As I mentioned in my last net worth update, I am in the process in doing some research on replacing my 8 year old vehicle.  Ideally, I would like to keep my current car a big longer, but it has recently turned on me and the repair bills are really starting to add up.

In keeping with my “find the best deal” personality, I am on the lookout for the best value for the features that we are looking for.  Speaking of my personality traits (or pitfalls as my wife would put it), I have the tendency to over analyze things.  Especially with consumer items that cost tens of thousands of dollars.

So far, we have agreed to go with the compact SUV market.  As this market is quite broad, we have narrowed it down to a 3 – 4 contestants.  However, out of the SUV’s, we’re still on the lookout for the best deal whether it’s new, used, out of province or out of country.

New Car Market

The new car market isn’t as “deal friendly” as it was earlier in the 2009, but there are still some incentives available.  Most are currently offering 0% for at least a couple years, but not that great a deal if you’re a cash buyer.  If we do go new, we hope to drive the vehicle for at least 10 years.  In addition to “factory incentives”, the dealership themselves should have some wiggle room as their margin is typically between their invoice price and MSRP.  The trick is finding their invoice price!  In Canada, invoice prices aren’t as readily available as in the U.S, but they can be found… at a cost.

I joined Car Cost Canada which provides 5 car invoice reports for the price of $40 (they provide 3 bonus reports if you complete a survey).  What’s great about the membership is that it provides listed factory incentives as well.  For example, the Honda website does not list the $1,500 factory rebate available for July (CRV), but it’s there and can sway the balance when two vehicles are neck and neck.  I’m not sure if I’m supposed to say this, but it seems that the compact SUV market typically has a $2k markup.  Not a lot, but provides some room for negotiation.

Since we are considering a new car, it makes sense to consider the large discounts on new cars offered in the U.S as well.  Even after the exchange rate differences (today $1.10), there is up to $5k-$10k potential savings which is quite significant on a $30k vehicle.  However, the savings can be eaten up by the 6.2% customs charge if the vehicle does not qualify under NAFTA, expensive FOREX from the banks, and the cost of travel to actually pick one up (depending on how far you live).  Furthermore, not all manufacturers will honor the warranty if they are purchased across the border.  Needless to say, there is a lot of due diligence required when purchasing across the border.  I will be writing more about the process of purchasing a car from the U.S in the near future.

Used Car Market

Knowing the depreciation of new vehicles, naturally, I’m going to consider a late model lightly used car as well. Being in Newfoundland means that the import used compact SUV market is extremely limited which means looking in other provinces as well.  As with buying any big ticket item used, proper due diligence is required to ensure that you’re not buying a dud.  For me, I would prefer a used car that is late model, low kilometers, accident free (carproof and/or carfax report) and properly maintained.  Off-lease vehicles usually fit the bill.

So that’s how I’m starting my research into a new vehicle, wish me luck!  Any tips that you have is appreciated.


  1. Michael - Fat Loss Tips on July 23, 2009 at 10:00 am

    I’m really interested in cross border shopping for vehicles and haven’t been able to find a concise source of information.

    One tip to consider if your stuck on buying new is waiting for the new models to come out which will significantly reduce old models (which by the way are still brand new vehicles). I saved over 5k on my last car purchase doing this.

  2. Steve on July 23, 2009 at 10:23 am

    Keep in mind their are some downsides to buying something off a 2 year lease. You can be pretty confident the routine maintainence was done, however, most people who lease a vehicle for 2 years are only concerned with avoiding extra penalties when they return it. So it probably doesn’t have dings and scratches. BUT….

    Expect lease vehicles to be driven hard, especially when cold, no proper warm ups in winter, no regular vehicle washing (first 2 years of Canadian winter without washing will eat away the galvanized metal. It won’t rust for another year or two, but you’ve lost MOST of your protection.)

    If you’re looking for a manual transmission, expect reduced clutch life. People with leases being returned in a month love to use them to teach their friends and family how to drive stick.

    In other words, lease vehicles rarely have the TLC a good owner puts into a vehicle they had for 5 years. And if the vehicle has been well maintained for 5 years, it will show at that point.

  3. FrugalTrader on July 23, 2009 at 10:54 am

    Great point Steve. I’ve also found that with the Rav4/CRV, right now it’s well worth buying new as they don’t seem to depreciate much in the first couple years.

  4. Mike on July 23, 2009 at 11:06 am

    What about the VW Jetta Wagon TDI? Review in todays Globe and Mail

  5. Thicken My Wallet on July 23, 2009 at 11:17 am

    A friend once invited his mechanic friend to our poker games and he gave some absolutely great insights into what cars are easy to repair, what parts are easy to obtain, what cars he sees in the shop all the time (Chrysler) and what he would buy (Honda and Toyota).

    Since most of a car’s costs over a normal life-span (now over 9 years on average) is maintenance and repair, it may practical to focus on what happens after you purchase as much as getting a deal on when you purchase.

    In other words, go befriend a mechanic and ask for their advice!

  6. cannon_fodder on July 23, 2009 at 11:20 am

    I’m interested, FT, why you are buying a car (a depreciating asset) vs. considering leasing.

    I recently got rid of my 14 year old car as it was starting to suffer major rust issues. I had put over a grand worth of repairs just a few months before that – if I had known I was going to get rid of it, I would have held off or put an interim fix in. But, when you consider that 2 month’s finance payments are more than that on my newer car, suffering through expensive payments really isn’t that expensive.

    Hold off as long as you can! And, like Michael said, once the new model years start poring in the dealers will look to slash existing inventory.

    When I went in to negotiate my last deal, I took in my laptop with an Excel spreadsheet and kept plugging in the finance numbers given to me by the sales rep. I didn’t say much and let him do all of the adjusting and it worked out well. He gave me a new number, I plugged in the figures, and shook my head and said basically, “We’re not where I need to be”, or “We’re moving in the right direction, but we haven’t reached the destination”. Other than that, I just shut up and let him do the talking.

  7. FrugalTrader on July 23, 2009 at 11:28 am

    Thanks for the tips guys!

    CF, I ran the numbers before, and purchasing comes out ahead of leasing IF your the type to keep the car for many years : 7+ years I believe. I’m the type of person who’d rather not have any payments, but with the 0% financing they are offering now, it’s hard to turn down.

    Would you consider leasing your next car?

  8. Henry on July 23, 2009 at 11:33 am

    Toyota Graduate Program gives 500 dollars allowance if you graduated within the last four years from an accredited post secondary program. If that applies to your wife, you would still qualify for the 500 dollars allowance. If Toyota Graduate Program applies, you should leave this detail to the end.

    You should definitely get 4 wheel drive for compact SUV.

    Ford Escape 2009 might be a good choice if you want to pay for cash.

  9. Kathryn on July 23, 2009 at 11:47 am

    Coming from someone who also over analyzes things, when we were in the market for a car I had a huge spreadsheet going with everything from fuel economy, trunk space, length and type of warranty, passenger volume, rear legroom, cargo volume, admin fees and other delivery costs. It also included consumer report satisfaction rating and the car cost Canada price. It’s embarrassing how detailed that thing was. I had the whole thing narrowed down to 3 with all the data. At that point it came down to what was most important to our family (space, fuel economy, consumer report rating and overall price.) Seeing it all in spreadsheet form made it much more clear which one we should get.

    I can e-mail you the spreadsheet if you like. You could put in your data and then you could put in a voting feature and we could all decide which car you should buy! :-)

  10. M Hawk on July 23, 2009 at 11:53 am

    Kathryn, you should share that spreadsheet with the rest of us :)

    I like the idea of a spreadsheet because it’s about numbers, not about emotional attachment… I’m not a great car shopper because I like fast black cars and I kind of ignore things like gas mileage and warranty. A spreadsheet would be a good comparison tool.

  11. FrugalTrader on July 23, 2009 at 11:59 am

    Kathryn, we must have similar obsessive tendencies because I have a spreadsheet of my own. :) Would love to see what you came up with though.

  12. Kathryn on July 23, 2009 at 12:01 pm

    FT: I’ll e-mail it to you in PDF and you can post it if you like or just compare it against your own.

  13. cannon_fodder on July 23, 2009 at 12:02 pm


    The first car I’ve owned I purchased new and sold it 10 years later. The 2nd car I leased for 4 years (it was already 3 years old) then bought it out. I kept it for 11 years. This last vehicle we are financing since the rates were so good.

    I can write off vehicle expenses but if you can get good leasing rates it might make sense because you aren’t stuck with the vehicle if you don’t like it or your needs change (e.g. you have a nice coupe and then 4 years later you have 2 children – time to move to a 4 door something).

    Kathryn – I think that was a great idea. I know I wished for a website that would have all of that information handily available. Believe it or not, one consideration we had were the exterior physical dimensions. If a vehicle is too big for our garage, then it’s off the list.

    A database of all pertinent details as you have suggested would be quite helpful in the car shopping experience.

    And, I’ve been known to like a spreadsheet or two. ;-)

  14. almost there on July 23, 2009 at 12:13 pm

    great car site

  15. Kathryn on July 23, 2009 at 12:14 pm

    CF: Funny about the exterior dimensions. That was a huge issue for us too with a one car garage. We just tested that out on the ‘test drive’. We drove it home and drove into the garage to see how well it fit.

    We also took four duffle bags (how we travel), stuffed them full of pillows and comforters to see if they’d all fit in the trunk.

    We’re a one car family so we wanted to be sure we were getting one that was big enough but still had good fuel economy.

  16. nobleea on July 23, 2009 at 12:37 pm

    i think buying across the border makes sense for more expensive luxury vehicles. it is a big hassle. and if you have to take a week to fly down, buy it and drive back, i could think of better ways to spend a week’s holidays.

    i recently sold my leased car (1 yr left on 4 yr lease) and bought a rebuild car at a substantial savings from a non rebuild car of the same era. nowhere near as fun to drive, but it’s paid for (with what would have been the remaining 12 lease payments) and gets better gas mileage.

    the wife says i can buy whatever car i want once the mortgage is paid off.

    depends on what car you want to get. toyota and honda don’t depreciate much. i think toyota has some good financing deals now. mistubishis depreciate but are good quality and have that looong warranty. i’d buy a new hyundai, especially with their long warranty.

  17. DAvid on July 23, 2009 at 12:41 pm

    A NEW car?!?!?

    Isn’t it interesting how one’s opinion can change once they are actually making a decision, rather than postulating about it?

    Having seen the amount of salt STILL piled on Harvey’s wharf every year, I would not expect vehicles in St. John’s to survive as long as other parts of the country, so you may not get the value of the used car you might otherwise expect.

    Good luck on your hunt.


  18. FrugalTrader on July 23, 2009 at 12:44 pm

    LOL @ DAvid, I was waiting for a reader to call me out on considering a new car. :) You are right though, once weighing all the options for the vehicle that we want, buying new isn’t so bad, especially if you’re going to keep it for the long haul.

  19. John on July 23, 2009 at 12:44 pm

    I don’t know what the policy on posting links is, but I hope this one is forgivable since I think it’s pretty relevant to the discussion.

    The 2010 Chevrolet Equinox has been getting some good reviews (like this one: and I think its a valid competitor in the compact-SUV market.

    I know it’s often accepted in PF blogs that Japanese makes like Honda and Toyota are better quality, last longer, and are more efficient – but in my own experience I haven’t noticed a difference, and rankings like JD Power and Associates seem to back this up. Especially with these automakers struggling, GM might offer a more competitive price. You can’t know until you look, but I just think being a smart shopper involves thinking outside the box and leaving preconceptions at the door. I’m sure you’ll make a great decision. :)

  20. Angela on July 23, 2009 at 12:53 pm

    “important to our family (space, fuel economy, consumer report rating and overall price” – those are our priorities too. Would you mind saying which 3 you narrowed it down to and which one you ended up buying?

  21. longtimereader on July 23, 2009 at 1:00 pm

    may I recommend Mazda5 — the best kept secrect in NA ? I traded in a 10 years old civic however what I found is that the negoication could be quite complicated when it comes to trade in — the dealer keeps saying they don’t deal with “old” cars and he had to get 3 different “wholeseller” to get me the best trade-in price . Eventually I gave up on the new car price and just tried to get the best trade-in price — however when I looked at the number today all I can say is it was just a okay deal . I think you should try to sell your old car by youself and chances are you will get the best price for your car . if you don’t mind the hassel .

  22. Sampson on July 23, 2009 at 1:06 pm

    Couple of tips if considering a new car or buying from the US.

    New car negotiation. Make sure you negotiate each item/package individually, so if the premium package costs $3500, but CarCostCanada lists $2000, make a specific offer for that package. Repeat for all packages for the best results.

    Don’t get caught up on the new/old car financial debate. When it comes down to it, it’ll amount to a few thousand over 10 years. Cars are luxuries and a bit on the frivoulous side. If you’ve budgeted, and can afford it, get the one with all the options you want – I’m still kicking myself for not having a better electronic lumbar support ;)

    Re: buying from the US. Its simple as pie. Obviously you’re at a disadvantage since the closest border crossing is quite far away. My brother-in-law did this last year, flew from Calgary to Seattle (early bird flight), got home that same night. Saved nearly $8000-$9000 (after everything) on a Civic Si. the key here is that its actually manufactured in NA so no import tax. The RAV4 is built in Canada also, so keep in mind that if you get one from the States, all you’ll be paying is GST – some States will also refund State tax since the purchase is destined for elsewhere.

    Another factor is the specific car involved. Some cars are marked up way higher in Canada – compact SUVs actually fall into that category, so its worth really running the numbers.

    Here are a few sites if you haven’t found them already.

  23. Digger on July 23, 2009 at 1:09 pm

    When I am shopping for a used vehicle I always find it hard to compare them in an apples to apples kind of way because of the difference in milage. I created a different kind of spreadsheet to tell me how much per ‘year of driving’ the car would cost in order to have a better comparison of the value of the vehicle. As I like to keep my cars as long as possible so I do not look at resale value.
    I started with the number of kilometers an average vehicle should go, subtracted the mileage of a specific used vehicle and divided that by my average kilometers driven in a year. That gave me the number of years I could expect to drive the car and I divided the list price by that number. Now I had a cost per year for the vehicle which I could compare with other used vehicles.

    An example:
    Assuming that all cars should reach 250,000km and I drive 20,000km a year.
    2006 Honda CR-V LX model with comparable options found on
    Car 1 – $22,996 and 25,000km on it costs $2044.00 per year of driving
    Car 2 – $19,490 and 65,000km on it costs $2107.00 per year of driving
    Car 3 – $17,495 and 71,000km on it costs $1954.00 per year of driving

    Car 1 – (250,000 – 25,000)/20,000 = 11.25 years of driving left
    22,996 / 11.25 = $2044.00 which is the cost per year to purchase this vehicle.
    Car 2 – (250,000 – 65,000)/20,000 = 9.25 years of driving left
    19,490 / 9.25 = $2107.00 which is the cost per year to purchase this vehicle.
    Car 3 – (250,000 – 71,000)/20,000 = 8.95 years of driving left
    17,495 / 8.95 = $1954.00 which is the cost per year to purchase this vehicle

    This at least provided a starting point to compare vehicles and get an idea of which dealers provided good value or were pricing their vehicles too high.

  24. cacp on July 23, 2009 at 3:35 pm

    Remeber to negotiate as if you are paying for the purchase in cash!! Most domestics are now offerring a “Cash Discount” off the MRSP. There is no such thing. There is just the cost of the vehicle.

    If you take it the situation and reword the offer from MSRP – “Cash Discount” to be Cost + “Non-cash premium” @ 0% interest it shows that that “Cash Discount/Non-cash Premium” is really just pre-paid interest. Instead of financing the vehicle at 5% for 5 years, they took the NPV of all those %5 interest payments and made you pay for it up front. I personally think this to be VERY shady.

    Negotating from a cash purchase lets you find what the absolute cost of the vehicle is, then ask for what the “Non-cash premium” will be. From that you can calculate what the effective interest rate of it is over the amort term. Afterwhich you can decide if it is truely less than bank financing over the equivalent term.

    Frequently the best % if found through a HELOC anyways so it may be in your best interest to buy using your HELOC and the vehicle will then not have a lien against it. My $0.02

  25. Adam Burry on July 23, 2009 at 4:04 pm

    The “Lemon-Aid” series by Phil Edmonston is a good resource.

  26. SteveB on July 23, 2009 at 4:46 pm

    I know this site has a somewhat negative view of Hybrids, but I bought a Prius and got over $6000 in incentives, even though I paid MSRP. ($2000 EcoAuto, $2000 PST rebate, $2250 Scrap-it Program here in BC)

    I don’t know what government incentives are still out there (or out east) but that might be another thing to look into…

    BC has the Scrap-it Program which pays you $$ if you trade in your beater for a more fuel efficient car (based in GHG reductions).

  27. Michael James on July 23, 2009 at 4:50 pm

    I second Adam’s suggestions for checking Phil Edmonston’s Lemon-Aid guides. I wouldn’t buy any type of vehicle without checking the appropriate Lemon-Aid book. They are unbiased and take into account all important factors. They also contain useful advice on many aspects of car ownership. After the first time I read one of these guides, I stopped looking at almost all other sources of car reviews because they are worthless by comparison.

  28. DAvid on July 23, 2009 at 6:30 pm

    Digger said: A whole bunch of stuff….

    But if you bought it new, and ensured it was not mistreated, might you expect to get a few more miles than the used vehicle? If you can baby it along for an extra year and a half in YOUR ownership, the new car falls into the same price range as you quote, and at the end of lifespan is younger than the used car would be.

    $30,000 new / 14 years = $ 2142 per year vs $23,000 / 11.25 = $2044 per year. However the 2006 will be nearly 15 years old once it has all the miles on it. Is the $100 per year really that big a deal in the scheme of things?


  29. RB @ RichBy30RetireBy40 on July 23, 2009 at 6:37 pm

    Hey Frugal Trader,

    Before you buy your car, please read this article. I’ve had 8 cars in 10 years, and have figured out a very good system. I donno why my URL link says 7 cars in 10 yrs though! lol. I’m a blog dummy.



    Rich By 30, Retire By 40

  30. RB @ RichBy30RetireBy40 on July 23, 2009 at 6:39 pm

    BTW, two tips: 1) Don’t buy a new car pls. And 2) The car’s value that you buy should cost NO MORE than 1/10th your gross income.

    Hence, if you make $100,000 gross/yr, try and spend no more than $10,000 on a car.



  31. vanguy on July 23, 2009 at 6:42 pm

    Have you considered the 2009 Nissan Rogue ? they have $4000 cash back right now on the AWD S and SL and $3000 on the FWD SL and if you live in BC the FWD version also has $1000 PST/SST discount for fuel efficiency.
    Nissan is a reliable brand like Toyota and Honda.
    Car cost canada report for the rogue is posted through this link

  32. JP on July 23, 2009 at 8:50 pm

    I’m a long time reader but have never posted…for this topic though I’m compelled. There is a free site that is a great Canadian source for wholesale and retail used car prices for most major automakers going back to 1992. I recently bought a used car and found the pricing calculations indispensible when comparing used cars that I was looking at. For each make and model you can also include extra features that would have come with the car and also adjust for mileage. I used the mileage calculations to personally calculate expected depreciation over the next few years for my typical mileage by looking at the same model a few years older.

  33. Goodboy on July 23, 2009 at 9:54 pm

    Hahaaa Would you knowingly buy a stock that loses 10% the first day and wont increase in value, cause thats what a new car is. cars are money pits either way, but throw money out the window with a new car on immediate loss of value, taxes, insurance or throw money into the old car. Sure there is repairs with any older vehicle but since it is my business vehicle repairs are tax deductible. Older cars are also cheaper to insure in most cases. I bought my car when it was 7 now its 13 years old and its mint in fact its going in a car show next month.

  34. Ms Save Money on July 23, 2009 at 10:39 pm

    That’s so cool that you posted this article!

    I’m getting a car this weekend. The Nissan Altima 2.5 S – features include moon roof, touch start, auto seat moving thingy, and radio control on steering wheel! Got quoted for 21K and 23.5k out the door.

    I have an auto loan approved by my credit union already for $35,000 for 4.5% – I just have to pick up my check on Saturday morning :).

    I’m super excited!

    Ohh and I noticed you’re going for SUV? You should definitely consider the Nissan Altima since it’s very roomie, smooth ride, and extremely reliable.

  35. Fred Mercier on July 24, 2009 at 5:46 am

    Why Do you Want to Buy a New Car When you Can buy a Delorean !

    Haha !

  36. cannon_fodder on July 24, 2009 at 10:15 am


    Thanks for pointing out that site. I remember coming across that months ago when I was looking but had forgotten about it.

    As far as I can tell, it won’t necessarily apply value for certified series vehicles which many of the luxury marques as well as GM offer on their used brands.

  37. gcai on July 24, 2009 at 11:23 am

    Wow a virtual goldmine of information !

    I would like to add my “‘nugget” if the decision comes to a new vehicle – run by Bob Prest.

    For $159 pus GST he guarantees the best deal you’ll find in Canada.

    I used this service when buying my Subaru Outback – dealfinder saved me almost $3500 on the price – there were no super duper deals at that time

    The Outback – a great vehicle IMO :-) – has run like clockwork with only regular maintenance for over 9 years and still looks like new after 200,000 kms.

    Also it was totally hassle free -you tell dealfinder what car you want with all the options etc. – he responds with a detailed price breakdown – base price, option costs, markup and taxes – if you go ahead he sets up a 3-way call with the dealer, goes through the deal again so everyone is on the same page, you make a deposit by credit card and then go an pickup the car -no having to deal with the sales malarkey.

    I will definitely use dealfinder again..


  38. RB @ RichBy30RetireBy40 on July 24, 2009 at 11:24 am

    Ms Save Money – You ain’t saving money if you’re going to spend 23K on a car via a car loan! :) Don’t do it miss, seriously!

    What happens is the euphoria is high in the beginning, out surpassing the cost of the monthly loan. After about one yr, the euphoria fades and the pain of the monthly loan is still the same!

    If you’re making 231K/yr, go for your 23K car (1/10th) otherwise, buy something you can pay cash with :)



    Rich By 30, Retire By 40

  39. Felix Chesterfield on July 24, 2009 at 12:54 pm

    Does anybody have any experience with this market research firm?

  40. Richard on July 24, 2009 at 2:50 pm


    I’ve bought new and used (a Toyota Matrix and an Acura MDX, respectively). I think both methods can work out well if you do the research and can get the right price. It also depends on the model and its depreciation rate – for example, I’m not sure I would have ever shelled out the $ for a new MDX, whereas the Matrix depreciates more slowly and so was better value as a new vehicle.

    For new, I used and was thrilled. They took care of all the negotiation (several thousand off of MSRP) for a modest fee; I just had to pick up the care from a nearby dealership. I would highly recommend them if you decide to go new!

    For used, I think is a great source for used vehicle values – they are even adjusted by province.


  41. FrugalTrader on July 24, 2009 at 3:18 pm

    Thanks for the tip about deal finder. I wonder how Bob would do against local Toyota dealerships who refuse to lower their price on the Rav4’s.

  42. Richard on July 24, 2009 at 6:28 pm

    re: Dealfiner — I’d recommend giving him a call and asking him. He was able to get me a great deal on the Matrix in summer 2005.

  43. Bill on July 25, 2009 at 1:24 am

    I’ve been reading this site a while, without much for comments; it seems I’m among the many that are vicariously excited about the new car.

    FYI, my brother bought a new Subaru Forester from a dealership in Portland, ME and saved ~30% after all the travel/exchange/duty/etc. Not bad on a ~$30K car. He also checked it out with Subaru Canada ahead of time and had them certify in writing that they would honour the warranty (though I think they might have spelled it honor…). He timed it well and bought it when our dollar was at par, but there should still be substantial savings to be had. He also only had to travel from NB.

    I’m living in ON now, and have been considering an AWD replacement for my golf when it finally quits; you can get a surprisingly good deal on an Audi A4 with awd around these parts, and in the Montreal area, FYI…provided you don’t mind driving a standard.

    Good luck!

  44. Blogging Banks on July 25, 2009 at 3:38 am


    That’s another solid article. I would look forward to reading your post on importing a car from the US for use in Canada. Some acquantances of mine have managed to export a car from the US into Europe, and still managed to turn a profit in the process. How they manage to do that is beyond my level of comprehension however ;-)

  45. used tires on July 25, 2009 at 6:11 pm

    The way I look at it, as soon as you drive out with your new car, its no longer “new” is it? You can always find stuff that is pretty much “new” at a good price. Of course you run a few risks when you buy used, but that’s why its important to investigate! I’ve never made a new car purchase, as I’ve always bought used usually 3 years older, and I’ve never had a problem =D

    Till then,


  46. Abie on July 27, 2009 at 7:22 am

    Buying a Car is everyone’s dream, but it can be fulfilled only for few.

  47. Ed Rempel on August 4, 2009 at 1:45 am

    Hi FT,

    Interesting article. Cars are one of the big 4 places that people waste the most money needlessly. So many people buy cars for image reasons, instead of for the best driving experience or best value.

    Having seen the finances of thousands of families, we can tell you there is no correlation at all between vehicles and wealth (except for very expensive vehicles). People 2 paycheques from bankruptcy often own expensive cars and millionaires often drive old, inexpensive cars.

    If you can afford a car you like and have your long term financial goals looked after, then by all means buy what you want. But most people can easily save thousands with their cars by focusing on saving money.

    Here are our suggestions for saving money on cars:
    1. Evaluate cars as a cost/year, especially with depreciation. Figure out what you can afford and stick to it. For example, if you can afford $2,000/year for depreciation, then you should keep a $20,000 vehicle for 10 years.
    2. Buy used and target 1/2 the price of a new car. That usually means 1-2 years old for American cars and 2-4 years for Honda/Toyota.
    3. Consider cars that do NOT hold their value. If you are buying used, these are the cars that will give you the best discount.
    4. Find a good, honest mechanic (get a referral) and try to avoid dealerships, except for free warranty work. Dealerships tend to be far more expensive than a good mechanic. With our mechanic, in 30 years of owning used cars, the largest repair bill ever was $700. We talked to people all the time with relatively new cars that had a repair bill over $1,000 – usually at a dealer.
    5. Place little value on the warranty. If you are trying to avoid dealerships, then the warranty is worth much less than most people think.
    6. To save money, buy used and drive your car into the ground eg. buy 2-years old and keep for 8 years. The biggest savings are in the last years, when you can have no loan or lease payments.
    7. People we know that buy cross-border say that in general, buying in the US becomes worthwhile when the Canadian dollar exchange rate is above about $.85-.90. Generally, more expensive cars provide better cross-border value.
    8. In general, buy instead of leasing. Leasing is just another form of financing, but is generally only available on new cars. You need to be clear of all the fees, actually purchase price and interest rates with leases. It is very easy to hide costs in a lease, often just by making the lease a year or 2 longer, since people using leases often make the mistake of focusing on the monthly payment. The biggest savings with cars are the years after the loan/lease is done, so try to keep your car longer.
    9. Remember that depreciation is the big number and repairs are a small number. In general, the amount you lose when you drive a new car off the lot (20-30% of value) is roughly equal to the first 10 years repairs and maintenance. We always find it funny when someone trades in an old car when they get a large repair quote (over $1,000) because “it is cheaper to buy a new car”. Then they buy a new car for $30,000 and have $6,000 depreciation in the first 5 minutes of ownership.


  48. Michael James on August 4, 2009 at 2:26 am

    Ed Rempel — great advice! For the parts that I already knew, I agree completely, and for the parts that were new to me, thank you. One thing that I would add is that when deciding which model to buy, check the appropriate lemon-aid guide by Phil Edmonston.

  49. Four Pillars on August 4, 2009 at 10:19 am

    I agree – Ed’s list is pretty good.

    Not sure about the pricing though – if you want 50% off a new car I think 4 or 5 years old is more realistic? I can’t imagine anyone selling a 1 or 2 year old car for 50% of the new price.

  50. Jess on August 6, 2009 at 9:02 pm

    Hey FT – any chance of posting or emailing to me Kathryn’s Excel spreadsheet. I am in the midst of buying/reseacdhing and would love to take a look at it. Thanks!

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