I am in my mid-late 20's and I just got a job in my chosen career field about 8 months ago. It pays well for my location (64k per year) and I'm trying to avoid raising my expenses with my income.

My current car is going downhill. It was around $2500 a year ago, but has been nothing but problems. Each month a new problem arises. The job I have also requires occasional travel from 30 minutes away to several hours away. Sometimes they will rent me a vehicle, but other times I'm expected to use my own car if I need to make repeat trips that are only 30-45 minutes away.

Here's some information about me:

  • Net income is ~$4000 a month
  • I can live off a very bare minimum of $1700-$1800.
  • I save about $500 every two weeks. This is split between a saving account (emergency fund, near term goals such as a vacation) and an investment account (long term saving/growth). These total to about $5000 currently.
  • I'm single, but occasionally pay for expenses of a parent that is on a low fixed income and also has health issues.
  • The only debt I have is one credit card that I still need to pay off. It's at about $1700 and I usually pay $200-$300 per month on it.

So my question is should I get a new car and how much could I afford? Should I go for the alternative of another used car? I believe I can afford it, but I'm scared of being "stuck" in this job if I take on an auto loan.

  • 13
    Just a note, it sounds like you have the means to pay off that credit card now. Unless it is 0% interest, pay that $1700 all off now and never pay interest to a credit card company again. Jun 25, 2018 at 20:44

7 Answers 7


A brand-new car is a luxury purchase that loses ~10% of its value the moment you drive it out of the dealership. It sounds like what you need is a reliable used car. That would be an investment in being able to do your job. Keep up the good work and continue to build your savings.


First - pay off that credit card, skip the saving for a month or two to do that. No reason to keep high interest credit card debt.

But as far as the car: From a purely financial perspective, new cars never make sense. As nanoman says, they lose a lot of value right away, and keep losing value. Used cars are far more cost-effective.

Choosing to buy a new car is a luxury, but something that you may well prefer to pay. That's not something we can help you with of course; it's just up to your personality, your current financial well being, and your preferences. You pay extra for the comfort, the features, etc.; some prefer to pay that, some prefer not to. But it's never a good financial decision.

As to whether to replace your current car, it comes down to two things: reliability and cost. Cost, is it cheaper to buy a used car than to keep maintaining this one? If it costs several hundred a month to repair, well, I can think of a lot of new cars that cost close to that with no repairs, and definitely a used car would be a good choice. But if it's like $500 a year, well, that's a normal cost for a car.

Reliability is the other key factor: is your car breaking down while you're on the road? Or is it just minor things that you want fixed (like, weird noises, etc.) and routine maintenance? If it's breaking down on the road, I'd say reliability is a problem, and you're going to risk both injury and expense, as well as your job, keeping something that'll break down and mean you can't visit a client. But if you're mostly not having that sort of issue, and when it does happen you're in an urban area where a taxi/uber is just a quick button push away, you might be fine with this car.

Ultimately it comes down to this plus your preference: are you willing to pay a little extra (even if cost and reliability both say don't worry about it) to have less stress from your car? Maybe you are, maybe you aren't, but that's how to make the choice.


First, if you're putting $500 back every two weeks you're already miles ahead of most people in their twenties. For future reference, a good long-term goal is to be putting at least 10% of your income into investment/retirement accounts.

Like others have said, paying off the credit card should be a priority. After that is done, you could certainly afford a new(er) car. One thing I've always done is continue putting my car payment in the bank for a year after I pay it off so that I've got a good down payment on the next one.

There are a couple of things to consider. Like others said, a new car is going to depreciate quickly. However, as interest rates are rising, it's probable you will be charged a higher rate if you finance a used car. If it's one you plan to keep long-term, new might offer better perks. Especially if you wait until August or September when new model years are released.


What you need to compare:

Current car:

  • Repair costs
  • Insurance

New car:

  • Loan
  • More expensive insurance

There are probably other things to consider too such as taxation and fuel consumption.

But I would pay off the credit card debt first before buying a new car. When choosing a new car, don't buy to impress, buy a good Toyota or Honda Civic with a nice warranty on it. If you're single something like a small-sized sedan or a hatchback should be sufficient and help you save money.

  • 1
    Are you suggesting a "new" car in the sense of "factory new" or "replacement of the current car"? Because the question specifically asks "new car or another used car", which means there are 3 options to compare: current (used), another used car, or new car.
    – MSalters
    Jun 26, 2018 at 14:11

Yes, buying a used car sound like a good idea. You can get verified used cars under $5000. Paying for the credit card debt should also be kept in mind. I think you should not buy a car soon but save money for later and clear your credit card debt.


This is going to sound incredibly weird, but... "new" car is in the eyes of the beholder. Your circumstances dictate that you require a vehicle for the sake of employment, so if your primary vehicle breaks down on you, you have no way to supplement your income until you can get it fixed or replaced.

The big thing here is that in your specific circumstance, your car is less of an expense and more of an investment. You can choose to invest in a car that is newer, or you can choose to invest in a car that's less new than this model year. What dictates that investment isn't how much you're able to earn, but what value the investment is going to bring back to you.

Spoiler alert: I'm not convinced that a new vehicle would be a wise investment since the barrier of entry is too high for how much you earn and how much you save versus your debt and expense load.

You haven't specified roughly where you live, but you use USD as your currency, so I'll take a stab at "eastern seaboard", since a large amount of the population of the US lives on the east coast. (California is also population-dense, but I have yet to meet a person who could live comfortably on $1800/mo in California. That's rent in most places.)

Given that as your geographic constraint, it's fair to assume that you'll see a wide variety of weather and traffic - notably, rainy, wet with the occasional really bad snowstorm that could hit. It's also fair to assume that you'll have to deal with traffic - some good, some bad, but you'll be commuting quite a lot from place to place.

In that mindset, the cost of the car becomes the cost of entry. You then have to factor in:

  • the cost of fuel (gas or electric), and
  • the cost of upkeep maintenance (routine or emergency)

before you can determine if you can afford a specific kind of car.

Fuel costs on the east cost of the US are a shade lower than average at the time of writing, and assuming a 12-gallon tank and refueling every week from near empty, you'd be paying something on the order of $33/wk on gas. Factor in costs such as antifreeze/coolant, insurance, and tires, you could be looking at something between $200-$250/mo on upkeep alone, using some conservative, back-of-a-napkin estimates for insurance (around $90/mo on the median to high end), the average cost of a new set of tires across a year assuming you replace tires every 4 years ($600/48 mo -> $12.50/mo) and an oil change in the first year for a new car ($25-$35).

Getting a new car would also then add tax and title to the purchase of your vehicle, which varies based on jurisdiction and state. For example, I wish to by a vehicle that costs $55,000. After tax, that car now costs $61,000. With title, I believe I pay $500 for the first year of ownership, which then goes down over time.

There's a large up-front cost to paying for a new vehicle which most earners don't readily identify. You don't mention how much you have in your savings, what the average cost of the car is or if you have a credit score good enough to get a loan which would cover a hypothetical $25,000-$45,000 vehicle. But, just being able to save money alone isn't going to be good enough to buy a new vehicle.

...but since you need a car, get a used car. It'll still be "new". It just won't be new and still have an expensive stigma attached to it.


If I could go back in time and change one financial decision, it would be buying a nearly-new Volvo S40 when I was 22 and a few months into my first "real" job, with earnings similar to your current ones - when I had my late grandmother's plain, but still functioning, 12-year-old Camry that needed a few hundred a year in repairs... and a couple thousand in credit card debt. The $468/mo note on that Volvo would be at least $50,000 today had I kept driving that Camry a few more years, paid off the card sooner and put the savings into an index fund instead, and that includes the fact that I bought the Volvo in 2002 and therefore my investment would have had to weather the 2008 crash.

Now that my husband and I have enough cash that we could buy a new BMW 5-series and have enough left over for insurance, we instead own a 2009 Ford Fiesta, having sold my 2008 Ford Focus wagon because a transmission replacement was in its near future and I realized that we didn't really need a second car any more. Each of these cars was bought when it was 3-4 years old with 60-70k kilometers (35-40k miles), at about half the price they were when new. These are European Fords, so not sure how their North American equivalents were those years. If we decide to go back to two cars or need to replace the Fiesta, it will be another 3+ year old car that doesn't have too many kilometers, probably Ford or Toyota.

So here's what I wish I had done (if I really had needed a different car) and what I suggest you do:

1) Pay off your credit card debt as quickly as possible - in your case, looks like within 2 months. You have $5k in savings, which easily covers 2 months of living expenses AND a week or two of renting a car if yours finally breaks down in a $1k+ way.

2) Start shopping for a 3+ year old car. If those are good enough for Warren Buffett and my well-off in-laws, they're good enough for me (and you). A 3-4 year old Toyota Corolla is a fine, reliable choice. Check Craigslist in your town and the next major metro area.

3) Once you find out what a 3-4 year old Corolla costs in your area, go to your bank, or, probably better, local credit union and ask about getting pre-approved for a 3-yr loan for that amount, minus non-emergency savings. Make sure there is no pre-payment penalty, because you're hopefully not going to need three years to pay it off. Getting my loan from my credit union and then paying it off two years early was the only non-stupid part of my own story.

4) Do not buy a used car without getting it looked at by a garage NOT associated with the seller. This is worth the cost.

5) Pay that loan off as quickly as is practical while developing a bit more of a savings cushion (6 months would make you feel a lot less trapped)

6) Savor having the best kind of car: paid off.

Good luck!

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