The financial fallacy of buying a new car to save on maintenance costs is rooted in the fact that the potential costs of maintenance are often vastly outweighed by the significant costs of buying a new car. The idea of purchasing a new car to save on maintenance costs seems logical on the surface: New cars often come with warranties and are less likely to need repairs. However, depreciation, insurance, taxes, the initial cost of the vehicle and potential interest on a loan far exceed regular maintenance and occasional repair costs of a well-maintained used car. Most cars depreciate the most within the first few years, so purchasing a lightly used car can save you a significant amount of money.
The prospect of not having to deal with unexpected mechanical issues or having a car that’s always in the shop is quite appealing, not to mention the delightful new-car smell and the status symbol associated with the latest vehicle model.
An effective financial strategy would be to consider the overall costs of owning a car. This includes purchase price, depreciation, insurance, fuel, parking, loan interest, and maintenance among others. In particular, rather than buying a new vehicle when the first signs of consistent maintenance expenses emerge, keep up with preventive maintenance on your current vehicle as recommended by the manufacturer. This approach will extend the life of the car, and although there will be cost involved, it’s likely to be far less than the cost of buying a new car.
Further readings on this fallacy:
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Article: “Should I Buy a New Or Used Car?” by Investopedia. Article Link
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“What Is the Total Cost of Owning a Car?” by NerdWallet. Article Link
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“Autocosts” Car Costs Calculator
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“Depreciation” Wiki Link.
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Book: “Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century” by Vicki Robin and Joe Dominguez. Book Link This book discusses the concept of “opportunity cost,” a foundational aspect in understanding why it might not be financially wise to buy a new vehicle to avoid maintenance costs.
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“The Millionaire Next Door” by Thomas J. Stanley and William D. Danko. Book Link Discusses the common economic behaviors of individuals who successfully accumulate wealth, including their habits about car ownership.