Considerations of Downsizing a New Car

Ben Rice

December 15, 2023

Motorists often think of cars as an investment, choosing the best deals that they can eventually resell. In a forum, a motorist named Dave shared his experience on purchasing a brand new Hyundai Tucson. It was priced at $31,000 with a $4000 downpayment and a 2% interest rate. He justified the purchase with a plan to keep the car for at least ten years. He currently has an outstanding balance of $18,000.

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Dying on the Highway

However, after being hit by another car this year and having had the other party’s insurance cover the $5,000 repair costs, the poster’s Tucson recently died on the highway. Thankfully, the new car’s warranty covers the repair bill, though Dave is now contemplating a downgrade, as another engine failure at “22k miles” would be disastrous to this long-term investment.

A Cheap, Reliable Car

“The car has a trade-in value to Carmax for $25,000 after it gets in good working order again,” Dave muses. “I’m thinking of taking the offer and purchasing a cheap, reliable car, then driving it until the wheels fall off.”

Making a Mistake?

Man Thinking — Image Credit: Shutterstock.

Dave is still on the fence about this idea, considering he would lose his “new car warranty,” not to mention the comfort a new, modern car offers. But would Dave be “making a mistake going down this route?” He has no other debt but a car, one credit card with zero interest accrued, and a stable income.

What should Dave do? Many other motorists in the thread offer their perspectives on Dave’s dilemma.

No Cheap Market Anymore

Man Shrugging No Remorse Smirk Shutterstock — Image Credit: Shutterstock.

“It wouldn’t be the end of the world,” advises the first commenter. “But the $5,000 car market is pretty much gone.” Even used car auctions seem to start at inflated prices these days. Maybe sticking with the Hyundai would be better if you cannot find the right deal. However, not all observers agree. “The $5,000 car market is still there,” warns an enthusiast, “but be prepared to either pay up for a mechanic or get your hands dirty.”

Cloud Cuckoo Land

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An alternative sentiment follows though it comes with the caveat that any low-priced vehicle has high maintenance fees. “You are living in a pre-2020 fairyland” is the next piece of frank advice. “Anything and everything out there below $10,000 is a steaming pile of regret. Period. At the LEAST, drive your car until the warranty expires.”

Loan Sharks

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While it may look like a sensible option, buying a cheaper car may come with excessive loans, so it is worth researching this before choosing to downgrade. “Oh man, the money you would save in getting a ‘cheaper’ car would be eaten up by the insane interest rates going for auto loans,” asserts the next motoring enthusiast, “especially for used cars.”

The 150K Golden Rule

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“Honestly, at this point, the two smart options are to buy something for $30k-plus that’s new/almost new,” offers a new thread post, “or spend three to four grand on something that’s 20 years old but under 150k miles.” Otherwise, you are buying a car that is ten years younger with the same mileage, and that makes no economic sense.

But Depreciation

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“You have already taken the loss from depreciation” is the next wake-up call offered. “You’ll never get that money back. If you keep the car, and own it for a long time, at least you’ll be getting something for the money you spent already.” From what most thread observers say, there is no such thing as a reliable cheap car anymore.

That Interest Rate, Though

Man Getting Annoyed With Car — Image Credit: Shutterstock.

“Two-percent interest? Still under warranty?” is the next commenter’s rhetorical question, followed by sage advice. “Keep the car. You would walk away with $5-7k worth of money, which just isn’t going to be enough to get something decent.” When the current car-buying market means anything less than $15,000 isn’t going to last more than ten years, and with auto loans now hitting up to 9% in some states, this is good advice.

Hyundai or Hyundon’t?

When a 2019 Hyundai Tucson owner started hearing a “grinding sound” at 28,000 miles, he sought help from Hyundai’s technicians, who couldn’t locate the source and effectively gave up on it. “I spent months worrying about the car, driving around with a horrible grinding sound, and finally traded it for a truck,” recalls the owner. “I got a good amount for it and have never looked back. I will never recommend a Hyundai to anyone.”

Source: Reddit.