Search Results for: 1/10th rule for car buying

We previously described the mass affluent class by income, wealth, and investable assets. Mass affluent is essentially a subset of the middle class that’s well educated and upwardly mobile due to their education and optimism. Given you’re reading a personal finance site for fun and education and I’m writing personal finance articles, let’s all consider ourselves mass affluent with upside potential! Hooray!

After 10 years of owning the same car, I’ve decided to finally buy something new within the next six months. There are a number of problems with Moose, a 2000 Land Rover Discover II, including:

• Warning lights on for the traction control, hill decent, and ABS.
• Check engine light is permanently on.
• Sunroof doesn’t open or close.
• Heated seats don’t work.
• No Bluetooth.
• CD changer doesn’t work.
• Front passenger seat no longer adjusts due to broken motor.
• Cigarette charger doesn’t work, which means I can’t charge my mobile devices on long road trips.
• Brakes are mushy even after changing them two years ago.
• Not sure if the airbags work since they haven’t had their 10 year service.
• Gears don’t connect once every 50 starts for some reason. Have to turn him off, wait for 10 seconds, and turn back on to reengage the gears.
• Two balding tires that cost $200 to replace each.

Other than these 12 problems I can think of, Moose runs like a champ!

Over the past three years I’ve spent about $1,100 buying him a new alternator, a new serpentine belt, a tune up, and fixing a massively leaking fuel pump. If there is one more problem that costs over $500, I’m sad to say that I’ve got to let him go. It’s hard to do because he’s been so good to me. Moose has never broken down, not even in the worst Tahoe snow storm. If I’m ever in an accident, I feel safe that Moose will hold up better as well.

I’m starting to fear that I’ll one day get stranded somewhere when Moose experiences some transmission glitch. I know all I have to do is call roadside assistance and wait 45 minutes for a boost or a tow, but that’s not ideal if I’m rushing somewhere. If you have an older car, getting roadside assistance for several bucks a month is the best thing ever. I did leave my lights on several times before and roadside assistance came quickly to give me a jump.

I’d love to finally find a new vehicle that has all the creature comforts that many people for the past five years have taken for granted. You know, like being able to plug in your mobile phone to listen to some tunes. I’ve come up with a list of vehicles I’m considering for myself and for the mass affluent. Let me know which particular car or category you’d choose and why. 

Are you looking for a car buying guideline? Do you think my 1/10th rule is too harsh? If so, do not fret!

Let me also introduce to you the net worth rule for car buying guideline to follow. The net worth rule for car buying is generally reserved for wealthier people or retired people with a lot of assets, but not a high income.

I came up with the net worth car buying guideline because my 13-year-old Land Rover Discovery II was starting to give me fits back in 2013. His cruise control had just died and I was starting to worry about car safety, which is everything if you have a family.

I had just spent $800 that summer on a new steering pump, timing belt, and 125,000 mile tune up. So it was disappointing to see another issue come up.

Besides the cruise control not working, the brakes are mushy, the airbags haven’t been serviced at the 10 year mark, the traction control and ABS lights are on, and a couple $220 M+S tires are balding.

Oh yeah, the CD player doesn’t work either and there’s no bluetooth of course! My trusty mechanic of 12 years said Moose was operationally fine. The dashboard lights are just on due to a broken fuse lodged deep inside the control panel that makes it not worth replacing. Still, I had my doubts.

I wanted to buy a new car! But I also had just retired in 2012 and no longer earned six-figures in finance. I’m other words, I was asset rich, free cash flow poor.

Based on the 1/10th rule for car buying, I can buy a new compact car. The problem is, I wanted to buy the latest Range Rover Sport that costs $90,000! Let’s see if there is a car buying guideline to help get me and you what we want.

Are you thinking about a new or used car? One thing to note is that used car prices have surged higher during the pandemic. This post will share the thought process behind buying used or new with my story.

I’m in love with Moose, my 12 year old SUV. There, I said it! When you are in love with something, no matter how old, out of shape, slow, or dumb, you will love it unconditionally until the day it dies. Moose is like my overweight son, who eats too much, but still gets me to point B without any problems.

And lest you think that Moose is a big polluter, not so, as he passed our stringent Smog Test every year without fail. Besides, I bought him used, which means I’m more environmentally friendly than new car buyers who failed to destroy their old cars. I did not add to the car population!

New Or Used Car Decision

In “Fighting My Car Buying Addiction,” I highlight three things everybody must do to quit splurging on things that lose value and destroy their personal finances. After all, the act of buying too much car has significantly damaged many people’s financial livelihoods. Always remember the 1/10th rule of car buying where you should consider spending no more than 1/10th your annual gross income on a car.

1) Name your car. Anthropomorphism is a powerful, powerful thing. As soon as you name your car, you give it a personality and a soul.  With a personality and a soul, you can no longer just abuse it like a ragged doll.  My truck’s name is Moose.  I love Moose. He’s handsome, reliable, and very loyal. Given he’s part of the family now, I’ve decided to keep him for as long as it makes sense. At some point, I’ll realize I should sell or donate Moose since he is turning 12 years old.  However, at this point, I’m happy to buy him new brakes, rotors, batteries and change his fluids.

2) Go to the dealer and intoxicate yourself. Moose’s private party retail value is about $3,600 from $8,500 five years ago.  When you go to a dealer, you start appreciating what you have.  Just the other day, I stopped by the Mercedes Benz dealer for fun on the way home from golf. I test drove a well-equipped $47,000 out the door 2012 C250 coupe. I loved the new car smell and the drive was exhilarating. This wasn’t even the highest end version as the C350 coupe had 100 more horsepower and cost $5,000 more. When it was time to negotiate, the salesman insulted Moose by giving him a trade in value of only $1,114!  There was no way this C250 coupe was worth 45X more than my beloved Moose! I declined his pitch and left smiling.

If you aren’t convinced how silly it is buying a new car when a used car can do perfectly fine, take a look at this picture carefully. Analyze it and soak all the data in.  Look at the monthly payments after a $4,000 down payment. Observe the Trade Allowance of $1,114 for Moose and the Net Sales Price of $46,497.98 after taxes. Ridiculous and insulting!

3) Visit a garage sale or throw your own. One of the most humbling experiences is de-cluttering and minimizing your things through a garage sale.  That golf club you spent $120 on might only get $10 now. That purse you were dying to have for $350 now is worth only $20 bucks.  The list goes on and on of things you spent way more than you should.  Once you start going to garage sales or to Goodwill, you will find so many bargains that you will seldom ever spend full or sale price ever again!

Sealed The Deal

In the seven years I’ve owned Moose, I’ve been pulled over by the cops three times. One was going perhaps 50 in a 35 mph zone, another was not coming to a complete stop when taking a right at the stop sign, and another was driving too fast through a yellow light (but the cop said it was a red light).

In every single case I was let go with just a friendly warning.  I might attribute my good fortune to my courteous speech, or good looks, but somehow I doubt it.  The reason why I was let go without hundreds of dollars in tickets is because of Moose. Moose just looks slow. Not only that, he looks honest and safe.

When a police offers sees Moose, even if he’s speeding, he doesn’t look like he’s speeding. His eyes will glance over at the black on black 911 Porsche Carrera S that’s going the same 10-15 mph over the speed limit instead and give him a ticket!  Police officers look at 12 year old Moose and think, You ain’t worth too much old boy.  No need for you to get slapped a ticket when there are cars on the road that cost 25X your price!

It’s way more satisfying for cops to catch and ticket the rich. When you drive an old car, they want to show mercy. The only way rich folks can get out of traffic tickets is by paying thousands of dollars to sponsor the 11-99 foundation for fallen officers and get the license plate border. A good cause if you have the money.

Three Warnings And Got Away

I’ve come to realize that I’m not lucky when it comes to tickets. I just have Moose.  Even a hot movie star like Jessica Alba probably wouldn’t be able to get away with three warnings in a row. Nope. But, Moose can. As a result, I will never sell Moose for another car.  I refuse to cheat on him given how loyal he’s been to me.

Only if Moose suffers some irreparable damage, or needs to be fixed at a price that costs more than his entire value shall I put him to rest and donate him to charity. I owe you that much Moose!

Why You Shouldn’t Buy A New Car

* Car sharing. The rise of car sharing companies like ZipCar and GetAround helps clients borrow cars on an as needed basis, lowering the cost of ownership.

* Health. I try and bike or walk or bus before driving. It’s easy to stop exercising as much once you have a day job. Exercising to work is a great way to stay active.

* Tickets. With budget problems all throughout the country, the ticket cops are out in force! Ticket prices have risen by over 100% here in San Francisco past 10 years and won’t stop. Nothing is worse than getting a $70 ticket when you could have taken the bus for $2.

* Avoiding hell. DMV is one of the worst places on Earth to visit. From the long lines to the fees to the crazy deadlines. Each time you buy a new used car, you’ve got to register your vehicle and pay taxes to the DMV.

* Freedom. When you can take public transportation, you can keep going. You never have to worry about going back to retrieve your car. There is something extremely liberating about my monthly bus pass, even though it won’t impress the ladies.

RECOMMENDATIONS

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Esurance has good driver discounts, and multi-product discounts as well.

Related post: The 1/10th Rule For Car Buying Everyone Should Follow

When buying a car, don’t let your emotions get the best of you. If they do, you may end up paying way more for a car than you should.

The 6th grade was when I first laid eyes on her. She was a 1989 BMW 635i Coupe who did donuts in the school’s parking lot after class thanks to an obnoxious, rich kid driver in the 11th grade. 

The driver was the son of a royal family who lived in a royal house filled with a fleet of the most luxurious automobiles.

I was immediately smitten and promised myself one day I’d be able to buy such a car as soon as I started working.

The Dream Car

The new 6 series BMW came out in 2005 and all the memories came rushing back.  What cost only $35,000 then now cost $75,000 thanks to inflation and the infinite amount of new features.  I don’t know about you, but  $75,000 is a big chunk of change and my absolute upper limit for what I’d ever spend on a car.

Instead of spending $75,000, why not go back in time and actually buy that 1989 635i Coupe instead!  My brilliant idea led me to Craigslist where I found my true dream car listed in “Fantastic condition with only 160,000 miles”!  That’s only 8,000 miles a year I rationed and off I went to see the seller.

The sand dune colored BMW was in great condition and the seller was only asking $3,800.  After a test drive and over 1 hour of negotiating, I got him down to just $2,500.  

What a bargain I thought knowing that even if the car blew up the next day, I’d only be down $2,500.  I gleefully drove back home in my dream mobile I had waited for almost 20 years!  Of course, as soon as I got home this is where all the trouble began.

Buying A Car Can Be Very Emotional

Having bought and sold 14 cars in the past 10 years, I fancy myself ad a car aficionado. Unfortunately, since I just had to have this new ride I violated one of my basic rules: sell my existing vehicle before buying a new one!  

Parking is an absolute nightmare in San Francisco, and unfortunately, I’ve only got one car parking.

So here I am, a guy who takes the bus to work with two cars and not enough space. What a pain  in the rump as I had to move my car every several hours before 5pm, or else risk getting a ticket.  

I ended up blocking my driveway most of the time instead, which immediately made my other car useless. At least I knew I wouldn’t be calling the parking police on myself!

I finally ended up selling my other car on Craigslist after a month so I could put my new baby in the garage.  Ah, how good it felt only to have just one car instead of two!

Buying A Car With Unforeseen Problems

A 20-year-old car undoubtedly has problems and I chose not to get an inspection out of sheer lust. Bad move as my steering gearbox had a crack, which resulted in a massive amount of steering fluid leakage every time I stopped the car.  

Cost to fix? $1,200-1,500, which I didn’t end up fixing. I just bought 20 gallons of steering fluid for $30 bucks!

What’s worse than a leaky steering box is a sticky accelerator.  I discovered on a routine drive around the city that my accelerator got stuck on “lead foot mode” and I had to ram on my brakes and shut the engine off before crashing into the car ahead of me!  It was one of the scariest feelings, ever.

This was a problem I had to fix, so I spent $400 changing out the electronics that controls the sensors to the accelerator. I didn’t want to end my life running a red light and getting t-boned because I couldn’t stop in time!

A third major problem arose soon after. The electronics would intermittently all shutdown so i would lose all lights and power steering.  Of course a cop was behind me during one episode and I got a fix-it ticket.  The ticket was only $15 bucks if I fixed the problem. 

It was just a hassle I had to go prove the fix over at the dreaded DMV.  Sweet, another $400 to change out another computer chip.

The final unforeseen defect was a low idle which caused stalling.  My dream mobile would just die at a red light, and I’d have to crank the ignition multiple times before she would start again.  

How stressful and embarrassing! Back to the auto mechanic I went who proceeded to charge me another $300 for a “classic car tune-up” and idle adjustment.

If Only I Didn’t Let Emotions Get In The Way

I let my emotions get the best of me when buying a car. I knew there would be problems with the car, but I didn’t care. However, I had successfully negotiated my dream car for only $2,500 and that’s all that mattered.  

In the end, I ended up spending $1,200 to make the car operable, and it still had the $1,200+ steering gearbox problem I refused to fix. Who needs steering anyway?  

All in all, I probably went to the mechanic 6 times and spent more than 15 hours in my 1.5 years of ownership to maintain the car.  In the end, it wasn’t worth the headache at all.

If I could do it over again I’d:

1) Bring a friend as a voice of reason.

2) Spend $100 and a couple hours having the car checked out by an auto mechanic.

3) Wait a couple days and then continue negotiating.

4) Check the online forums to understand all the major problems with the particular model and ask the seller about them.

5) Never buy a car older than twenty years again unless it is a show car!

I ended up selling the car to another emotional enthusiast for $2,200.  I told him about my problems and all the fixes made except for the steering box which he saw on his own.  He has a car repair shop so he’d just work on the car himself.

I’ve learned that I don’t have time to spend so much time maintaining a car anymore.  It was fun as a guy in my 20’s, but I want to spend my time doing other things now.  

A car should serve me, not the other way around. I will never let my car nostalgia get the best of me again. Don’t let it get the best of you either!

Finally, always follow my 1/10th rule for car buying. If you do, you will dramatically minimize financial regret after buying a car.

I currently drive a 2015 Range Rover Sport and I LOVE it! Getting A Range Rover was another one of my dream cars growing up as a middle-school kid in Malaysia. I plan to drive the RRS until 2025 and reconsider due to better safety features.

Related posts:

The Best Mid-Life Crisis Cars To Buy

The Safest Cars To Survive A Crash

Own One Car For Dough, One Car For Show

Car Recommendation

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Esurance has good driver discounts, and multi-product discounts as well.

See more of my top financial products to help you achieve financial freedom sooner, rather than later.

Before spending big bucks on a car, always get a second opinion. Spending big bucks on a car is one of the biggest sins in personal finance. Make no mistake about it. A car is a money-losing purchase.

Spending Big Bucks On A Car

As you may know, my 11 year old car is dying and I’ve been unsure whether to spend up to $2,500 fixing Moose, or let him fade away.  The service dealer said I would have to spend around $1,200-$1,500 to replace the entire exhaust system below, which is around 35% of the total value of my car!  That just doesn’t seem right.

As any frugal person would do, I got a second opinion.  The auto service industry is even more shady than the insurance industry and I wanted to make absolutely sure that I wasn’t being ripped off by the dealer before spending any more.  Besides, we all know that getting your car fixed at the dealer when you’re not under warranty is seldom the cheapest, and often the most expensive way to go.

Always Got Me To Spend Big Bucks On A Car

When I first moved out to San Francisco, I lived right next to a auto mechanic shop.  The owner’s name was Fred and we just started seeing each other everyday and chatting.  Over the course of 10 years, I’ve had him service and fix 7 different cars.  Furthermore, I’ve referred around 12 guys to his shop since he’s done such a good job.

Fred is so honest, that he’s told me on many different occasions not to fix the current problem at hand because it doesn’t really matter.  So long as everything works and safety is not compromised, fixing random things that cost a high price as a percentage of the car was not worth it.  He was very frank and never wanted me to spend more than I had to.

I brought Moose over to Fred and explained to him the slight engine leak and the rattle where the muffler is.  He immediately jacked up the car and pointed out that my muffler was fine. 

Instead, what had rusted away was the bolt holding my heat guard that was above my muffler!  As a result, every time the car moved, the heat guard would grate against the muffler and cause a rattling noise.

The Conversation

“So the muffler is absolutely fine?“, I asked.

“Yes, no problem at all.  Let me replace your heat guard with a new one.  Its easy to weld on“, Fred responded.

“How much?” I asked.

“Does $40 dollars sound good to you?”  Fred asked.

“Hmmmmm… did he really mean to say $400 and not $40?  Does a bear poop in the woods?”, I thought to myself.  “Absolutely!“, I blurted out.  With the dealer saying I would have to spend up to $1,500 to fix the entire exhaust system, $40 was a dream come true!

I was absolutely ecstatic!  I then asked Fred to take a look at the engine leak, and he basically said my top valve was leaking a little and to just check the engine oil once a month and make sure there’s enough oil.  He recommended not trying to fix it because he would have to take off all the parts above the engine to get to the valve.  “Save your money!” he said.  “Just buy a couple quarts of engine oil, top it off every other month and you’ll be fine!“

I then asked Fred if he could see anything else wrong with Moose.  He did mention my brake pads have about 30% left on them and that he recommends changing my front rotors and pads, and my rear pads before the winter.  Because Moose is heavier up front with the engine and all, replacing the rotors in addition to the pads is a good idea.  I haven’t changed my brakes and rotors in 4 years, and the previous owner already had one year on the existing brakes so it was about time.

Always Get A Second Opinion Before Spending Big Bucks On A Car

Servicing your car at the dealer is always an absolute rip off.  In San Francisco, labor is always around $100/hour vs. non-dealer auto mechanics at $50 hour. 

I drove out of Fred’s shop with a handsome bill of $75 to change my oil and fix my heat guard.  If I had done stuff at the dealer, not only would I have paid $1,200-$1,500, they would have probably also found more stuff to work on. 

They always do that.  You go in for an oil change, and they print you out a 25 item list of things to do.  It’s nuts!

The value of a trustworthy auto mechanic is worth as much as a trustworthy doctor.  In other words, the value is almost priceless because what you want is peace of mind that you aren’t getting ripped off or given the wrong diagnosis. 

Getting ripped off is horrible, and something mechanics have a reputation of doing since we common people don’t know much about cars.

The main tips for getting a trustworthy auto mechanic and not getting scammed are:

1) Do your research on the issue online first and make it sound like you know what you are talking about

2) Be courteous and straight forward.  Once they sense fear and/or rudeness, it’s all over.  They will make it a mission to gaug you like a Roman sport.  Even bringing them a piece of candy or a cookie will save you hundreds if not thousands.

3) Offer to refer a lot of new clients their way.  If they know you are well-connected, there is no way they are going to screw you.  They also love free advertising, so if you have a blog, then you’re really golden!

Be Respectful

I always tell anybody in the service industry that if they do a good job, I will refer them to all my friends.  I’ve done this with my mortgage guy, and I’ve done it with Fred the auto mechanic.  It always works, and you should always do it. 

Repeat business is what it’s all about, especially during times of economic turbulence.  The value of a customer is not just that one visit.  It is the value of all his subsequent visits plus all his friends he’s referred so that your business is always humming along!

I was mentally prepared to spend $1,500 to fix Moose, but instead, spent $40, with the might-as-well $35 oil change since I was there.  That’s a huge win in my book.  As a result of this incredible savings, the only thing I have left to spend is ~$600 for new brakes.

Not a bad idea with snowboarding season in Tahoe coming up.  So I guess I’ve answered my question on what to do with Moose.  I’m keeping him for as long as possible!  If anybody needs a good auto mechanic in San Francisco, please shoot me an e-mail!

RECOMMENDATION

Lower Your Auto Insurance Costs. Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. AllState has good driver discounts, and multi-product discounts as well.

Related post: The 1/10th Rule For Car Buying Everyone Must Follow

Updated for 2021 and beyond.

My car is dying and I need to decide whether to buy a new car, keep it, or buy a old car.

In a rush to get to a meeting, I managed to bash Moose’s right side mirror into a garage side wall and blow the mirror off.  Crap. 

That’s what happens when you have a large car, in a small garage, and do things in a hurry.  This little accident cost $135 to fix and 30 minutes of time.

While I was at the dealer, I used the opportunity to ask several other questions regarding what’s wrong with Moose.  For the past 12 months, there’s been a progressively louder rattling sound every time I drive, or slam the door shut. 

After a little inspection, the service agent said that it looks like my middle muffler connected to my catalytic converter is wearing out and needs changing.  OK, good to know.  “How much?”, I asked.  The service agent said around $1,200-$1,500!  YOWZA!

Related: The Car Sharing Economy Is On The Rise: A Conversation With RelayRides

Car Is Dying – Let Moose Live Or Die?

$1,200 to fix a muffler is ridiculous.  The service agent agreed and recommend I just go to a muffler shop and have them replace just the middle portion.  Parts plus labor will probably equal to $600 instead.  OK, that’s somewhat more reasonable I guess.  I certainly don’t want the muffler to fall off while I’m on my way to Tahoe when it’s dumping snow!

The issue is, Moose is an 11 year old SUV that is worth maybe $4,000.  My main concern is operability and safety, hence the muffler should be fixed.  In addition to the muffler problem, I’ve got three yellow lights on my dashboard that is indicating the traction control, ABS, and hill decent functions are out!  The reality is all three functions are working, it’s just the switchboard fuse that is broken. 

I’ve tested all three and reconfirmed with a mechanic friend of mine.  To fix the switchboard, that will probably cost another $1,200 bucks which is not worth it.  Instead, I just got some black tap and stuck it around the dashboard glass to block the lights so I don’t see them!  Finally, my brakes only have 30% left on them and will likely need replacing in 6 months.  That’s another $600-700 that must be spent.

All in, I will have to spend a minimum of $600 (14% value of the car), and perhaps up to $2,500 (62% value of the car) to get things nice and good again.  Oh yeah, I also got my DMV car registration renewal yesterday to the tune of $109.  Adding everything up, it just doesn’t seem worth it…. or does it?

Related: New Or Used Car? Why I Don’t Plan To Buy Another Car Again

THE ALTERNATIVES

I’ve been thinking about buying a new car for the past couple of years.  It’s just that every time I see a new model, I get bored of it in one year, which means spending tens of thousands of dollars on a car is not a good idea.  When the BMW 335i coupe first came out in 2007 for $47,000 I was determined to have one. 

By the time 2008 rolled around I was bored because I saw the new Audi S5 coupe roll out for the similar price.  And then I got over it because something better kept coming along.  It’s a never ending cycle of desires.

It’s strange, but to cure my car-lust, I go to car dealerships.  Sometimes, I just slide on into one of them babies and inhale the intoxicating new car small as I pretend she’s mine. 

Other times, thanks to very aggressive salespeople, I always respond “Oh, twist my arm and my nipples, OK!” when they ask me to go for a test drive.  By the end of the session, I am so thrilled, that the desire to spend any money on a car dissipates!

So let’s say your car is dying, you are by nature a frugal person, but fulfill the important 1/10th rule and can pay cash for whatever car it is that you desire.  Do you spend 20-62% of the value of the car ($500-$2,500) fixing it to a level which can last another 5 years? 

Or, do you spend perhaps 35-150X that amount and buy a new, safer, more reliable car which has a 4 year, worry-free warranty?  OK fine, I could also spend $20-$30,000 and buy a cheaper car too, but then I’ll really get bored with the car after a year. 

By the way, don’t forget about higher car insurance, crying if you ding your new car, sobbing if your girlfriend or boyfriend dings your new car, and never feeling at ease when you park at the grocery store!

Related: Don’t Let Your Emotions Get The Best Of You When Buying A Car

RECOMMENDATIONS

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs.

It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Esurance has good driver discounts, and multi-product discounts as well.

In 2017 I ended up finally trading in Moose for a Honda Fit named Rhino! It costs $22 to fill up a tank of gas vs. $80 before.

And in 2021, I’m now rolling in a sweet Range Rover Sport with 22″ wheels. I love the car because it’s roomy and safer for transportation my family of four.

Check out my top financial products to help you achieve financial freedom sooner, rather than later. Also check out the best free wealth management tool I use to manage my wealth since 2012.

Buying one of the least expensive cars will help you build greater wealth over time. A car is a money pit. You could use that money to invest instead!

If you are in the market for a new car—and have ruled out buying used for whatever reason—and you are on this site then you are probably concerned about getting the best deal possible. 

After all, nobody wants to overpay. Even a financial fool appreciates knowing that the value they’re getting from their purchase is up to par and that they didn’t make an embarrassing deal.

It is imperative that you strike a compromise between affordability and practicality if you’re looking for a set of bargain wheels. This has been said a million times in the past, but the current offerings of both foreign and domestic automakers makes this easier than ever.

Many Americans are turning towards cars that can be bought for relatively cheap but still want something new and something that has the basic comforts and amenities we’ve grown accustomed to. 

Everyone’s situation is different, but purchasing an inexpensive car is a great idea for if you need a second car or a commuter; or you simply need a cheap car period. 

If you’re looking for your primary mode of transportation for you and the family though, it’s best to err on the side of a larger car than having to buy another one down the road when finances improve or you outgrow it.

The Least Expensive Cars

1) The Hyundai Accent is an inexpensive but reliable car that can be bought for around 10,000-$12,000.  This car is great for people that need a decent form of transportation they can count on without worrying about it breaking down. 

Long gone are the bad Hyundai stereotypes of unreliability and such.  With the low price tag comes a few sacrifices, however. No car at this price will not come loaded, and features such as a sun roof, nice wheels and paddle shift transmission are absent.

However, the car is not totally deprived of options.  A peppy 110-horsepower engine is standard, along with safety features such as a low tire pressure indicator and seat belt pre-tensioners. If you are looking for the least expensive vehicular option to point A to point B, the Hyundai Accent is a viable option. (Official Hyundai pricing and Specs at Automotive.com)

2) The Nissan Versa can be bought for just slightly more than the Accent, but offers a few more options.

The inexpensive Versa will come with things such as power windows and power locks, and it is a larger car. 

However, the downside of buying an absolute base Versa is that things such as a CD stereo system and air conditioning are not included.  Pay a grand or so more though and you’ll get it.

In addition, the color choices on the basic Versa are limited to just blue, silver and black.  Overall the good news is that if you are willing to pay a few extra dollars you can get more features for not that much more money. Plus, it’s a larger car than the Accent.

3) The Chevy Aveo is GM’s entry-level car and costs under $13,000. The least expensive Aveo’s do not include many options, however, they do come with a stereo system as well as a few nice colors that you can choose from.

The all-new 2012 Aveo will be a completely revamped model, so if you’re planning on getting a deal now, go for the 2011 and take advantage of the discounts and incentives. You may be able to get a 2011 2LT model with MP3 player, XM radio and keyless entry today for the price you would have paid for a base model last year.

4) Next up, the Kia Rio. It will cost right around $13,000 for the base model sedan. This Rio, however, is devoid of any and all options.

The base model does not include a stereo, air conditioning or even floor mats. In addition, the color choices are very limited. For the price you would pay for a stripped down Rio the sensible thing to do would be to purchase a Hyundai Accent that included a few upgrades.

Since the Rio is so stripped down it would take an additional $2,000 dollars or so to get the car with some decent upgrades in it. The car is decent sized however, larger inside than the Aveo and the Accent and with more cargo room. (All new Kia prices and dealer quotes at Automotive.com)

5) Finally, the last on our list is the Toyota Yaris, though certainly not least. Offered as a sedan or three door hatch, this little Japanese import packs more base features than any of the aforementioned.

For the price of $14,000 it’s one of the best deals, especially when considering the versatile interior and customizable ordering options.

However, the Yaris rides on the shortest wheelbase in its class, and has smaller cabin room than the offerings from Korea and the U.S. When buying any Toyota though you’ll for sure know that you are getting a reliable vehicle that will stand up the test of time. All Toyotas are well made and have a reputation for reliability. The Yaris is no different.

Burnt Rubber

With gas prices regularly over $4 a gallon now, you’ll appreciate these inexpensive, fuel sippers. Our European brothers and sisters pay US$8+ a gallon for gas and if you ever go, you too, will start to appreciate the beauty of small vehicles. 

The above five cars are perfect for one’s budget, especially if you follow the 1/10th rule for car buying. You probably aren’t going to be turning many heads and picking up babes with these cars. But, what you will turn is a new page in your journey towards financial freedom.

Recommendation

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Allstate has good driver discounts, and multi-product discounts as well.

Updated for 2021 and beyond

Ever hoped for something to break in order to buy a new car? Well I am! I want to buy a new car.

I have to admit, I’m having withdrawals from not driving a different car for over 3 years now.  I used to get a new (used) car every year by wheeling and dealing on Craigslist, but I stopped once I found Moose.  Moose is so handsome and adventurous, even the ladies love him.

I picked up a friend of mine one evening to go grab some grub, and she mentioned a week later that her stalking neighbor, who has a crush on her said he’s frustrated that guys who own “Moose-like” cars always gets the girl.  Maybe buddy, it’s the creepy way you stare out the corner of your window to spy on women that makes you still single?!

A year ago, Moose’s passenger side electronics seat stopped working to my dismay.  Luckily, the seat was in a comfortable, semi-reclined position so I let it be.  I told myself then that it might be time to start looking for another car soon as fixing the thing might cost $500+ dollars.

And so, I made a decision that as soon as the driver’s seat electronics also stopped working, I’d go and buy me another car.

Each week that went by, I started secretly hoping my seat would stop working.  I was hoping for something bad, but not too bad to happen, so I could justify buying something new!  Screw it, I thought.  I’m going to go visit the dealer and check out the new rides anyway.  Moose ain’t ever gonna fail me!

Buy A New Car At The Dealer

As I was inhaling the wonderful rich smell of leather and glue, a service man came up to me and asked if I wanted to consider trading-in Moose for something new.  I started feeling horrible since Moose and I had grown so attached. 

But, I did tell the serviceman I’d consider it.  I revealed the only problem with Moose was the non working passenger side seat, and he said not to worry.  He came back 5 minutes later, opened up a compartment under the seat, and swapped out a fuse.

“Your car is as good as new!” the service man shouts.

“Sweet crap,” I think to myself as now I have no reason to exchange Moose for anything else.  I also wondered why I didn’t go into the service department to buy a $1 fuse long ago.  I told the serviceman that given my car was “as good as new“, I’m good to go and am not interested in spending $58,000 for a new Moose.  Now I realize why car dealerships keep Service & Sales separate!

Buy A New Car? Nah

If Moose is a babe magnet, handsome, reliable, and inexpensive, why do I long for something new?  Change is human nature and unavoidable so it seems.  It’s just like asking why Tiger Woods can’t just be happy with Elin, his family, and his mega millions?  The longing for something different is so hard to conquer.  It’s almost like an addiction.

Changing cars frequently is one of the stupidest things you can do if you don’t have the financial capacity.  You pay taxes with each purchase, often lose money with each sale, your auto insurance may go up, and you never quite know what you are going to get. 

Cars are money pits, which is why I seriously recommend you never spend more than 1/10th your annual gross income on the purchase of a car. If you find a car that gives you little-to-no problems, cherish it completely and forever. Buy a new car if you need to. But only if you can afford to using my 1/10th rule for car buying.

RECOMMENDATIONS

Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Allstate has good driver discounts, and multi-product discounts as well.

Related: The Safest Cars To Buy To Survive A Crash

Updated for 2021 and beyond