Why I Bought a New Car (in a looming recession?)

Why I bought a new car (in a looming recession)

In a time when nearly everything we regularly use/consume is going up all around us and continues to do so or has momentarily plateaued at said higher than usual levels despite continual rate hikes by the Fed, does it make sense to drop a lot of dollars on anything? We’re not just talking about anything here, but specifically a new car. Most of the personal finance advice you’ll find around the interwebs is very clear on the value depreciation (and its quickness) of new vehicles, so why would one (me) drop $8-10k more dollars than they would have pre-pandemic for a liability on wheels that’s going to drop in value the second it leaves the lot and more as the days of our lives go on by?

I’ll tell you why.

We’re living in a different world than we were pre-pandemic. If you don’t have your finger on the car market of late, then you may be surprised to learn that used cars have not only risen in value (yes, including my 13 year old Nissan Versa), but you just can’t find the deals that were aplenty prior to the surge in pricing and the chip shortage. Still though, does that then mean the best option is to buy a new car with the threat of a looming recession on the horizon?

I still see plenty of PF influencers talking about going carless or choosing used vs. new to save money both now and in the long term, but I personally haven’t found this advice useful in the place we’re in right now. It’s easy to say that, the math on paper is pretty simple, but if you’re actually looking for those vehicles — they just aren’t anywhere to be found at the moment. In fact, I read an article this week about how some used cars are selling for MORE than their new counterparts.

This process for me began last year, when I started to think about what I would do when the lease on my Jeep was up. I know, I know — a lease?! Isn’t that practically forbidden if you’re chasing FI? This is another perspective I disagree with a bit. In my case, I chose to lease a Jeep for a 4-year period instead of committing to it forever, since I had always wanted to drive one but didn’t know if it was practical to commit to it for 10-15 years. Conclusion: I do just love Jeeps but no, it is not at all practical. Just sexy and sure fun to drive. As it turned out, the buy price included in my lease contract was considerably lower than what it would have been in today’s market, so I actually bought out the lease and then sold it for a $5600 profit.

The first part of the plan was always to give the Jeep back/sell it and share one car for the remainder of 2022 as both adults in our house are home full time and we don’t technically need two vehicles sitting in the garage all of the time. This was an experiment for us to see if it was a a set up that made sense in real life, not just on paper. Aside from a few instances where we had to reschedule or shift something, it was mostly fine.

My initial plan was to wait until Q1 2023 to reevaluate how the experiment was going, how much money I had saved, and whether a second car was truly a need. In August, though, I was pushed to take action when my company laid off a percentage of staff without much warning. Since then, several other companies across all industries have done the same, so this was not a company-specific move, but I realized that I may want the option to drive to a different place of employment should I need it, or at the very least be able to pick up some extra gigs to stash away some extra cash or fill a gap if I’m in a round of upcoming layoffs. I do not live in a city with public transportation options, so having a car in this area can be seen as more of a need than in places with subway systems or higher walkability areas, etc.

For the past six months, I was able to save the difference in car insurance (1 car vs. 2) and the car payment plus a little more “found” money in my regular budget once I shifted things around a little. I also saved most of my commission checks and side hustle dollars to put together a $21,000 down payment on a new 2022 Prius.

While I am pretty proud of my hustle and determination to make this goal materialize at an incredibly accelerated rate compared to my initial plans, this hefty down payment was able to get my monthly financed payment in the low $200s range financed over SIX YEARS. When I compare this to the other vehicle I own (the 13-year-old Nissan Versa), I cringed more than a little when I realized the amount I financed even with a $21k down payment is still MORE than I paid for that car thirteen years ago. While I understand that this is not quite comparing apples to apples, we are talking about a more sophisticated vehicle this time around (with a few more bells and whistles included as well even though it is the lowest trim level)… I can’t help but think: my, my, how the times have changed.

The follow up question to this is: couldn’t you have just bought a perfectly good used car with that $21k down payment that would have done the job?

The answer here is surprisingly…no. That was my initial hope when I sold the Jeep. I had planned to save up over the course of 9 months-1 year or so at a slow, steady pace and then buy a gently used 3-4 year old Prius for less than $15k. What a fanciful hope that was. The only thing those searches yielded was disappointment. Mostly, what I found was that if it was priced under $20k, it had over 100k miles on it or had accidents on its record and was closer to the range of 7-10 years old. After several weeks of this, I shifted my focus to new hybrid vehicles that would indeed cost more but would at least give me peace of mind when it came to their history and future.

Three months later and a lot of headache later, I now have my bright shiny Prius sitting in my garage. The plan is to pay it off much sooner than the six year term I signed up for. I chose the longer length to keep the payments low so that the payment could slide into my existing budget without much reconfiguring. A new, hybrid car with a much more efficient MPG than the Jeep I owned before will allow me to feel less pain at the gas pump as well as dart around town doing deliveries and the like for a few extra bucks. It also provides additional peace of mind knowing that we have a back up car if needed.

The 13-year-old beauty of a Nissan that served me through most of my twenties still has plenty of life in her and is mostly babied, but I did occasionally stress about it being our only vehicle during some parts of the experiment. I chose to Doordash less when we shared one car because I felt like I was needlessly working it harder than it needed to be and was a bit wary to drive it out of town.

All this to say that sometimes, you have to look around and make the best decision that you can for where you are at that time. A lot of personal finance is simple math and most people can learn a lot from picking up a few books, but once you get the basics down – I think it’s important to remember that personal finance is indeed personal and it’s okay to stray outside the lines a little if it makes sense for you.

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