Buying Cars

Is it time/ready for you to buy a car?

When I was getting ready to buy, I did some math, to figure out if owning a car was financially worth it:

I like to do a little spreadsheet and add up all the costs (DL cost, Insurance, Gas, Repairs, etc). The federal govt does this for us, and it works out to $.575/mile (so 58 cents a mile). That's what it costs the federal government for an employee to use their car for work. So this is basically what it will cost you to own a car. If you add up all of your travel, and compare it to a taxi/uber, is it cheaper?

I wouldn't entertain buying a car until it's cheaper than your other on-demand options(taxi/uber/public transit/car rental/etc), or you are willing to just spend the $'s to make your life easier, knowing what it's costing you.

You might be able to beat the federal 58 cents a mile number, but probably not by much.

What to buy

As for which car model/brand to go buy, I'd recommend the Total Cost of Ownership car sites (Edmunds, KBB) and buy whatever is cheapest that you like in your area, that fits your needs.

If you aren't sure what brand/model to buy, I'd recommend either a Mini-van(the most versatility for your $'s) or a small 4-door car(the cheapest to own).


If you can pay cash: I'd recommend used, from a private seller, and pay a mechanic their $150 or so(1hr) to go with you(or test drive to the mechanic). The mechanic will be able to tell you this is a great car but will need $X more in the next year probably in maintenance, or this car is trash, I won't work on it, don't buy it!

This will give you serious information as to what to pay for the car. KBB.com can tell you what a good condition car is worth in your neighbourhood, and armed with the mechanic information, you suddenly can calculate what that particular car is worth. If the owner and you don't agree on the car's value, then go find a different car.

When is it time to replace my car?

If you care about safety, then ideally you should replace every 5-ish years. The IIHS has an article that backs up this perspective. Personally my vehicle is almost 8yrs old at the time of this writing and I still have no plans to replace it. That's because if you look at the actual tests that are run they don't change that often, and vehicles are improving safety somewhere around 2-6% yr and I'm willing to take on that risk as I really don't drive much, most of it is highway and I generally refuse to drive tired or stressed out or while unable to pay attention to the road.

You should save towards your next car purchase immediately after buying your current car. You know it will need replacing eventually, so start saving today for it.

From my perspective it's time to replace it when the cost to repair the car is more than the cost to replace it (or alternatively, the value of the car).

Value of car methodology:

If the car(if it was working) is worth $1,000.00, then it's worth repairing as long as the cost to repair is under $1,000.00

Price to replace methodology:

If I know the replacement I would like to buy would cost me $5,000.00 then it's worth repairing as long as the cost to repair is under $5,000.00

So generally if you prefer to replace than fix, then value of car methodology would let you replace more often than the price to replace methodology. Pick one that works for you.

Another way to think about it: When I'm worried about driving it the longest distance I traveled last year. I.e. if last year you took a trip from Canada to Argentina, and you wouldn't feel comfortable taking your current car on that trip, replace it. That means you will most likely replace it much more often than is mathematically warranted with one of the 2 options above.

Alternatively you can buy cheap and minimal car that is new(see what to buy) and then keep it for 10 years and replace it. Any new car should easily get you 10 years with basically zero repairs(assuming you do the normal maintenance). Never buy the warranty on cars, the vast likelihood is you will never need to use it.

Also see: PF wiki on Reddit

A perspective on vehicles / Vehicle Math

If we think about a vehicle as a tool you have to replace every so often, we can compute the utility cost of a vehicle purchase.

If we assume Vehicles will have an expected lifetime of 200k miles, we can calculate the $'s per mile:

Price of Car / (200,000 - actual mileage)

So far I've seen vehicles starting around 5-10 cents a mile up to 30 cents or more. Based on a very small sample size:

* Small cars tend to be around 5-10 cents a mile * Trucks tend to be around 30 cents * Vans tend to be around 20 cents.

Another way to do this, which is a little less accurate but can be more useful from a budgeting perspective is doing the same math, but by year:

How many years do I think this new car will last based on my driving. How many years less will the used car last because it has X miles and Y years of wear and tear. Now calculate cost per year and that's your winner.

For example, I expect I will keep the car for 150k miles before it has problems, and I drive 15k per year, so a new car will last me 10 years. If I buy a used car with 60k miles, that is 4 years less, so I will only get 6 years. If the new car is $50k then it costs me $5k per year. If the used one is $36k then it cost me 6k per year. Might as well get new. Just made up numbers, but you get the point.


I have no experience, but my understanding is: In general, the rule of thumb is that if the payment is less than 1% of the MSRP with $0 paid up front and all taxes and fees rolled into the monthly payment, it's a good deal. Also there's an entire website built around leasing that might prove interesting: https://leasehackr.com