Forgive me, Dave Ramsey, for I have sinned.

No, not the gay thing, sweetie! I ain’t even tripping! No girl, after nearly 17 years of faithful frugality, I did the unthinkable…

I bought a new car.

My original plan was to wait for the supply shortages to recover before buying my next car, but my trusty 2006 Honda Element had been stolen. It forced me to make some car-buying decisions, and quickly.

Days after filing a police report, I had given up on ever getting my car back. Then, on Day 6, it was recovered in a suburb, miles from my condo where it had been stolen. I was ecstatic to have it back (thanks to LoJack!), but I was unprepared for it to come back as a bruised and battered hot-mess. It smelled like some kind of smoke I would rather let go unidentified, had wires cut, showcased graffiti in the overhead, and required that my gear shifter be jerry-rigged to work properly. 

My reliable vehicle felt like a favorite shirt that had been worn by a chain smoker after being shrunk in the dryer two sizes too small. It no longer fit and sadly, didn’t feel like mine anymore.

My faithful Ellie carried me through more than 200,000 miles of adventures, but it was time to turn the page. It was time to say goodbye and finally treat myself to an upgrade. I was ready for a little taste of Opulence in the form of a new car.

Great question! This required a lot of research and soul searching until I felt okay with it myself. In short, this is a unique time we’re in right now, so here are my reasons for going against the FI/RE Rule of Thumb for vehicles, which says to always buy used.

Why I Bought New and Not Used

Price comparison. Used cars went up 41% in the last year. This made the price nearly comparable for new vs used.

New cars come with a 3-year factory warranty. Getting a used car for $5,000 (if you can even find that anymore) doesn’t really save you any money if the thing breaks down and you need to spends $1,000s on maintenance; or worse, to start over and be forced to buy another car altogether.

Better fuel efficiency. I’m lucky if I get 20 MPG (miles per gallon) with my 2006 Honda Element. So with my next car, it will have a combined 36 MPG city/highway. I had no luck getting a hybrid model reserved so I’m going to take a gamble that a gas engine for a sportier car might hold some novelty resale value when gas engines are phased out in 2035. And if I drive with the Economy setting turned on, I think I might be able to get it up to 40 MPG or more, thereby cutting my monthly gas bill in half! If you’re able to get a hybrid right now, good luck. I gave up. But be prepared for them to be priced much higher, nearly negating any federal tax credit. Also, bonus points if you use the Gas Buddy app or go to Costco to save on your gas spending every month.

Security. I was shocked by how little help I got with my insurance company after my car was stolen. But that was on me. I declined Comprehensive coverage a while back because it seemed silly to pay $1,000/year to insure a car that’s only worth $4,500. I’m glad I paid for LoJack when I first bought the car, but it would’ve been better if the car was unable to be stolen in the first place. Supposedly, the latest security systems on new cars have a feature that automatically shuts the car off if someone tries to steal it without having the key FOB. 

Financing. While Mr. Ramsey and members of the FI community will recommend only buying a car in cash, I chose to finance it. Even though I have $30,000 already socked away in my medium-term savings bucket which would allow me to buy a new car in cash, I would rather get a 3% auto loan and put my cash to work earning a lot more in the market as it recovers. (Bonus points if you direct this extra money into investments within a tax sheltered account, like a Roth IRA or HSA.) But I won’t be using that money to buy-and-hold more index funds. I’m planning to eventually deploy it as a down payment on my 3rd piece of real estate so it can earn me an even better return; much higher than 3%! I realize I could drive my 17-year-old car for another year or two until the market cools off, but after having it stolen and now feeling gross when I drive it, that leads to my final reason…

Treat yo-self! With my net worth teetering near the $1M mark, I’ve made a conscious decision to steadily infuse more and more opulence into my life every year as I approach FI. For me, that doesn’t mean going crazy and buying a $100,000 vehicle (yet), but simply upgrading to something new that’s also practical and reliable, and has solid reviews to boot.

My 7 Tips if You, Too, are Buying a New Car in 2022  

#1: Use the NEW CARS search tool for each dealer’s website

With the inventory shortage, save yourself some time and only ask about a new car that is actually slated to arrive at a specific lot. Otherwise, a dealer might say, “Put down a $500 deposit with us and we’ll see if we can do a trade with another dealer that has that specific car coming to them.”

#2: Use online tools to price shop

I gathered as much pricing info as I could, using sites like KBB.com, CostcoAuto, and that TrueCar search feature from my credit union. These data points gave me a ballpark price to expect before walking into the dealership. Over the past month, I found that dealers were adding anywhere from $3,000 to $6,000 in accessories to price their new cars over the MSRP. In my next tip, let me tell you how I navigated that.

#3: Let the dealers compete with each other

After deciding on the exact car I wanted, I needed to dedicate half a day to driving between three different dealers to get price quotes so I had a solid apples-to-apples comparison. The first price quote was the worst: $4,000 over MRSP and only $1,000 trade-in credit for my Honda Element. The frustrating thing was that the price quote I had from TrueCar was not honored by the dealerships because they added on their own accessories, which brought the price above the MRSP that was quoted on TrueCar. Over time, I saved $500 on each quote between the first, second, and third dealership I visited. (They required that I go there in person for the quote.)

#4: Ask for rebates

After getting the dealer to agree to their best base price and highest trade-in credit in a written estimate, I asked if they could add in any rebates. A few I’ve heard about: Costco member discount, a student discount, and a military service discount. I asked about all of these. (A friend told me if also worth asking about rebates for public sector workers, police/FIRE/EMT, CPA, teacher, or friends-and-family discount.)

The exact car I wanted was not available through the CostcoAuto.com search tool and the military discount required that I was on active duty. Luckily, I did qualify for the $500 student rebate. After providing proof of my current class schedule (or a degree I earned within the last year), they locked that in. The only caveat with these rebates are that they require dealer financing.

#5: Use dealer financing initially to acquire a rebate and then transfer your loan to a credit union

The dealer offered me a 5% loan but my credit union was around 3%. After making the first 1-3 payments, I was told I could transfer the loan to my credit union to get the lower fee.

#6: Be prepared to wait

Even when I found my specific car that was scheduled to arrive at a specific dealership, there was often a month or longer lead time until it would arrive. The dealer’s inventory system showed the status of vehicles that were scheduled to be built, in the process of being built and/or waiting to be shipped (PENDING status), or actually on a shipping truck with a 1-2 week ETA when it expected to arrive at the dealership. If you think you might need a new car, I’d recommend you start the process ASAP so you have time on your side.

Bonus tip: you may want to ask to see the color of your car before it arrives. After waiting weeks for my first car to arrive, the silver color I requested (called “Morning Mist”) was only silver from one angle and baby blue from another angle. I didn’t want a car that was “gender-reveal-party blue” half the time depending on the angle of the sun, so I didn’t buy this car when it arrived and had to start the waiting process all over again from the beginning! 

#7: Arrange for a private sale of your current car

The Kelley Blue Book value of my used car was around $4,500. If it hadn’t been stolen and needing repairs done to it, my car could fetch the sales price of similar comps listed on AutoTrader for around $7,000 and higher.

At every dealership, I had my car inspected for a trade-in quote when I first arrived and before we ran through the numbers. The last dealership where I put down my deposit “only” charged me $3,000 over MSRP for the accessories they added; and they balanced that out with an insulting trade-in credit of $1,000 for my Honda Element. So I said, “Looks good. Take off the trade-in credit and let’s lock it in. I’ll just sell the car to a private buyer myself.”

On a side note, the OfferUp app was by far the best place for me to get a response from people interested in buying. Once I had someone willing to see my car in person and commit to buying it, I sent him an email documenting the price, the timeline of when it would be available, and stated that this private buyer would have priority to buy it over the other people who messaged me on OfferUp.

POWER TIP: if you decide to buy or sell to a private buyer, be sure to use a money order so the transfer of payment is documented when the money order gets cashed and have both parties fill out their information in the DMV’s Notice of Transfer and Release of Liability form for your home state.

Choosing a FI/RE Friendly Car

Are you curious to see the car I ordered as my new FIRE-mobile? After doing more waffling than a continental breakfast, I came across this video listing one guy’s picks for the 5 best cars for people on the path to financial independence. Spoiler alert, they are:

1. Toyota Avalon
2. Honda Civic
3. Toyota Prius
4. Honda Accord
5. Toyota Camry

I was already a fan of Honda for its price and reliability with my Element, and I really liked the interior and exterior lines of the 2022 Honda Civic. After seeing the video above, I decided a new Honda Civic would be my new car!

But then I waffled again…

I saw a post from Jeremy of @personalfinanceclub about how easy it is to find a used car online and felt like I should do a little more due diligence.

Everything I saw for $5,000 looked as old as my Honda Element and didn’t feel like it was worth the trouble of swapping out what I was already driving. A lot of these older car had salvage titles, too (read: they’d been in an accident and were rode hard and put away wet, as they say in the South.) When I contacted a few sellers, they were shady AF. One of them would only accept cash and no money order. My credit union manager strongly recommended I ONLY pay with a money order to avoid fraud. When I paid for a CARFAX on this same car, I asked why the seller was getting rid of the car after just a few months after getting it from a dealership. His answer: “personal reasons.” 

So, I had to tell this shady queen “Bye Felicia.” I’d rather not get a “deal” on a car that’s been stolen, has been in an accident, or has some type of underlying mechanical issues.

After a little more searching, I came across a sports car I’d never seen before, the MAZDA3. It looked like something James Bond would drive! And it was $23,000 on Carvana for a model that was a few years old. Would this be my new car???

But after weighing out the risks of buying used for almost the same price as new, not having a factory warranty, and buying a car that had been recalled in the past, I decided to go back to my original plan of the 2022 Honda Civic. But this time, I decided on the Porsche-y look of the Civic Sport Hatchback configuration in a non-bluish silver color.

While watching a video review of the 2022 Honda Civic, the YouTubers were funny enough, actually comparing the hatchback version of the Civic to the MAZDA3! In the review, they said they preferred the Civic for its performance and roominess. And the Civic has better MPGs, too.

I’m super excited for the sporty look of the 2022 Civic Sport Hatchback and the functionality of easily getting my surfboard in it. I’m stoked for all the new features that have been added to cars since 2006! Even better, the Civic was named Car and Driver’s “Editor’s Choice” for the #1 compact car.

Oh, and it was named North American Car of the Year, too. NBD.

If you are accustomed to pre-COVID car pricing and want to save yourself some sticker shock, here’s a breakdown of all the line items that went into my final quote. Note: the $2,995 in mark-ups from the dealer were: a security system, phantom (whatever that is), perma plate (a paint protector), and a pro pack. All of these, I was told, were non-negotiable.

After all the research, visits to dealerships and endless waffling, I am happy to have a Civic Sport Hatchback in the color I wanted (lunar silver) and am eagerly awaiting its arrival in just 1-2 more weeks! (A frugal friend of mine says that the light paint color might help reflect heat in the summer and save a bit on gas usage from running the AC less, too.)

I just turned 43 so maybe this is my version of a midlife crisis vehicle as a FI/RE frugalista!

But I’m admittedly not a car person, so I’d love to hear from you. If you were going to treat yourself to a new car that was both opulent and practical, what would you choose? Jeremy from PFC went with the MAZDA CX-5, which looks pretty sweet, too.