COMMENT OF THE DAY: LIVE HUMBLY, THEN CASH OUT “. . . Best success I’ve seen is those who buy cheapest house in a bling neighborhood. Live humbly, leisure frequent, maybe do a little renting later, then sell the land to guy who wants to tear it down for his monstrosity. Relax with your new found cash. Kind of like buying a brand new car . . . why do it? Let the other guy have the 2-week splendor of bragging of the brand-new car he just bought. I’ll take the car with 6k miles for 8k less and the same warranty.” [drew, commenting on Comment of the Day: When I Hear the Word ‘Culture,’ I Reach for My Wallet]
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A man after my own heart. We did the same thing and have money to show for it.
Cars are built so much better than they were twenty years ago that it is no longer true that a slightly used car is the best deal because of the “drive off the lot” immediate depreciation. Also, demand is high for used cars (especially fuel efficient models) because people with bad credit can usually find a lender for a used car more easily than for a new vehicle. And the profit margin is much higher in used vehicle than for new for the dealership. If you can get a good interest rate, you can get just as much value out of a new car as with a used car because you will get more mileage in before the wear and tear items come up (tires, brakes, timing belt, etc.).
As for home buying, the best strategy is to buy the home that you can afford, that you like, in the neighborhood you like so that you will be happy in life. Life is too short to spend 15-30 years living in a stinker just to hopefully cash in and make a few buck when you move to the condo by the beach with the shuffle board courts.
That is also good advice for car buying, except that many people won’t quite get fifteen years out of a car. If you are a car enthusiast, buy the car that you can afford that you most love. Drive it until someone totals it. Depreciation is simply a non-issue if you intend to drive it forever. If you are the kind of person who considers cars an appliance and you want the least hassle, then lease and trade in every three years or so. You will have continuous payments but you will have maximum reliability and warranty coverage, and possibly even a significant amount of routine maintenance covered.
My car is nearly 15 years old, and it runs great.