By contrast, a year after getting the Subaru we bought a used Toyota Corolla for my wife to drive. We paid $2,500 for the car and had to get a valve job and timing belt for $1,500. Because the car was 10 years old, registration fees for the Corolla were much less than the Subaru. Also it’s a beater so we only carry liability insurance. We’ve had the car for 8 years at an average cost of less than $700 per year. In other words, our Subaru cost us around $3,000 more per year than the Corolla.

New cars simply aren’t a good deal. They depreciate quickly – 20 to 40% just the first year. After that the depreciation slows down somewhat but buying a new car is still a losing proposition. The 2 things a new car has going for it are reliability and the factory warranty. This is not as big a factor as it has been in the past though. Most new cars come with a 5 to 6 year/50K to 100K mile warranty. Since the warranty applies to the car, not the owner, your best bet is to find a low mileage used car that has 2 or 3 years left on the factory warranty. A good chunk of the depreciation on the car will already have occured, and if you maintain it well, chances are you’ll be able to drive it for many trouble-free years.