenance on it, you can't afford it (higher end cars and/or sports cars are usually more expensive to get fixed)

Think about those rules and your cars you currently have. Can you afford them? Can you afford to replace them or upgrade them?

If you need more help with this, schedule a meeting with us. How to buy a vehicle is one of the many financial services we can help you with.

Until next time,

Jacob Dunklee


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