New vs Used Cars: What does buying a new car really cost over the years?

Update by JL’s Team

Thinking about buying a car but unsure whether to buy new or or used? This post is for you.

JL breaks down the per year cost of buying a new car vs three years old vs eight years old. 

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Our trusty and faithful 2007 Subaru Forester left this morning with his new family. He was 12 years, 8 months old with 160,773 miles on the clock. In exchange, we were left with 45 small pieces of green paper.

Vicky and Jeff are readers of this blog, and they bought Steve for their son whose 1998 Civic died of rust poisoning. He’ll go first to VT while their son finishes college and then on to WV for graduate school.

We are thrilled that he has found a new home with people who appreciate him.

We bought Steve new on my wife’s birthday in 2007. Paid cash, of course.

He has been, in my judgement, an outstanding car. But he has not been one of those cars people claim to have run for 2-300,000+ miles with no attention other than oil changes and tires.

I confess, I am deeply suspicious of such claims, and chalk them up to selective memories. The same as I do when I hear the claims of people having bested the Las Vegas casinos or having out-paced the index with their stock picking. It is easy to fool ourselves.

This is a minor reason why I keep spreadsheets on my investments and on my cars. The major reason is I am just warped enough to enjoy such things. Here is the one I’ve kept for Steve:

Subaru Forester 2007

And here’s the same file in Excel:

Subaru Forester 2007

If you are warped like me, you’ll probably enjoy pouring over it. Among other things, you’ll see I tracked…

  • every drop of gas run through him and you can see how his mileage varied from year to year*
  • annual depreciation and the opportunity cost (at 5%) of the capital tied up in him
  • repairs and maintenance, and you can see how those varied year over year

*this variation tracked with where we lived at the time  (more rural = better mileage) and by who was driving him the most. Interestingly, our daughter always got the best mileage.

Now, it would be fair to point out that I have a tendency to “over-maintain” my cars.

You can see where, for instance, in 2013 and again in 2016, I took him in to have the door dings and scratches removed to keep him looking handsome. And did he really need those expensive new struts in 2017? Probably not.

Plus, I don’t do any of the work myself and that adds to the cost.

So, the case might be made that the repair costs could have been significantly lower. But we are looking at not what might have been, but what actually was. And that makes line 25, Total, especially striking.

In total we spent $67,003 over the ~13 years we owned him, an average of $5154 per year.

The first five years, the highest deprecation ones, were all above that average. In fact the annual cost doesn’t dip below it until 2012. No surprise there.

The lowest cost years were:

  • 2015 — $2911
  • 2016 — $3590
  • 2019 — $3873

Each was after the big depreciation years early on. As you might expect and hope. But so were the two most expensive years:

  • 2013 — $6463
  • 2017 — $6115

In my last post, Why we bought a brand new car, I made this assertion:

To be clear, if you are on the road to FI, you should not be buying new cars.

And I pointed you to the Frugalwoods saying…

In fact, as Mrs. Frugalwoods explains so well in her recent post, you shouldn’t even be buying a newer, low mileage used car.

But is it true?

Well, as my friends at Millennial Revolution say:

Let’s math this shit up!

We’ve already determined that buying Steve new has cost…

  • $67,003 over ~13 years
  • $5154 per year

What if we had bought him three years old at the beginning of 2010, with 41,721 miles?

  • $50,243 over ~10 years
  • $5024 per year

How about if we waited until he had 100,000 miles? That would put him at the beginning of 2015 with 104,341 miles.

  • $21,992 over ~5 years
  • $4398 per year

Why so much lower? Well, in those last five years we enjoyed three of the least expensive years, even while enduring the second most expensive one in 2017.

Let’s get crazy! What if we only kept him for the first three years and then bought new again? You know. Like normal people.

  • $16,760 over ~3 years
  • $5587 per year

What does this all mean? Well, a few things jump out at me…

  • In 2013 and 2017 we had years that cost over $6000, more than any of the first five years big depreciation years
  • Even so, the average yearly cost dropped the older Steve got
  • Buying Steve new and running him for a long time was cheaper than if we’d moved on after three years…
  • …but more expensive than if we had bought him at three years old or at 100,000 miles

Do those last two bullet points mean that buying new and running a car “into the ground” is the more expense choice? This data set can’t tell us. Steve still has many more years of useful life left and the cost trend is down. Vicki tells me her son is warped like me and likely to keep this spreadsheet running. If he does, maybe in a few years he’ll share it.

There are also a few factors to consider that might make Steve an unrepresentative illustration.

  • As already noted, I tend to over-maintain my cars. Someone doing just the necessary stuff would have still lower costs in the later years.
  • Steve is the base model Forester, as is Steve 2.0, so the depreciation hit over the years is less. As I explained in my last post…

Most cars have a wide price spread between models, and the (2020) Forester is no different. The MSRP for them ranges from ~$26,000 to ~$36,000. That’s a $10,000/38% difference between them. Each year that difference will shrink on the used car market until somewhere 7-10 years out, a used Forester is a used Forester and the price difference is solely based on miles and condition. Indeed, for some cars, the simpler versions might just become more desirable and command a higher price.

  • Subarus are modestly priced cars to start with and historically hold their value better than most.

The cars that tend to deprecate the most are the expensive premium brands and the highest optioned models of the others. The moral?

  • If you want to buy new, you’ll be hurt less with a base model of a mid-level car.
  • If you want all the luxury options and/or a premium brand, buy used. Those take the biggest depreciation hit and thereby give you the the most reward for buying used. Of course, they are likely to need more, and more expensive, repairs as they age.

This has been fun to work through and I confess I wasn’t sure how the numbers would fall out. As Kristy and Bryce say, it pays to “Math that shit up!”


The dark side of buying used…

The. Worst. Used. Car. Ever


In the comments, Nancy asked how I calculated the depreciation and opportunity costs. My reply…

At the end of each year I look up what the car is worth on sites like Edmunds and KBB. Once I decide on that number, I subtract it from what the car was worth the year before and that is the depreciation.

The opportunity cost is 5% of whatever the car was worth at the beginning of that year.

5% is pretty random, but I chose it because it is a fairly low return that should be easily obtainable were the cash not tied up in the car.


From our friends at Stop Ironing Shirts…

The 150,000 Mile Decision: Repair or Replace?


I haven’t forgotten that in the last post, I teased you with this…

We just bought a brand new 2020 Subaru Forester and (gasp!) we even had to take a loan to do it. But it’s not what you think.

I’ll explain later in the next post: How we bought our new car. I’ll also explain there the process we used to buy Steve 2.0 and why we didn’t buy it from the dealer offering the lowest price, who happened to also be the one closest to us.

Still teasing, but one day…


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Important Resources

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  1. Stop Ironing Shirts says

    Great post JL. Interestingly enough I crossed 220,000+ on my Honda and have a draft post I should get out about it this week. We had a huge slug of maintenance between 150k and 160k, but the thing has been humming along nicely with no repairs for the next 60,000+. Sometimes this stuff is unpredictable, my two before it were retired just before 150k

  2. Jen says

    How many days do you think it spent in the shop? As a single person with a kid I have to rent a car when my car is being worked on so it’s a big pain in the butt plus it’s expensive. I drive my cars til around 100K and then sell them on Craigs List and replace with a new one. I also drive Subarus (snow!) and I really like them. I can’t see anything in your spreadsheets that would convince me to drive an older car that is more likely to break down so thank you for posting them.

    • jlcollinsnh says

      It was never in the shop longer than overnight and, since the places we took it offered free loaners, those times were no big deal.

      If we had sold Steve and/or the ’93 Accord we would have done nothing other than routine maintenance to either.

  3. RobDiesel says

    I am glad to see I’m not the only one anal about the numbers of the car. I have every receipt and cost associated with my trusty old 2006 Volvo V70 turbo.

    I use a program called CarTrak that might be clunky compared to today’s apps and wizbang things, but works very well and does great reports.

    I ran a quick report on cost/year and found that 2016 was the most expensive year was 2016 with 3500 in spending. Luckily (and I have to back that out), I had made an error in the spending. Two struts went bad, and I added the cost of them again (buying the replacements) but forgot to back out the refund on the originals. Then when the new ones went bad, I added the cost of the Bilsteins, but forgot to back out the refund on the 2nd set of bad ones.

    Still, $800 for two OEM headlamp assemblies (from Europe, so I got the superior H7 bulb sockets) and the $850 Polestar tune for more power/torque and much improved transmission logic were the big costs there.

    Suspension, brakes, tires and lights are things that I consider safety devices, so I don’t mind spending on them.

    With the new sub frame bushings installed by the dealer (I should make a post on that, but the short of it is that they give me a new loaner car AND wash mine when they’re done, so sometimes it’s beneficial to not do the work myself), the cost of my car is around $11000. That comes out to about $1500/year, but that includes the purchase price of the car too, so I feel I am doing OK here.

    I haven’t included any tire prices either, as I tend to craigslist resell tires to pay for my own. I find cheap Volvo wheels from someone, clean them, list them with offset, center bore and part numbers and cars they interchange with, and with a ton of pictures, they usually get sold for 50% more than what I paid for them.

    Damn, I really can’t stop rambling. haha

    • stephen r MASSE says

      but it still is a volvo!!!…really a car for old timers and kinda boring…always believed in old cars…just not foreign boring stuff with expensive swedish parts…could do as well with an old chevy from the 70’s or 80’s and much easier to source parts….something like a cool 80’s el camino or mid 60’s pontiac comnvertible….just as cheap to own and maintain,& waaaay cooler!!! and actually will become valuable over next 10-20 yrs…just a suggestion for others…

      • jlcollinsnh says

        I’ve always thought that was an interesting solution to the whole transportation thing.

        What do you drive, Stephen?

        • stephen r MASSE says

          well, of course you should hagve decduced from my response: a 64 pontiac lemans purchased with a $2000 inheritance from Nana 23 yrs 85 chevy el camino for odd jobs and car shows..and a shit box japanese econobox(gambler) for skiing all winter!!…newest car i’ve ever owned also..1998..with those DAM computers and sensors!! hahahaha

      • RobDiesel says

        Stephen – “but it still is a volvo!!!…really a car for old timers and kinda boring…always believed in old cars…just not foreign boring stuff with expensive swedish parts”

        I can’t argue with you there. Or, well, I guess I could. 🙂 De gustibus non est disputadum, as they say.

        I mention in JLC’s previous post that the reason I ended up with Volvo (wagons – 9 of them since 2005) is that they are cheap to buy, cheap to insure, cheap parts and easy to work on. Basically, though I wasn’t aware of FIRE at the time, they tick all the check boxes save for “good mileage”.

        Boring? Well, one was a 1988 wagon ‘converted’ to a 1998 and with a custom built turbo engine and exhaust and converted to stick shift. It was crazy, to put it mildly.
        Another one of the wagons had a Ford 302 V8 put in it. Not only was the rumble amazing, but it would do burnouts like nobody’s business.

        I *did* drive old 60’s Mopars as daily drivers for many years, but that’s when gas was cheap and I lived in Los Angeles. The Volvos became the cross between daily-driveability and hotrod and still decent mileage. Plus wagons look so sleek, I just prefer that.

          • RobDiesel says

            You don’t know boring until you’ve spent some time in a Prius. My partner has one of those. Remarkably versatile and fantastic engineering, and an absolute horror to do a road trip in.

            I recently test drove a couple of Lexus LS 460s. A 2009 and a 2013, to see if there was a difference between the generations. Nope. On paper, they’re perfect, but in reality, they’re boring. I think they’d do road trips just fine, but there no joie-de-vivre in them.

            I did do a 3500 mile road trip in a Carrera 4, and while I couldn’t own a 911 myself, it wasn’t half bad of a car. I think ultimately what I think I would love to own is a restomod – like a late 60’s Chrysler wagon, but with an LS swap and Volvo seats. Get the best of both worlds. Yeah, the safety will be abysmal, but the FUN will be out of this world.

  4. DC says

    Great post! Our family car is a ’96 4Runner with 317,000 miles. We bought it in 2007 with 145,000 on the clock and replaced the engine at 190,000 with a 22,000 mile engine from a salvage yard. Two years ago we were expecting our 4th child, which caused us to start looking for a 6+ passenger vehicle. Depressing. But the folks at now-defunct Little Passenger Seats provided the rescue, with a bench seat with head restraints and shoulder straps engineered to fit in the 4Runner cargo area for $1300. Now we all fit comfortably and even have room for a friend or two.

    This has been relatively economical, but a front-wheel-drive minivan (a la Honda Odyssey) would have been an even better choice over the years.

  5. Catie says

    Just went to the mechanic so I refreshed myself in expenses. Without depreciation, my annual expenses for gas, insurance, maintenance come to 2-2.5k/yr for my Scion xD. I drive ~6k miles a year.

    Spreading out the purchase price (bought 3 yrs old 45k miles) would add another 1.4k/year and decreasing the longer I own it. Looks like my car stacked up pretty well in comparison!

  6. DC says

    The original blew a head gasket, as is the wont of many 3rd gen 4Runners (or so they tell me).

    We spent about $5,000 to have the engine replaced, including parts and labor. It was no screaming deal, but it barely passed my rudimentary cost/benefit analysis at the time.

    Given that any generation of 4Runner is not particularly economical, it may be that my affection for it is a sort of long-term Stockholm syndrome.

    • jlcollinsnh says

      Head gaskets can be an issue on the Subaru flat-4.

      We had to replace the head gasket on one side of Steve’s engine, but that didn’t cause an engine failure.

      “…my affection for it is a sort of long-term Stockholm syndrome.”

      Great line! 🙂

    • jlcollinsnh says

      Hondas and Toyotas (and Subarus) can easily go a 100,000 miles with nothing but basic maintenance. And looking at the maintenance schedule for our new Forester, it is shocking how little of that is required:

      Oil/filter changes & tire rotations every 6000 miles
      *Cabin air filter every 12,000 miles
      *Engine air filter every 30,000 miles
      Brake fluid every 30,000 miles
      Spark plugs every 60,000 miles
      Fuel filter every 72,000 miles

      *These are so easy to do, even I can DIY them.

      Of course it will need new tires somewhere in there.

  7. Dave Mackie says

    Another numbers guy here. Graphs and pie-charts too…
    Thank you jlcollinsnh for this; I had no idea if my numbers were in to ball park of what they ‘should be.’ $360 a month!! Can it be that much? Yes

    A few months ago I sold my 2005 VW diesel Golf with 241,894 miles (bought new)
    Total costs were $64,082: 26.5¢ /mile $12.08/day $362.52/month
    total cost = depreciation, maintenance, fuel, and insurance/registration/tax
    (no opportunity cost figures but I can tell you how often the left headlamp failed)

    I did all the work except for the timing belt at 80k mile required intervals
    Fuel economy is very noisy (or volatile): 37.5 mpg overall (low 28 high 47)
    Fuel cost too: low = $1.53/gal (Feb 2016) high $4.80/gal (Jun 2008) $3/gal average

    • jlcollinsnh says

      Being able to do the work yourself is a big plus.

      Our 2020 has a timing chain. Gonna be nice not to have to worry about timing belts anymore. 🙂

      • Dave Mackie says

        I bought a factory service manual when I bought the car in 2005.
        At that time the timing belt interval was 100k miles but VW got tired of replacing engines when the belts failed at 90k so they reduced the interval to 80k.
        A bit irritating but only a small increase in the cost per mile…

        My 2015 VW diesel wagon timing belt interval is 130k
        and now the ‘factory service manual’ is DVD only 🙁

  8. financialfreedomsloth says

    Very interesting post! I ghave to admit I had a slight shock when seeing your number, 5,000+ USD per year is a high number! But then I ran my own number for the last 2 years we had our old car (I am a lot more layz when it comes to keeping track of my numbers) and I arrive at an annual cost of aorund 3,000 euro. And this is for a second hand car bought for 8,000 euro when it was 4 years old. And as you mentionned the last years are the cheapest. I know I had a big maintenance bill before I started tracking our numbers, so realisticaly speaking we should be more around 3,500 euro to 4,000 euro with the difference being explained by our lower amortizing costs. Damn, cars are expensive!

    • jlcollinsnh says

      Cars are VERY expensive, but most people manage not to notice.

      But once you start tracking what they cost, it is shocking indeed. 🙂

      • Greg says

        That was the thing that surprised me the most, not just that cars are expensive, but specifically that even a used car is not a huge savings per year on a percentage basis ($4398 vs. $5154, only about 15% difference).

        Of course, financing costs and frequent trade-ins would make everything much, MUCH worse financially.

        I imagine that if most households could find a way to do without one of their cars, they’d have plenty of things they would rather do with that extra $4-5k per year.

  9. JG says

    Thanks for the yearly math calculations. We drive our cars into the ground, currently husband has 2010 Accord with 204k. Looking a bit rough but we love no payments. I’ve always been strongly against leasing but looking at the cost to own makes me think again. For a lease of $350/month, that’s $4,200 a year…less than some years you’re naming and sometimes there’s free basic maintenance with leasing…. I always hated the idea of spending all that money then being left with nothing at the end of the lease term. But now I’m not sure that’s correct….

    • jlcollinsnh says

      You have to look a bit more closely at what makes up my “lease comparision” number: Depreciation, opportunity costs, and maintenance (which on a lease you’d do the bare minimum)

      The “Total” cost includes things like insurance and gas, which you have to pay for regardless.

      Plus you have to be aware of mileage limitations, which for a 3-year lease are typically 36,000 miles. As the spreadsheet shows, we would have been over that and those extra miles can be charged at a very high rate.

      So to make my comparison, I can see that the first three years “lease comparison” totals $8100. So if I could find a no money down lease of $225 a month or less, it would be worth a look. Provided I was willing to drive less than 36,000 miles.

      If the lease required a down payment, say $1200, I’d subtract that:
      /36 months
      192 per month

    • jlcollinsnh says

      Hi Nancy…

      At the end of each year I look up what the car is worth on sites like Edmunds and KBB. Once I decide on that number, I subtract it from what the car was worth the year before and that is the depreciation.

      The opportunity cost is 5% of whatever the car was worth at the beginning of that year.

      5% is pretty random, but I chose it because it is a fairly low return that should be easily obtainable were the cash not tied up in the car.

  10. Drew says

    Thanks for this timely post, as we just had our 3rd child, and debating this very argument (currently have a 2015 Prius, no loan). Technically, we can fit all 3 in the back seat at the same time, but it takes some squeezing.. Gathering the information from this post and the linked posts, I think we should go with a used, known reliable vehicle, and pay cash. Got it. Couple things-
    These calculations don’t seem to factor in the tremendous (at least in Missouri) transaction costs, which are immediately 7.2% of the purchase price. Then, the additional insurance premiums, along with the additional annual property taxes.
    Once the upfront transaction costs alone are factored in, it becomes absurd to purchase any vehicle more than once in every 5-7 years.

    Also, if you didn’t hear- Mr. Joshua Sheats over at, has put your book on his Top 10 Must Read Personal Finance book reading list:
    “Book 9
    There are three basic types of investments you can participate in:
    Active Business
    Paper Assets
    Real Property
    In the previous recommendation I discussed how investing in your own business can help you to increase your income, decrease your expenses (especially taxes) and to increase your investment return.

    But I know that not everyone is cut out for entrepreneurship.

    Does that mean that you can’t build wealth effectively? Of course not!

    So, today I want to recommend a book to help you with your paper asset investment plan. And that book is “The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life” by J.L. Collins.

    There are many excellent books on investments. You should probably read them all. Or at least all you can. But in my search for a simple, accessible tome to get you started, I just don’t know of a more useful entry point than this book by Collins.

    In the book he presents a good overview of financial advice (that’s suited to career-oriented employees) and a simple plan of investing.

    It’s good. Check it out.


    My Chautauqua goal year: 2022 We should be 1/2 way to our FI number at that point, or closer. See you then.

    Thanks Jim,

    • jlcollinsnh says

      Hi Drew…

      Yikes, those MO taxes sound heavy. We were living in NH when we bought Steve back in ’07. No sales tax. Zero.

      Thanks for letting me know Joshua has chosen to recommend my book. I was on his podcast a couple of times a few years back, but have lost track of him.

      Glad to hear Chautauqua is in your plans. Hope I’m around and still doing them in 2022! 🙂

  11. daniel kearns says

    I really, REALLY enoyed your analysis of buying a car. And as a long time reader of your blog (first time commenter), I am probably the only person to completely have changed my bias due to your analysis (my bias was always buy used, money spent on cars is money wasted, etc).
    But after looking at the REAL and COMPLETE numbers, I mean really, the difference between NEW and used is only 130$ a YEAR??? (new versus 3 year old car)
    As my friend says when I get too silly about saving money, “well than, why don’t you just sit naked in your kitchen on a box you found and not do ANYTHING?”
    I think with all the money I have saved over the years, I can spend 11 dollars a month for the pleasure of a new car. Is it rational to spend 11$ for new car smell…no. But how many people reading this blog have to worry about 11$ a month, and how rational is it spending TIME on working the numbers…unless of course you ENJOY doing that.

    • jlcollinsnh says

      Glad you enjoyed it, Daniel…

      …and happy it will help inform your future thinking on cars.

      Just be sure to bear in mind this is an analysis of one particular car. As they say: Your mileage may vary. 😉

  12. Dugan says

    Interesting article– I was surprised to see what a small difference there ended up being between buying new and used.

    2 things I was unclear on though:

    1) Since this was all done after the fact why not calculate the actual opportunity cost as calculated by what percentage you earned on your investments during that year?
    2) Shouldn’t the opportunity cost increase exponentially over time since I’d assume you’d reinvest the 5% annual gain from the previous years?

  13. Anne says

    Thanks for the analysis. Very interesting.

    But I have some questions:

    About the opportunity cost: You calculate the opportunity cost as the amount you would have invested if you didn’t own the car. But you would have to have some type of transportation, correct? If you didn’t pay the money for the car, you would have to assume that you did not have a car. So wouldn’t the opportunity cost be the 5% you would have gained in the investment minus the replacement transportation cost? This is a big one for me. Yes cars are expensive but the alternative, depending on where you live, can be even more expensive or non existent.

    About the new vs used: You compare yearly cost of new vs used but don’t you have to normalize the costs for the entire time period? For example, your new car lasts 13 years, so your yearly cost is as you calculate it. But a used car would have to be replaced with cash up front. For example, isn’t the correct comparison that you bought the 3 year old used car in 2007 so that you had to replace it in 2017 with cash up front while the person who bought the new car in 2007 (you) still had 3 years to go (and save for the new car if necessary)? Alternatively, couldn’t you add up how much you would have to save each year to be able to replace that car with cash in year 10 or 7 or 5 depending on the mileage of the car. Then you could compare with different time periods. As an example, if you bought the 100,000 mile car for approximately $20,000, wouldn’t you have to make sure that you save the $4000 (about $350 per month) every year to be able to replace it at year 5?

    Thanks for listening. I love reading your blog

    • jlcollinsnh says

      Hi Anne…

      Sure, you could add those considerations to the spreadsheet I provided and I would be curious to see them if you do.

      Candidly they just didn’t occur to me. But I also won’t bother with them for Steve 2.0.

      The key goal was to track the operating costs, and adding depreciation and opportunity costs are all the frosting I care for on this cake. 🙂

  14. George says

    Thanks for sharing the spreadsheet. Your numbers align with my own spreadsheet and its far more overwrought analysis. I have an older vehicle, 2006 Honda Element. I bought it in March 2017 with 154,000 miles, and I just hit 196,000 the other day.

    My main problem with owning an older vehicle is the hassle of the repairs, and the unreliability of the vehicle. I don’t care that it’s a jalopy. And the repairs are not catastrophic, they are just old/high-mileage car things (brakes, exhaust, alternator, front end, etc).

    Your final years of the Forester confirmed my stats with the Element: I’m spending about $1,300/year on repairs and maintenance ($960/$290 to be more precise). You were spending about $1,600 for both combined.

    Factor that in with the actual cost of the car, and for not too much more per year I can drive a far more reliable vehicle. I think I’d prefer to spend my money on the depreciation of a reliable vehicle, rather than the repairs on an old beater. It’s getting spent either way.

    Too many of these frugal gurus espouse the old car approach, but once you factor in repairs (and the hassles of even just the repair, assuming you don’t break down out of town), the value drops significantly. I am talking here of value in terms beyond just money.

    My mechanic’s estimate of $100/month for old car repairs dovetails almost exactly with my spreadsheet. I figure a newer car will have about 1/4 of that per year.

    My numbers show that the actual cost per year for the car — value lost due to depreciation, plus repairs — is about $2,000 for the 10-year-old-car, and $2,600 for the 3-year-old car.

    I figure maintenance is required no matter what. Same for gas (probably cheaper, better MPG in newer car), insurance (maybe slightly cheaper for an older car). I don’t factor those in to the comparison. Those are unavoidable either way. Even on a lease.

    I did what I thought was the proper frugalist thing with the Element, and bought old and cheap like all the frugal gurus said to. But the ongoing and unpredictable repairs, the headache and hassle of repairing, and the stress and paranoia when I drive (I often drive long distances for work events) has hit a breaking point for me.

    My plan for the next car is to go for the 3-year-old model, drive for 3 years, sell, repeat. Maybe even go for 5-year-old.

    The peace of mind that extra $600 a year will bring will be well worth it.

    Yes, the older car has been technically “worth it”, if you only look at the money. But for a not-unreasonable increase in an already expensive situation, you can bring up your quality of experience dramatically.

    • jlcollinsnh says

      Excellent analysis, George…

      …and a great example of the value of tracking costs so you actually know what the numbers tell you.

      There is absolutely a “hassle factor” around the inevitable repairs in owning an older car and, if you don’t do the work yourself, you want/need to find a reliable local mechanic.

      For nomads like us, these factors are even more troublesome.

      I probably should have discussed these in my post. Thanks for pointing them out!

      “I don’t care that it’s a jalopy.” Love this!

      …and it is actually one of the appealing parts of owning an older car to me. 🙂

  15. Steven says

    My family thinks I am excessive with my car expense sheets (spreadsheets with a tab per year)! I only tracked expenses, i.e., purchase cost, interest payments if any, gas, license, car washes, repairs, accessories, insurance. I break this down to cost per mile and found that after a couple of years, the cost per mile is less than the IRS mileage allowance. I tend to maintain the vehicle but drive it for 15 or 16 years, by which time I am tired of looking at the same hood. I might go back and look at the annual actual costs just for fun. At the end of the day, just understanding those numbers helped to determine repair or replace decisions — usually in favor of repair.
    Good post. As you have said, be aware of the costs and benefits before making decisions.

  16. Liche says

    My mechanic actually told me to buy a new Toyota basic model without any fancy upgrade. He said, “you will never really know how the previous owner abused the car”. I guess he is honest because he will lose some business by saying so?

    By the way, will you be interested in having your book translated into another language? I really enjoyed your book and would like to introduce it to my home country. I can translate!

    • jlcollinsnh says

      Thanks for the offer, Liche.

      My agent is in talks with various international opportunities for the book.

      A Korean edition is already out and Chinese, Taiwanese and Japanese ones are in the works.

      I agree with your mechanic. 🙂

  17. YAO YU TING says

    Hello, Mr. Collins. Sorry for bothering you. I am an otorhinolaryngologist in Taiwan. I am interested in personal financial management and read a lot of books about this topic. I also write some articles in this field. Here are my blogger website and my facebook fan page:
    My friend in America introduced your book to me and I am impressed and agree your viewpoints about personal financial management.
    I wounder if I have the honor to introduce your book to people in Taiwan. I have translation experience for one medical textbook and an author for a medical dictionary. Here are the information of my works:
    I planned to publish your book in traditional Chinese by Kindle direct publishing system if you have willingness. I will give you formal contract with legal effect. It includes details about upfront payment and bonus payment. Please connect to me if you have willingness. Thanks for reading and have a nice day.

  18. Chris says

    Thanks for this breakdown! My wife and I made the decision to lease a few years ago based on numbers like this. We were spending around ~$5k/year owning, similar to what you show here. We ended up leasing a base-model, no-upgrades Subaru Impreza hatchback ($19k new purchase price) for zero down (that’s key). Our average spent — including lease, taxes and fees, insurance, gas and oil changes — for the last three years has been $4700 / year.

    I realize we may be able to shave $500 / year off that number by going the used car / deal-hunter route. We ultimately decided that extra $500 was worth the peace-of-mind of knowing we wouldn’t have any big maintenance surprises that were out of warranty.

    We both walk to work and barely drive (6k miles a year between the two of us) so I realize this might not be a great option for everyone. But I’ve had a lot of people aggressively tell me that I’m making a terrible financial decision by leasing.

    This was a great reminder to run the numbers yourself – every situation is different and there isn’t a one-size-fits-all approach to something like transportation costs.

    • George says

      @Chris: my previous car was a lease, and during that time I got really into the FIRE stuff. I couldn’t wait to get off the lease and buy a 10-year-old car. I too had a no-down-payment lease, and reasonable payments.

      But now that I’ve dealt with the hassle of regular repairs on the used car for almost 3 years now, and have some actual financial data on the used car costs to compare it to the lease (or to buying newer-used), I do not find a lease to be as unwise a decision as I’d been led to believe.

      As you mentioned, it’s definitely not cheaper to lease. But it’s not outrageously more. And the peace of mind and reliability you receive for that modest extra cost is an easily justifiable value to many.

      In fact, I see my frugality as a tool to allow me to spend extra when appropriate for me.

      I don’t think I could lease at present, due to mileage and the type of car I’d need for work, but like you I no longer see them as being totally out of the question as I once did.

      Ultimately, for the costs to be so close, if I am going to dump money into a car, I’d rather it be a nice and reliable one. I’d gladly pay 10% more for that value.

    • jlcollinsnh says

      I agree with you both, Chris and George.

      It always pays to run the numbers and then decide. And it is important to be clear on the options you are comparing.

      I’ve never leased, because the numbers never worked out most often because our anticipated mileage was too high.

      Back in the day, I drove company cars that were leased. I recall that when turning them in, the dealers always exaggerated “excess wear and tear” to charge extra fees. Even though it wasn’t my money, I always fought them on it and they always backed down.

      Maybe they just thought the users like me wouldn’t care and the company would just accept it.

      But it has been a factor in putting me off leasing.

      • George says

        A few other lease factors I encountered, to keep in mind:

        – the agreement had a $750 fee included for not leasing another vehicle from the dealer when the car was returned (I was too naive at the time to attempt to refuse it; they of course mentioned it at the paperwork stage); no idea if negotiable

        – I sold the car to a private party, so did not have to deal with the “excessive wear” nonsense at turn-in. And I had some acorn damage to the car that I bet would have cost me a lot.

        – dealer still charged a “documentation fee” to do the transfer for the private-party sale, and it wasn’t cheap ($250 or $750, can’t recall but I think the latter). I included that in my sale price for the car and was up-front about it on the listing

        With the above in mind, I would likely not lease again. The “turn-in damage” stress was consistent from the moment I left the lot. But if I did ever lease again, I would at the least refuse that fee for not leasing anther vehicle.

        From what I understand (from online sources), with used car sales, dealers will not drop the documentation fees. If you buy from them, you can haggle on the car price, but in my situation that was not possible.

        But something to keep in mind if you plan to sell the leased car yourself at the end. The sale is technically between the dealer and the buyer, not you.

        • jlcollinsnh says

          “The “turn-in damage” stress was consistent from the moment I left the lot.”

          Yeah, that would wear on me too.

          As for selling a leased car yourself, why not buy it first and then sell it on?

          I did this with one of my company leased cars and when I sold it on five years later it was just like selling any used car.

          Seems once you own it, five years or five minutes, it would be the same.

          • George says

            From what I understood, the documentation fee was the same no matter if I bought it, or a third-party did.

            Although now that I think back, they may have called it a buyout fee… perhaps it was actually negotiable. Maybe there was also a documentation fee… again, way more naive back then.

            Still, the fee(s) for buying/selling were implied to be the same no matter who bought it. But I could have been duped.

          • Chris says

            Thanks George and JL, I appreciate your perspectives. Leasing served a specific purpose for us in a very specific season – it’s definitely not an indefinite decision.

            Re: Turn-in fees, it’s easier now that there are players like CarMax in the game. They bought out our first lease with no fees plus gave us a check for $300 because their offer was higher than the buyout quote on the lease. I’ve learned to never go back to the dealer at turn-in.

  19. PJ says

    I love maths and can see and understand the numbers here.

    However, driving a new car vs driving a beater has a value too. This value will depend on individual wants and car DIY ability. So it will vary from person to person. So, for me a final step is needed to complete the value comparison. For example what is the value of:
    1) The safety features of new cars are amazing. I recently bought a new car myself when my daughter passed her driving test. the car practically near enough drives itself. It is far superior and safer to the similar sized 10 year old car I already own. I place a high value on this item
    2) Who owned the car before? What did they do to it? Again a high value for me. I like to know the total history of my car.
    3) My ability to carry out repairs. – Zero in my case!
    4) Vanity issues – Do I like owning a new car. Zero value for me. I am not very materialistic.

    I would suggest this has a non zero value for everyone and for some makes a difference to the conclusions made in the article.

    • jlcollinsnh says

      Points well taken, PJ…

      …and well worth consideration.

      As I say in my Manifesto…

      “Life choices are not always about the money, but you should always be clear about the money choice you are making.”

    • Yong says

      Would Like Your Thoughts Jim,

      I believe you should not pay cash for a car. Instead take out a loan everytime–given below conditions. For intance a real world example, I just bought a new car for my wife for $34K with a 5 year loan at 3% interest. I could have taken the money out of my investments, but I estimate I get a 6% return after taxes; taxes are on long term investments and my income is low enough to keep me at 15% tax rate. Running the numbers I will pay $2.7k in interest on the loan over 5 years. On the $34k, my interest earned is $28k over the 10 years I want to keep the car. Seems like a straight forward decision to not pay cash to me to pocket the $25k net.

      • jlcollinsnh says

        If you can borrow at 3% and invest at 6%, clearly it is a slam dunk.

        The rub is, of course, the 3% is locked in and the 6% is an estimate.

        • Yong says

          Too true. It’s all about weighing the probabilities. Thanks for the lightning fast response and have fun with Steve 2!

  20. Nice joy says

    Hi Jim
    I looked at the spreadsheet. To me, it cost you a lot to repair and maintain this car almost 12000 for a new car in 13 years. That is a lot. To me, nothing should break down in 13 years. If you had a personal mechanic then the cost could have been a fraction of it.

  21. Ed69 says

    I didn’t read every comment word for word so please forgive me if this as been brought up in previous comments.

    I believe there are a couple of other factors in assessing buying new and running it for 15+ years.

    1) Some people are better at negotiating a better purchase price on new cars than other consumers. If you are a bad negotiator and go in paying MSRP your beginning cost is higher than someone who might be able to get it below invoice with rebates. Some people hate to negotiate more than anything and leave money on the table. Say you go via Costco auto buying program which will give you a decent price but still not the best.

    2) You get the privilege/comfort/knowledge of being the 1st and only owner of the car. You know how it was maintained, broken in (which I understand doesn’t really need to be done anymore), how it was driven (didn’t have the Hell beat out of it like a rental), etc.

    3) You could get incentives for purchasing new, like 0% interest rate on a loan. I plan on going into the dealership to pay in cash, but unlike the olden days when that was a benefit, now-a-days dealers make money on the back end of the deal with financing, but the car manufacturer might be running a special that you can get 0% interest rate on the car to ‘finance’ it. I’ll take free money every time.

    I have found the best negotiating tactic is the ability to walk away. Don’t fall in love the with car and be willing the walk out the door if the deal isn’t to your liking. Every single time I have purchased a new car I have gotten up to leave when the deal started to sour. Stuff like: a) We forgot to tell you there is an advertising fee that every dealer has to pay that we’ll add in right here… bye. b) Oh, the 0% financing can’t be combined with the $500 rebate the manufacturer already took off…… me: bye. c) The $250 dealer doc fee is standard for all dealers, sorry…… bye
    The furthest I have made it before being called back for them to offer the original deal was the first stoplight off of the dealers lot. Usually it is before I make it to the front door of the dealership.

    Can’t wait to buy my next new car……

  22. Trevor says


    I love the data you provided to show your TCO (total cost of ownership). Working as a fleet consultant for over 10 years, I’d say your data is pretty close to what I’ve seen over the years. I work with much bigger data sets and with companies that run 20+ vehicles for their businesses. I did a Quora post that outlined a lot of the data and went through many of the misconceptions. I think it could help some of your readers:

    Also, buying used or new and running the vehicle until it dies works for most people. But I just want to point out that you’re not really saving much money in the long run. As with many things in life, if you self-hack, and do all the repairs yourself, you can indeed save money in the long run. 🙂

    Lastly, next time you’re shopping for a Subaru Forester, let me know, I can break down the costs and get it to you cheaper. 🙂 Just did it for some family members. The 2020 Subaru Forester is a beaut!

    • jlcollinsnh says

      Thanks Trevor…

      …and thanks for the awesome article link. Love looking at data!

      Reviewing my own spreadsheet, I was pretty amazed at how consistent the costs were year over year. Only the amount in each category changed. 🙂

      Thanks for your offer to get a deal on a Forester. Wish I’d known at the time. How do you get those deals?

      We are loving the Forester so far. 3500 miles and just rolled into AX. 🙂

      • Trevor says

        I work for a fleet management company and we get increased incentives from the manufacturers because of the volume we do. Typically, we only work with companies that run vehicles for their businesses but occasionally help individuals.

    • jlcollinsnh says

      Also, I notice you use the base Camry in your illustration.

      Base models are our preference but I wonder…

      Does the analysis hold with fancier models?

      • Trevor says

        For the most part, when you go up in trim level, your depreciation costs will be greater. But it depends on the vehicle, incentive/rebate you’re receiving, and demand for different trim levels. Some manufacturers give you a higher incentive for a higher trim level resulting in the higher trim level depreciation costs being less than the lowest trim level.

        Let’s look at some numbers on the 2020 Subaru Forester lineup.

        My price on a 2020 Subaru Forester Base is ~$21,550. Projecting out doing 15k miles a year here are the residuals I’ve come up with:
        New 0 miles- $21,550
        1 year old 15k miles- $20,700
        2 year old 30k miles- $17,300
        3 year old 45k miles- $15,150
        4 year old 60k miles- $12,500.
        So running your Subaru Forester base 4 years 60k miles will result in about $9,050 in depreciation or loss in value.

        If we look at the 2020 Subaru Forester Premium, here are the numbers:
        New 0 miles- $24,085
        1 year old 15k miles- $24,100
        2 year old 30k miles- $20,300
        3 year old 45k miles- $16,500
        4 year old 60k miles- $13,750
        Running the Premium for 4 years, 60k miles will result in $10,335 in depreciation

        And then if we look at the 2020 Subaru Forester Limited here are the numbers:
        New 0 Miles- $27,295
        1 year old 15k miles- $27,000
        2 year old 30k miles- $21,700
        3 year old 45k miles- $18,700
        4 year old 60k miles- $14,000
        Resulting in a loss of $13,295 in depreciation.

        So looking at the Subaru Forester example, running the base model will give you a lower holding cost. But if you want leather, heated seats, etc, then by all means pay more for the higher trim level. 🙂

        Also, you’ll notice a huge drop in value on the Forester after the 2nd year. That’s because of the new body vs old body. And yes, you could flip out of this car after 1 year and have virtually $0 in depreciation. This is what many rental car companies do. They use their buying power to buy vehicles cheaper than anyone else and then after 1 year they get out of them, selling the vehicle for about the same price they pay if not more.

  23. Ale says

    JL – Just bought your book and devouring it! I was confused about buying a car in cash being better than lease (page 40-42), so looked up this post of yours, looked at your excel…but now I’m even more confused.
    Here it goes:
    > In your opportunity cost, you’re only looking at 5% over the current value of the car each year; but instead of paying 19,143, you could have leased the car and invested the difference: that’s the opportunity cost you should be considering, and it compounds;

    To bring you my real life example:
    We leased a new car one year ago; the MSRP was $34,990; instead, we made a downpayment of 2,700 and are paying 289/month on the lease; in 3 years we will have spent $13,104 (2700+289×36); the difference between MSRP and the 3 years lease cost is $21,886, which invested at 8% per year compounded, will take us to 27,570 at the end of year 3 (a gain of 5,684). So the true cost of leasing the car for 3 years instead of buying it, will be 13,104-5,684=7,420.
    For buying the car to be better than leasing, we would need to sell the car at the end of year 3 for 34,990-7419=27,570…which is unreasonable (the purchase price at the end of the lease, which is a good proxy of what we could sell it for, is 20,585). Happy to send you the excel.

    All other operational costs are identical between the two options, so I’ve discarded them.

    What am I doing wrong??? It’s the second identical car that we lease (and the second lease was even better than the first one because of loyalty discount), and our plan is to continue doing so, but I must be missing something? I would love your thoughts!

    • George C says

      JLC replied to an earlier comment ( that mentioned something similar, getting a loan at 3% and investing at 6% return.

      The main factor here is the unpredictability of that investment return.

      And for JLC, being a nomad means the lease mileage limitations are not going to work out.

      But based on your math, even without the compound interest, the lease buyout and the difference between MSRP & Lease cost isn’t all that much (about $450/year).

      Assuming you are OK with the mileage limit, seems the lease isn’t that much different.

      My approach for my next car is going to be to go for a 3 year-old vehicle with the initial depreciation hit already taken by the previous owner.

      My current vehicle is a formerly 10 year-old car (now 14), and the hassle of the expected but unpredictable repairs has outweighed my frugality. And to be honest, my spreadsheet shows the cost difference between 10 year-old car and a 3 year-old car that you sell and repeat is again very small. Not worth the headaches for sure.

      And I dug into my spreadsheet like you, and do not see a big incentive to pay cash. It’s a gamble, but I think worst case it would break even (4% loan, 4% compound interest) and best case I make a few bucks on 7-8% compounded interest.

      Sure, 2020 shows us that big drops can happen. But I think on average the invested money is going to at least offset the loan interest.

      I even went so far as to calculate the compound interest on an ongoing basis, assuming one were to use that invested amount to pay off the loan. Meaning, there would be less of the investment each month earning compound interest. You invest the full amount of the loan, then pay for the loan payments out of those funds. So each month it would be reduced by the loan payment.

      It still came out to be quite similar in cost overall.

      So yeah, I am on the same page with you. Lease is a bit more expensive than a loan, but has milage limits. But lease or loan on a newer car, if you invest the total, it seems to work out to be a similar cost in the end.

      • Ale says

        George – Thanks! I had not read all previous comments and didn’t realize someone had asked a similar question already.

        I’m with you, and indeed what you suggested (invest the purchase money and pay the lease – or loan in your case – with that account) is what I’m considering too. I also consider that a good exercise to test perpetuity and initial withdrawal rate hypothesis for a small portion of our family monthly expenses, to incrementally expand into other areas of our life.

        Thanks again!

  24. Tam Tran says

    So my cheapest option is buy new and run the car into the ground. And the second cheapest is buy the car at 100k miles and drive it for 5 years?

  25. Steve says

    After graduating college, my wife bought a brand new base model ’07 Mazda 3 in the end of 2006 for about $17k after taxes. I had an old Honda Civic from college that I drove until we started having kids in 2010. We sold the Civic, got a bigger car for my wife, and I started driving the Mazda. I’ve been a big fan of the MMM thought that biking is a great and healthy way to get around. So I bike to work in the warm months and limit how much I drive the Mazda. It’s now ~16 yrs old with about 130k miles on it. I do a lot of maintenance myself and haven’t had to do anything major yet. So far, the largest cost has been about $500. I’m not as cool as JL with tracking everything I’ve spent on the car over the years, but I would guess we’ve spent about $13k on gas, $1k on routine maintenance (oil changes, etc..), $1.5k on tires, $2k on registration and associated fees, and maybe another $3-4k on other maintenance. The simple math says this car has cost us about $2400 per year on average (not including insurance which is another ~$50/month) Currently, I spend about $1000 a year for regular costs (gas, registration, oil changes, tires, minor maint.), but I know I’ve got some big ticket items that could come knocking any day. For now I’ll keep pushing her as far as she’ll go, I’m hoping that I’ll still have her for my currently 12 yr old daughter to drive when she gets a license. Then I’ll face a new financial obstacle of paying for car insurance for a teenager!

    • Greg says


      Your analysis suggests there are big savings to be had from (1) reducing your annual mileage and the associated fuel, wear, insurance cost, etc. and (2) learning how to do some of the simple maintenance yourself.

  26. Andre D. Jones says

    Hello Mr. Collins. I’m not sure how else to reach you. I have a talk to a business and finance class for a charter school. I shared the benefits of your investment strategy and your Simple Path to Wealth book.

    I offered to buy each of the students a copy of the book as I feel do they can apply it they will change their financial futures.

    I need to buy 50 in the next week or two. Is there a source whereby I may receive a discount as I’m gifting them to high shill students?

    The only way I see to purchase so far is Amazon. I look forward to hearing from you.

  27. Tom says

    Hey guys
    Just an FYI, you mentioned your newsletter and I’m not seeing the hyperlink or anything shown. I turned off my filters and still nothing. Thought you should know

    later tater

    • clevelandjacobchs says

      Hi Tom, the newsletter signup is at the end of each post and in the sidebar. Just enter your email in the box where it says Subscribe to JL’s Newsletter. Once you sign up, you’ll receive a weekly newsletter from the team. Thanks for asking about it!

  28. Steven says

    If you waited until 2022 to sell your Subaru Forrester: 2020 value $5500, 2021 value $7500, 2022 value $10,500 …something like that.

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