Buying a Car in a Pricey Market

Recent automotive industry news indicates many consumers are keeping their older cars rather than purchasing new ones. While vehicles last longer now than they ever have, the main reason people are holding on to their cars is the sticker shock of new models. The average new car price today is about $47,401, nearly double what it was 12 years ago, but down 3.5% from January 2023.

For more car-buying tips, listen to Episode 1 of our podcast, Merging Into life: Buying Your First Car.

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How long can I expect my current car to last?

The average age of a AAA member’s car is about 12 years old, but your car’s lifespan depends on how well you take care of it and how well you follow the scheduled maintenance. Try to build a relationship with a good repair shop over time, so its staff understands your expectations and budget. They should also keep you informed about your car’s overall condition and perform routine maintenance.

Some drivers will wait until the car breaks down or warning lights come on, but it’s always advisable (and less expensive) to do preventative maintenance, including oil changes, cabin- and air-filter replacement, battery cleaning, wiper-blade replacement and headlights checks. Find a AAA Approved Auto Repair shop near you.

Many cars also have lower mileage and less wear and tear because people are driving fewer miles to work since the pandemic. Instead of commuting five days a week, many people are now only driving to work two or three days a week, or none at all.

Traditionally, drivers wanted new cars every few years to get the latest, greatest safety features, said John Paul, AAA Northeast’s senior manager for traffic safety and Car Doctor. But now, many of the important safety features, such as smart airbags, anti-lock brakes and automatic emergency braking are standard in most cars.

At the same time, be aware of recalls. The National Highway Transportation and Safety Administration maintains a database of all recalls in the last 15 years. Enter your vehicle identification number on the NHTSA website to see if your car is affected.

Is it time to let go?

“There was a time when we said that if the cost of the repairs equaled half the cost of the car, it was time to let it go,” Paul said. “Today that may not be as relevant. As an example, a 2010 Toyota Camry can be worth $5,000 to $7,000. At one time putting a $3,500 transmission in a $6,000 car was crazy. Now with the average used car price at $28,000 putting $3,500 into a car that is still serviceable to get a few more years out of it can make sense if the car is structurally sound, the engine is in good shape and you still enjoy the car.”

Here are some guidelines for deciding whether to replace your car:

• If you’re facing a major repair, make sure your car is both mechanically and structurally sound before you commit to the service. A vehicle that’s been around for a decade is sure to need additional repairs or parts in the future, and they could be pricey.
• If it is starting to rust away. Once structural rust sets in, the cost of repairs can become overwhelming.
• Parts availability. As some cars age, replacement parts become hard to source, meaning that it your car breaks down, it may stay out of service for a long time.
• Overall dependability. If your car is stranding you on a regular basis, a newer car should be more dependable.

Deciding on a New Car

There is a plethora of choices on the market these days. Yours can depend on your driving style, commute, cargo needs and more. Also, consider if you want a traditional gas-powered car, a hybrid, plugin hybrid or electric vehicle.

If you’re considering an EV, there are tax incentives for both the purchase of the car as well as for a home charging station. For gas-powered cars, think about your driving habits, how often you expect to fill up and the price of gas. And, if you’re taking out a loan, you’ll find interest rates have increased dramatically.

Be wary of longer-term loans. The dealer may find a way to make your desired monthly payment feasible, but if you take on a six-, seven- or eight-year loan you’ll be making car payments and paying repair costs. And, if you decide to trade in the vehicle after a few years, you may owe more than the car is worth.

The cost of owning and operating a car goes well beyond the monthly loan payment. The latest study from AAA revealed that the average cost is $12,182 a year, or $1,015 per month. This study factors in purchase price, depreciation, special features and add-ons, fuel, insurance, repairs and more.

What’s my trade-in worth?

Before shopping, do your homework. Check out what companies like CarMax, TrueCar and Carvana are willing to pay for your car. When you start negotiating for a new vehicle, it’s always best to consider the new car purchase and the trade-in as two separate transactions. Settle on a new car price without the trade, then bring the trade into the discussion.

Do I want a new or used car?

You’ve probably heard that a new car loses its value the minute you drive it off the lot, and that’s true. In fact, most cars depreciate about 20% in value in the first year of ownership. A used car might be a better choice, though inventory is getting tighter as people hold on to their personal vehicles longer. However, there are unique concerns that come with any used car purchase.

Used car considerations

Keep in mind that someone traded in that car you have your eye on because they kept it long enough, repairs were mounting up or it may not have been reliable. Certified pre-owned cars generally have better warranties and are in better mechanical shape due to a more rigorous inspection process.

One important note: With the increase in hurricanes and flooding, CarFax reports that nearly half of flood-damaged vehicles return to the market as used cars. Click here for a full list of signs that may reveal if a car has been flooded.

Find a great price on a new or used vehicle with the AAA Auto Buying Program.

Does your car need an upgrade? Will you buy new or used? Tell us in the comments.