In today’s demanding world we have so many things that we rely on, and we just don’t want to have to worry about every little thing, so we often abdicate responsibility for the quality of our possessions to others. The problem with that is that it is a great way to make other people rich and find yourself wondering how you got conned. Believe it or not, there are a lot of people out there that are willing to take your money and make promises. Here are 5 reasons from my own experience that it is better to ignore the warrantees on a new car and be the master of your own fate.
1. It’s cheaper
The biggest thing that you pay for when you buy a new car, or one that is still under warranty, is depreciation. The estimated depreciation rates for new cars vary depending on who you ask. It turns out that one of the two things that everyone has is an opinion, and they are all different. This article from carfax.com estimates that the second you leave the lot, you lose 10 percent, and then another 10 percent within that first year. This depreciation doesn’t stop, either, as it is estimated that your car will be worth 60% less than the original purchase price in just 5 years. Don’t believe me? Spend some time between Kelly Blue Book of a 5 year old version of the car you want and looking up new car MSRP, e.g. the 2018 Camry LE with a few options has an MSRP of $27,580, but a 2012 Camry LE in good condition (probably average, if you believe bell curves), is only worth $10,335. That is for a car that has a socially perceived high reliability rating, and so it won’t depreciate as much as some other cars that people think are bad.
2. Premium materials last longer
Cars last a lot longer than people think, and I conjecture that that is more true of premium brands like BMW, than it is of high volume brands (that actually make more money). When you ask someone to pay $58900 for a new BMW X5 vs $34410 for a Toyota 4 Runner (or even $42725 for the limited package of the same), people want to know that they are getting their money’s worth. There are ways that we as a species sniff out quality pretty quickly. Anyone who has hefted an iPhone or driven a BMW knows what I’m talking about. Quality items feel solid. They are heavier, because there is more metal reinforcing the frame and more stuff packed in. When I was shopping for my BMW X5, one of the things I noticed is that the curb weight of the vehicle was about 500lbs heavier than other comparable vehicles, and it was quieter in the cab. Even at 10 years old (yes, I am driving a 10 year old BMW) it feels nicer than most brand new cars, because it has quality materials that were manufactured to feel nice. These same materials that are thicker, more reinforced, and often better engineered usually last longer because it takes longer for them to get weak.
3. New cars are untested
Brand new cars may come with a warranty, but they often are testing grounds for new technology. This can be good or bad. It really is a gamble. While it is true that you are somewhat protected by the warranty on the car, but the warranty won’t last forever, and when you are selling things in high volume, you don’t necessarily have to have a quality good to make money offering a warranty. I think the latest series of Dual Clutch transmissions in the Ford Focus is a good example of this. I have a good friend who has had to have his transmission serviced at least 3 times under warranty, because it wasn’t designed well. He is looking to dump the car before it runs out of warranty, and I would feel sorry for anyone that picks up that car when he dumps it, because it is EXPENSIVE to maintain that transmission. My point here is that a lot of the problems that are going to occur with a car can usually be found within 3 to 5 years and well documented on this wonderful tool we call the internet. This way you don’t have to go on the word of a salesman or brand reputation, you can actually have some evidence that the car you are interested in won’t have any major problems.
4. Other people can’t tell you aren’t driving a new car
If you are buying a car for the prestige of a new car, then this paragraph is for you. When I bought my BMW, almost everybody that saw it immediately thought that I had gotten a huge raise (even coworkers that make the same amount of money as I do). The truth about new cars is that there really aren’t that many changes on an annual basis. Manufacturers will change some trim options around a little bit to make the car look a little different, and sometimes there are marginal changes in certain parts, but cars are often made in a 7 year generational cycle. My BMW X5, for example, is an e70 which were made from 2006 to 2013. This means that if I had bought one brand new in 2006, then traded it for a new one in 2009, and again in 2012, then I would have payed 3 years in depreciation 3 times in a row and still be driving basically the same car. You can also bet that the MSRP of the 2012 model will be higher because of inflation than the 2006 model was. This also means that if you buy a car right before the manufacturer releases a new generation, you should expect to see a dip in resale value, since your car doesn’t look like the brand new ones anymore. This also means, that if you plan it right, you can buy a 5 year old car, and have it still look like the brand new one for at least 2 years.
5. You can DIY cheaper than warranty or shop work
This part takes a little bit of bravery and time, but I can promise you that it is rewarding. It turns out that one of the ways that dealerships and manufacturers mitigate the costs of the warranties that they offer for mucho dinero, is by charging a lot for service on the vehicle. One way to be able to offer free stuff, although you are still paying almost $20 kilobucks premium on that warranty for the Camry we talked about earlier, so it definitely isn’t free, is to charge more money for the things that people pay for. In reality, it is often very affordable to work on your own car, and since it is old enough to no longer be covered by a warranty, you have nothing to lose, and knowledge and experience to gain. In most cases, with my car repairs, I have been able to buy the tools I don’t have and the parts and still maintain a significant savings over what I would pay someone else to do it. With this I am also investing in myself and learning something I didn’t know before. Also, if you think about it, it would take a LOT of repairs to make up the almost $20k difference in price between the new and used Camry example we used earlier. I have never payed enough in repairs, even if I wasn’t doing them myself, to make up the difference between a new car and a used car.
In conclusion I hope you can see my logic in avoiding buying a new car (even a cheap one). While in my example I chose the BMW because it was a car that I like, it almost doesn’t matter what sort of car you buy. It is almost ALWAYS cheaper to buy a quality car that is a few years old and keep it than it is to buy a new car. Remember also that price comes from people’s perception. A little patience and a research can go a long way.