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Edmunds Proves That You Can Afford A Used Car Without Financing

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On: Thu, Apr 11, 2013 at 3:43PM | By: Chris Weiss

Edmunds Proves That You Can Afford A Used Car Without Financing

It seems like we’ve been caught in a never-ending recession for the past half-decade. During such times it’s easy to put off paying today what you can pay during the (presumably) better times ahead. This is particularly true of major purchases like automobiles. Many buyers choose to finance their new or used car purchases, a strategy that can help them afford to the purchase in the present but leads to much extra cost over the term of the financing period. 

During a 13-month used-car experiment, the auto experts over at Edmunds tested the practicality of purchasing a low-priced used car outright versus financing a higher priced car. Their findings are that buying a car outright can indeed be a practical solution... but not necessarily for everyone.  

In what Edmunds called its “Debt-Free Car Project,” it sought to purchase a car below $5,000, a price that represents an affordable upfront cost for many car buyers. It was able to come in well below that threshold, driving home with a 1996 Lexus ES 300 for $3,800, including tax and title.

Thing is, everyone would buy a $5,000 used car if all things were equal. But all things are not equal. Besides easily forgiven superficial considerations like outdated styling and lesser options, older, less expensive used cars tend to have more mechanical problems, requiring more maintenance and repair costs. While new and newer-year used cars cost more up front, they will presumably come in better condition and eliminate some of the long-term repair headaches and costs.

Indeed Edmunds almost doubled its investment, racking up nearly $3,300 in repair and maintenance costs over the 13-month Lexus test period. The car also left drivers stranded in two separate instances, adding stress and pyschological burden to the time and financial burdens of car repair.

It should be noted that Edmunds’ testing was a bit more intense than the average car’s year. It drove the car 18,000 miles—well above the U.S. national annual average of around 13,500 miles—and took the car on a cross country road trip and drive through Death Valley. Someone that didn’t undertake a major road trip and drove around or under the average would likely have fewer repair costs.

In the end, Edmunds’ experience led it to recommend purchasing a sub-$5,000 car, but with a big caveat.

“Buying in the sub-$5,000 price range, you will drive a car that will probably have repair issues, so if you have a trusted mechanic, or if you are capable of doing the repairs on your own, it could be a solid choice,” said Edmunds.com Consumer Advice Editor Ron Montoya. “But if you get overwhelmed dealing with mechanics and repair shops, or if you worry excessively about potential breakdowns, you may want to save enough money to prioritize reliability over cost-savings in your next car purchase.”

Montoya’s advice is fairly obvious and intuitive—cheap, used “project” cars have always been best suited to those with the skills to repair them on their own—but Edmunds' test does provide some extra juice to the age-old argument.


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