Open Mike: It Costs More to be Poor, Part II (and a Question)

Out of college, I lived in a little "vintage" apartment building in Georgetown, a neighborhood of Washington, D.C. According to the terms of the lease, we weren’t allowed to have washing machines and clothes dryers of our own in the apartments, which was okay because there wasn’t room for them anyway. In the basement of the building there were two coin-operated washing machines and two dryers that each cost 75¢ to operate. Neither of the dryers worked well enough to get the clothes dry in one pass, so unless you had a very small load of laundry, you had to pay for two cycles.

Okay. So, 75¢ plus 75¢ plus 75¢ equals $2.25 for a load of laundry, not counting the cost of detergent. Including sheets and towels as well as clothes, I did two loads a week. So laundry cost me $4.50 per week.

No big deal, right? Well, right. It was no big deal. Paying a measly $4.50 is a lot better than having to invest in a washer and dryer. I only planned to stay in that building for a couple of years, so I didn’t even see the situation as permanent. To tell you the truth, I never even thought about it one way or the other. I just did my laundry, as one does.

Life went on. One thing led to another, and I ended up working as a freelance photographer. Georgetown is a nice central location for a working photographer who has to get all over D.C. on short notice. Long story short, I ended up staying in that apartment for seven years.

When I finally did move, I also "moved up in the world." My next apartment was a lot nicer. Just off the kitchen, it had a separate room just for a washer and dryer, complete with the water hookups and dryer vent and those special outlets for the big beefy plugs. As Homer* would say, woo-hoo! But no machines. Again, no big deal. I headed down to the local Sam’s Club and bought a plain, bargain-priced washer and dryer set for $500.

That’s when it suddenly occurred to me to sit down and do a little arithmetic. It’s when I first figured out that laundry in my old building used to cost me $4.50 a week. And I had stayed there for seven years.

Seven years x 52 weeks a year x $4.50 equals…

¡Ay caramba!

If you just did the arithmetic too, you realize I had paid $1,638 for the use of the cruddy laundry machines in the dank, smelly basement of my old apartment building—more than three times what my own new machines had cost!

True, I did have to pay for electricity in the new building, and not in the old building. But even generously allowing for a buck’s worth of electricity per load in the new building—probably more than it really cost—the most I would have paid for laundry in seven years using my own machines was $500 for the machines plus $728 for electricity, or $1,228.

Over seven years, I would have saved at least $410 on laundry.

And that’s not even taking to account that at the end of the seven years in the new building, I would still own a seven-year-old washing machine and dryer worth maybe $200 or so. So just by being wealthy enough to buy my own laundry machines up front, instead of having to pay to use someone else’s, I would come out at least $610 ahead on laundry. And probably more.

It's like I always say, the reality of having no money is that it costs more. Not "more" in any diffuse general sense, taking into account intangibles like limitations on life choices and personal satisfaction: it just costs more in plain ol' money.

Question for you
So let me ask you a car question: Let's say you have a daughter who just graduated from college. She's living in a new city and she needs a car. She's saved up $5,000 for it, and she's looking at three choices:

1. Buying a used car outright off AutoTrader or Craigslist and paying cash for it.

2. Buying a certified used car from a dealership, paying $1,500 or $2,000 down and financing the rest. (Getting financing isn't a problem because you—her parent in this exercise, remember—are willing to co-sign.)

3. Buying an inexpensive new car with money down and financing.

Some considerations:

• The advantage of Option 1 is that there are lots of used cars for sale privately in her price range, some of which are probably decently reliable transportation. The problem with Option 1 is that it's tough to know which cars are the decent ones, and she can't afford to get stuck with a lemon or a car that's going to require lots of repairs or additional expenses.

• The advantage of Option 2 is that she'll probably get a better, newer car, and she'll help her credit rating, which, as a new college graduate, is nonexistent. Plus, the dealer might offer a limited warranty. The problem with Option 2 is that most dealers don't bother with used cars cheaper than about $10k, so the car she buys is going to cost a fair amount more than $5k in the long run.

• The advantage of Option 3 is that she'll very likely get a known quantity, a new car with no reliability issues, and a full new-car warranty. The problem is that the cars in her price range are going to be among the cheapest new cars you can buy, and cheap new cars often have less residual value after the term of the loan is over.

What would you advise?

Mike

*Not the poet.

"Open Mike," which appears only but not always on Sundays, is the off-topic page of TOP. Not that I stay on topic the rest of the time, but whatever....

P.S. "It Costs More to be Poor" Part I is here.

[UPDATE: The daughter and parents in question are the ones in this post. —Ed.]

Original contents copyright 2015 by Michael C. Johnston and/or the bylined author. All Rights Reserved. Links in this post may be to our affiliates; sales through affiliate links may benefit this site.

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(To see all the comments, click on the "Comments" link below.)
Featured Comments from:

David Zivic (partial comment): "I have had good experiences buying dealer certified used cars. I would advise putting 20% down and paying for, not financing, tax and license. Then should a rainy day arrive she will not be upside down with the loan."

Ruby: "We went with Option 1 for our son; however, it took six months to find the right car, and my brother-in-law is a mechanic and looked over every car we considered at his shop at no cost to us—including a couple of used cars from dealerships. We lucked into a client of my husband's who liked to buy cars and use them for about six months, spruce them up, and then sell them. We were able to find him a nice, low-miles 2002 Mazda that continues to serve him well. We had both time and a free inspector working in our favor, which made this option more attractive.

"Option 3 will cost more for insurance, and that is part of the long-term cost analysis.

"I ran this past my husband (who is a financial consultant), and he said Option 2 is the best choice in these circumstances. We got our own car from CarMax, and he said that was the most pleasant car-buying experience he's ever had. I've been driving that car for five years now. My brother-in-law the mechanic also bought his truck this way.

"I wish this new graduate luck and a reliable car at the right price."

MarkB (partial comment): "...More debt is that last thing any recent college graduate needs, regardless of the co-signer. Personally, I think tooling around in a paid-for car feels a lot better than sending off a check every month or getting into the habit of buying things on credit or leasing."

latent_image: "I'm no financial wizard though I am cheap when it comes to cars. Best purchase so far has been a certified used car. Two year/40,000 km. warranty. I knew what I wanted and used the manufacturer's website to locate a car in my region. Managed to talk the price down, too."

Jim Hamstra: "For 55 years I have followed Option 1 and saved a lot of money in the process. Nowadays I buy from a private owner and try to find a car around three years old with around 30,000 miles which sells for half or less of new price. If you buy a well maintained dependable model you should be able to drive it for over 100,000 miles and it will still have some value when you sell it. It's great to have no debt and another benefit is cheaper insurance and registration.

"One example: Many years ago I bought a three-year-old Honda and put 100,000+ miles on it then sold it to a guy that wanted it for his wife. Ten years later I found out the rest of the story when I met a lady who asked if I remembered the car. Her husband bought it for her then divorced her. She drove it for several years then gave it to her daughter to drive while in college. After that her son wanted it for his car while in college. She then told me he had just graduated and had sold the Honda—for the same price I had sold it to her husband ten years earlier."

David: "While in graduate school, I lived in apartment without a washing machine or drier, so I used a nearby laundromat, where I deposited many coins. But, I also met my future wife there, which made me far richer than I can say! YMMV."

John Camp: "You have to make a story out of it to make the call. She's a college grad in a new city, which I would suggest means that she has some kind of a job where a college degree has some importance. In that case, I'd say Option 2, the cheapest decent car she can get with the lowest down payment (you suggest $1,500) financing the rest.

"Then take the $3,500 and make a wholesale marijuana purchase, and start dealing to the other low-level college grads at your workplace. At that scale, you should be able to double your money every week, for a month or so, assuming that the job pays you enough to live on, so you don't cut into the dope profits. If you don't try to pyramid your profits (which could attract the eye of the cops) and are content with a relatively small network of regular, well-vetted users—say 20 members, buying an ounce of high-quality bud a week—you should be able to yank down a hundred thousand a year with no taxes. And then, you know, buy a Jag, one of those electric red convertibles, and get rid of that piece of sh*t your parents co-signed for. And get some decent threads, too."

Mike replies: And you think you're going to be able to turn it off and retire. Right!

Steve Rosenblum: "I agree completely with what Jim Hamstra said. I have been through this with all three of my kids. If she can afford it, buy a three-year-old reliable car such as a Honda Accord, Camry, or similar. Find a reliable honest mechanic and insist that any car that is seriously considered gets checked over by the mechanic. Tell the mechanic the car is for your (or whoever's) daughter and that you need to know it is safe and reliable for her. These cars are capable of going 200K miles or more with good maintenance. The car will cost a third to a half less than a new car. One of my kids is still driving the 2002 Accord that was purchased in this fashion and it runs great. Resist buying a very old car because it's cheap. Safety features have steadily improved over the last decade and you want your family member to be well protected. Remember, the car may well be kept for many years and the safety features will be frozen at the year it was produced."

gary bliss: "Hmmm. Among my other professional duties, I do this sort of thing for DoD. And, as several people have said, 'it depends on the price difference among the options.' Sadly—and there is a story here to complex to go into but well documented in, among other places, The Wall Street Journal—the days when you could routinely find three- or four-year-old clean sub-compact cars discounted 33 or 45% over MSRP dried up about three years ago. That car is maybe 20% less than new, and often more. The $10k used sub-compact in the DC area (particularly a Toyota, Mazda, or Honda) is more like a seven-year-old model with 100k miles. Ouch; I would take new for that choice. So you really must factor everything in—including insurance as one poster noted.

"It really very much depends on the used car deals, but the market has finally responded to the truth: cars are far more durable than they were even 20 years ago. And dealer warranty packages are generally, as noted, poor deals due to the 'outs' in the wording."

Juan Flores (partial comment): "The warranty is of tremendous benefit when buying a used car.

"About ten years ago we purchased a car in seemingly good condition from a dealership (and our regular mechanic checked it over and found no faults), then during the course of the six-month warranty the dealer was obligated to repair the various faults that arose, which ultimately exceeded the price we had paid for the vehicle. The car then gave us five years of faultless service.

"I believe that many latent issues a second-hand car might have will be more likely to become evident early on, so a short warranty nicely offsets the premium you would pay vs. purchasing a used car via AutoTrader."

dale [all sic]: "too bad I just sold my 2008 volvo c30 t5, a very fun car, it great shape had my mechanic provide a complete pre sale inspection with the only item was plan on rear brakes in a few months ($400). only a lean 165k for volvo mileage. its old quickly for $4k."

Mike replies: I assume that last line was a typo? :-)

Comments

[martin]

Id go for £4000 car, with £1000 for unexpected bills and for someone knowlegable to check the cars over before purchase.

[David Zivic]

I'll comment on the laundry first.
You didn't mention a third option. "Fluff and Fold" where you take your laundry in in the morning and pick it up in the afternoon washed, dry, and folded. About $5.00 a load. seems like a lot except no soap and no electricity considerations. What is your time worth should also enters into the equation.
When I was rolling in dough I went to Europe and I have photos to prove it. I had business on the French Riviera and stayed at the Monte Carlo Beach Hotel and I had the Hotel do a little laundry for me as I travel light. Two tommy Bahama shirts and a pair of Levi jeans was $90usd. I left it in a bag on my doorknob in the morning, and when I returned from the Monaco Yacht Show it was hanging in my closet. I enjoy sharing that story as rolling in dough doesn't seem to be part of my lifestyle anymore....except for cameras and lenses of course !

Comments on car thing.
I have had good experiences buying Dealer certified used cars.
I would advise putting 20% down and paying, not finance, for tax and license. Then should a rainy day arrive she will not be upside down with the loan.

[Robert Harshman]

Buying a 2-3 year old well maintained low mileage car is always the best option when your young and don't have much money. Even when you do have a lot of money it's still the best deal around. But, you have to do the homework, have a good mechanic look at it and research the price via bluebook, etc. And I would recommend buying it from a individual, not Carmax or a dealer. While you will not get a warranty you should be able to save $1,000 to $1,500+ on the purchase. You can get bank loans to buy a used car too.

[Bruce Mc]

1. Get as much gas mileage and reliability as possible for as little money as makes sense. A 1 year old Yaris would be just about right.
2. Read the Mr. Money Mustache website for details about car buying, and saving money in general.
3. Listen to "Thousand Dollar Car" by the Bottle Rockets.
4. Is she white? Do her parents own a house? If both answers are yes, don't worry about her credit rating. She will be able to buy a house when she is ready to, and there is no other reason to have a good credit rating. This is sad but true.

[Eolake]

It's a complex issue with many unknowns, so I'd get some data and then go with my intuition.
That said, as soon as I had money enough, I always bought from new.

I've lived in this apartment for twelve years. It's not a fancy area (though comfy and not unsafe), so if I'd rented it would have cost me for those twelve years about 60,000 Pounds Sterling (call it about a hunnert grand bucks).
When I bought it, this are was a bit behind in the housing buble, and my business was going well, so I could exactly afford to buy it cash for 34,000. So that means, like Mike says, that by being flush, in twelve years I've saved about 26,000 pounds, AND I have the apartment (now worth about 60k or more), which I wouldn't if I'd rented.

[MarkB]

Regarding the car, I'd strongly recommend Option 1. (I say recommend, because I have a daughter, and I'm wrapped around her little finger... sigh.)

First, a used car in the $3-4k range that was $15-20k new, generally won't suck up lots of maintenance costs (but there will be some, which is a good lesson to learn about cars, hence not spending all $5k). Also, a reliable $4k used car isn't expensive to insure or likely to get stolen (more lessons about cars).

Finally, more debt is that last thing any recent college graduate needs, regardless of the co-signer. Personally, I think tooling around in a paid-for-car feels a lot better than sending off a check every month or getting into the habit of buying things on credit or leasing.

Of course, my Dad made me pay for my own insurance (rider on his policy) when I turned 16 and wanted to borrow his wheels... plus gas! (What a killjoy!)

[Richard Newman]

On the washer-dryer: Over 7 years, expect to pay for at least one or two maintenance calls on your machines. Probably at $200+ per call.
On the car buying. How long does she intend to keep the car? and how many miles does she drive per year? If both numbers are low, leasing is an option. And what warranty goes with the used car? Also, on ANY used car, have a good mechanic give it a thorough go-over before buying. It can save you much money and grief.

[Eolake]

On thing that puzzless me... when I started earning money, I read a stack of books about investing and such. And a very common assumption is that a "normal" return on investments should be around eight percent, so that's what they calculate with when they draw up their gold castles in the air about either investing or saving well.

It puzzles me because, for one thing the overall economy can't grow like a rocket, trucks have to be built, factories too, etc. And that's about a couple of percent per year.

Also, being Danish I have banks in both countries, so I have been able to put my money where I could get the best interest, and *still* the best interest I've gotten on average over 15 years has been 2-3%. (And if like most people I had not had a large cash reserve it would be more like 1%.)
So where are those fabled eight percent? I think some are talking through their backside.

Some will surely say, "... but it's over long term, you see..." Well, it really does not feel to me like the economy is anywhere close to such a fantastically prosperous point where banks or the average stock market will blithely pay your 10-12% to bring the average up to eight. Does it to you?

[Chris]

I would go with a cheap new car and then start saving for the next car. New cars might last 8-10 years or more with goof care.

Whatever option you pick you could save ahead of time for the next car and never have a car payment again for the rest of your life!

Chris

[Patrick Perez]

One source of a good used car to consider: A few months ago I noticed the Mormon church near my house was selling their 3-4 year old fleet. A mixture of 2012 Ford Focuses and Toyota Corollas, 50K miles give or take, for about $9500. This seemed like a likely well maintained car, at a terrific price. I didn't buy, as I'm only 125K miles into my 2006 Acura TSX (in the UK, my car is sold as a Honda Accord, though it's different than the US Model).

Patrick

[Roger Bradbury]

I'd say go for the first option. As others have said, you need somebody who knows about cars to look at any car you buy privately, and to put aside some money for repairs; any used vehicle will need a few repairs after you buy it. That's just the way it is.

I've always chosen small cars, which I've bought privately when they are about eight years old. In every case they have come fitted with cheap tyres. Cheap tyres don't grip and often don't last well, so I replace them with tyres from a good well known firm like Avon. The result is better grip and a safer car.

[Herman]

Is it better for a poor photographer to buy a used or new camera?
A rich photographer doesn't have this worry, as he doesn't have to take photos for a living.

[Don]

Things are very different (and not better) in the US. That said, the only debt you ever need is for a house. Buy a car at least 3 years old with a good history, and a model known to be cheap to run and reliable.

In the spirit of saving the planet it must be economical on petrol, helping to "Keep it in the Ground"

http://www.theguardian.com/environment/series/keep-it-in-the-ground

[Mark Kinsman]

We went with both option 1 for the first car, which turned out to be a car salesman selling his moms Camry ( the classic only drove to church and store with 70k miles on a mint 1991, we purchased in 2013).
A year and one car accident later, we went with option 2 - a certified 2001 Camry with 115k from a time when Toyota was still Toyota. No rust runs great, and it gives our son a leg up on establishing credit as we pay it off early too!

[Speed]

Our neighbor's son just graduated from college, has a good job and bought our eleven year old, one owner (us) 82,000 mile car for what the dealer was offering in trade -- the wholesale price. He is happy, his dad is happy (they know the car's history) and we are happy.

He wasn't interested in the motorcycle.

[John Krumm]

My wife and I (together since 22) had pretty good luck over many years buying used Toyotas with around 70,000 miles on them, usually 10 years old or so. Always liablility insurance, never collision. But they still needed fixing for various problems (clutch, brakes, struts the usual suspects) and that did increase costs for us. The poor tax. We dearly wanted a new or almost new car and finally talked her parents into a partial loan from their retirement that allowed us to buy a $7000 1993 Toyota pickup with only 7000 miles on it. That truck took us reliably through eight years or so of my wife's residency and our daughter's birth and early years. Always regretted selling it since they basically stopped making small, economical pickups not long after.

So as for advice I'd say the newer the car the better, but keep it basic and be willing to use it for up to 10 years. The last four or five years are car gravy after it is payed off. Don't worry about resale value, worry about transportation value. If you do buy used look for something boring, like an Accord or Camry, which usually have good crash ratings and are generally super reliable. Five thousand dollars is unfortunately about like $1500 to $2000 in 1993 car dollars. And the best loans are from relatives who are kind enough to write them off eventually, if that avenue is open. Establish credit some other way.

[Stan B.]

Same reasoning behind buying the bigger, more expensive economy size detergent for what you use regularly- if you got the dough. Basic tenet of capitalism, which extends to offshore tax havens.

[ShadZee]

As mentioned before buy a 2-3 year old car. The key word is BUY. Not finance to buy.

You can find a 2-3 year old Fiat 500, for around $8,000. Parents can pitch in the extra $3,000 to purchase the car. Once she has more money and a better job, and she's saved to BUY a better car, she can sell the Fiat and pay them back.

There is a reason I drive a 14 year old car... NO PAYMENTS ;-)

[Ben]

Not car related, but to go with the "costs more to be poor" theme, we live in a nation that insists on 30% down for getting a mortgage, this precludes many of our friends who would prefer to buy, but must instead rent. (I'm not the type who thinks renting is throwing money away *always* but if you know you want to stay in a city for a while, and have a large enough family, buying can make definite financial sense). In addition, our jobs pay well enough that we routinely make 3-4x the minimum payment, which will save us more than 2x the initial cost of the house in saved interest payments by paying off early instead of taking the full 40 years.

Our higher salaries can literally translate into owning 3 houses for the price of one, in the time someone with less capital will be renting and end the period with no property owned.

[Dennis]

I would advise option 1. Get out of the cycle of debt ASAP. It costs more to be poor because you're always behind; anything outside of your budget requires a loan. There's a difference between wealth and income. Wealth (some relative degree of it) can come from savings. Buy the used car and start saving for the next car (plus maybe some repairs along the way), drive it into the ground (you just have to figure out when it's starting to cost too much to maintain, which is always tricky). Ideally, when you have enough for your next car, you'll *still* keep driving the old one until you have enough for the next one plus a new washer and dryer :) (Get a Speed Queen).

[Dave in NM]

"Poor" is a relative term.

[Jay]

If car sharing is an option, then I'd do that. I came to the U.S. several years ago to go to grad school. I had no driving history and no co-signer to get a loan. I ended up getting an electric bicycle to get me around and haul groceries. Later I joined Austin's first car share program and solved my transportation problem. When the cost of insurance and maintenance is factored in, I am pretty sure I came out ahead.

[Bill Tyler]

A low-mileage used car is always a better deal financially than a brand new one. I have no opinion on the financing. I do, though, have a general observation on the cost of being poor. Several times in my life, I've lived at the boundary between a well-to-do area and a poor one. I have one particular area in mind that I won't name. There were two branches of a supermarket chain that were accessible to me - one closer to work, upscale, and one closer to home, downscale. I noticed over a period of months that the produce in the upscale market, though priced the same, was of noticeably better quality. In effect, the well-to-do got more for their money when buying fruit and vegetables.

[Steve Biro]

Certified pre-owned can be a very good option because the cars tend to be only 1-3 years old, have undergone more-thorough inspections and carry some kind of warranty. But often the price of a CPO vehicle can run as high as 80 percent of the original MSRP when new, which kind of defeats the purpose of buying used. I'm not saying CPO won't work, just to keep your eyes open.

Something else to consider: If one is doing any kind of financing, interest rates on used cars are almost always substantially higher than on new cars. But buying used means one avoids a lot of new-car depreciation. Still, sometimes I feel depreciation is a bigger factor in purchase decisions than it should be. If my plan was to buy new with full warranty and run the wheels off the car, I wouldn't be concerned about resale value at all.

Which brings me to my point: For me, options 1 and 3 make the most sense. Which one you choose will be based on just how much income and savings are available.

[JE]

Well, if the car model you choose is inherently unreliable it doesn't really matter which option you choose-- it's gonna be a lemon. pick a car known for reliability first (over other emotional concerns)

[Bruce Appelbaum]

I'm afraid that Option 4 was not included in Open Mike. My daughter did just graduate college but has been living in New York City (Brooklyn to be exact) for 3 years now -- college and post college.

In the words of some sage, she needs a car like a fish needs a bicycle (actually she does have a bicycle). She lives in a small apartment building -- no off street parking. And street parking is difficult at best, and requires moving the car at least once a week so the streets can be cleaned.

Since she is under 25 and lives in Brooklyn, instant assigned risk pool and probably $3K a year for insurance. I don't even want to think about car maintenance.

She takes public transportation (subway) to work and buses for other local travel. When she comes home for a weekend, she hops on commuter rail (we live about 50 miles away).

She has had her own credit card for a few years, always pays it off, and that has been her strategy to build a credit rating. If she has to travel for work (and she does), she gets a car from Avis or Hertz or Zipcar (where she gets a car if she really needs one for personal use). And Uber is available to her in lieu of taxis, which try to avoid the outer boroughs.

I do understand that my kid's situation may not apply to all, especially to those not living in cities with well-developed public transportation, but it not only applies to this daughter, but also to my younger daughter, still in college but a devotee of mass transit there.

By the way -- I grew up in da Bronx and did not get a drivers license until I was 23. Public transit or a bicycle until I starting having to travel for work and needed to rent cars.

[Trecento]

I've only ever done option 1, so I can't advise.*
The standard answer that I know is this: buy a used civic or corolla, and use bank of mom financing. If you have to get a loan, go to a credit union, not a bank or dealer. You cant get a loan for a car that is more than 10 years old, so you have few choices below 10,000$.
Get the car inspected before you buy, look for less than 150,000 miles, and skip any car with a CVT type transmission. (They are too delicate.) Know your blue book values before you buy. The best way to buy a car is to offer cash to someone you know and trust who wasn't planning on selling right away, but knows you will give a better deal than a trade in offer.

*five cars inherited over 25 years, and three used, all cash purchases. I'd rather have kept my relatives instead of inheriting the cars. Best car: 1993 Saturn sedan with 5-speed. Lasted 25 years altogether between me and my dad. Fyi, Buicks are pretty reliable (except for CV joints), but the interiors wear quickly. My friend has only ever owned two cars in 25 years: a Civic (250,000 miles) and a Prius. He's never had to pay for gas in something that got less than 30mpg. Talk about a true savings.

[Paul Richardson]

Okay. I recently - five days ago - confronted this exact dilemma with a recent graduate. The scenario was that she had a car - a Volvo - with about 100k on it. It was paid for, but now ten years old, and things were starting to go wrong. This time it needed struts, and who knows what else. We were looking at shelling out (or I was) over a grand for a car that was starting to get shaky, maintenance wise. So after a lot of deliberation, I decided to trade her car for a certified 2012 Volvo S60, that will be under warrantee for the next three years, bumper to bumper. It meant a fifteen thousand loan, but she has a degree in pharmacy and should be able to assume the payments as soon as she passes the boards (this week, I hope). Was I foolish? Maybe. But she'll have a credit rating established, and I won't have to worry about her driving home after second shift for at least the next three years. That is worth something to me.

[Jamie Pillers]

Mike,
I have a 12-yr. old VW Golf with only 60,000 miles on it. Lived its entire life here in moderate-climate northern California. Very well maintained and I have all the maintenance receipts. Car is in great shape. I just had a look at its Blue Book value... $4200.

I wouldn't hesitate giving this car to my daughter for her college years... very reliable car, inexpensive to maintain, good gas mileage. So... my recommendation is to look for well-maintained, low-mileage car that's older than 5 years. And if possible a car that's lived in a climate without those murderous winter months.

[ShadZee]

One more thing....

The "Extended Warranty" dealers sell are pure profit for them. In almost all cases, the dealer will have some sort of clause to get out of the warranty it needs to provide.

[Henning]

I tend to go for options 1 or 2, but have bought new as well. In the long run, getting a reliable car and keeping it a long time is the best bet whatever you do.

As for renting vs. buying a house: if done properly your odds are almost always better over a longer period with renting. This certainly is the case in most developed countries, and even here in Vancouver where the housing market has been incredibly hot.

As mentioned before, investing at bank interest rates doesn't work, but investing reasonably in market tracking portfolios or better does work, and does average at the rates usually mentioned. The problem is really whether or not you have the discipline to invest the difference between renting and buying regularly, or will you just think you have more cash available and spend more on other things regularly.

[N]

I'm with Bruce- #4 all the way.

You've got the cost of the car, the cost of insurance, fuel, and then there's parking. Depending on where she'll live, parking is pretty difficult. $250+ a month for parking garages. Otherwise, she'll have to move the car at least 2 times a week for alternate side street cleaning. The ticket for not moving the car is $45+ depending on where in NYC you are and that's one of the cheaper tickets.

You've got 24/7 public transport and everything else already mentioned.

BTW, we have a minivan (gift?) so my wife can take our 2 daughters wherever. She hates the subway and I hate driving in the city. I think it's a ridiculous option in NYC.

[Jim Bullard]

Many moons ago when I was a poor college student I read "Living Poor With Style" by Ernest Callenbach. As I recall the recommendation he made regarding cars was to buy a 1-2 year old car (after the initial depreciation) and drive it until the annual repairs were costing as much as or more than the payments would be on a new one. I believe the second cheapest way was to buy a new one and do the same. The book is still available on Amazon I see and it answers all sorts of questions like this. Well worth reading IMO.

[Andrew Molitor]

If you do the first one, get a good mechanic to check the car over, and pony up for a top of the line AAA membership.

AAA is practically free anyways since there are AAA discounts on everything and it's not very expensive in the first place. With the free long distance towing on the better plans terrible situations are converted into a boring wait for the tours truck.

[bruce alan greene]

I've gone option 1 and option 3.

Option 1 turned out to be quite expensive for repairs (Volvo with 100,000 miles) Repairs doubled the price of the original $5000.

Option 3 has worked well, if you do your homework and pay the right price. Find out the dealer invoice, subtract the dealer hold-back, and subtract any other rebates or dealer incentives. Add a couple hundred for dealer profit. You should find the price close or sometimes lower than the 2 year old "certified" car. Check the paperwork carefully and don't buy any add-ons from the dealer. They will eventually treat you nasty, but they will sell you the car!

I recently helped my daughter replace the old volvo with a new Civic. The new car had 1% financing vs. 4.5% from the credit union. Insurance is expensive .... especially with 2 accidents on your record. Drive carefully :)

[Benjamin Marks]

I have owned four cars (two of which we are still driving into their . . . ahem . . .late middle age) and have done one each of your scenarios, at least from a financial perspective.

I bought my first car for $2900 cash from a dealership as I started graduate school. It was a Mitsubishi Mirage with 98,000 miles on it. The price was on the high end of blue book. I lucked out. The car ran like a top. I didn't do anything to it other than change the oil and rotate the tires. I put 30,000 miles on it and sold it when I graduated for $1500. I think it helped that I had all my service records for it.

I bought my second car brand spanking new. I had been working in my chosen profession for about seven years and was able to pay cash for it. It took two weeks for a family member to put a rod through one of the interior vents. Sigh. So much for new. That one is still running well at 140,000 miles, but my wife now drives it about 12 miles a day. My hope is that when it dies we will replace it with a leased electric car.

About a year after we moved to Vermont for her work, I got a job and we needed a second car. This one was a used Subaru Outback (which, it turns out is the national car of Vermont . ..NB, Mike great for upstate NY winters too, but not a sexy vehicle, IMHO). We paid cash for that one too although it had 45,000 miles on it and it did come with a warranty from the Subaru dealership. I drove it for another 75,000 miles and then crashed it . . . to be replaced with (gasp) another Subaru. I kind of felt like the first Subaru had saved my life, and if you ask nicely I will send you pictures of the crashed car (from which thankfully there were no lasting consequences other than a lighter wallet). You'll see what I mean about brand loyalty. The second Subi had to be partially financed, because the insurance money from totaled car #1 is never enough for replacement value to purchase car #2. At the same time as I started making payments for Subi #2, I also started deducting a "future" car payment from my pay and depositing it into a bank account not linked to any plastic. Subi #2 also came from a dealership, used with 75K miles on it. So when this second Subarau dies (currently 193,000K and going strong), there will be the scratch to replace it.

To get to your original question: In my experience, lack of financing, if you can swing it, really translates into personal freedom. You want to quit your job and move to another city? The car is yours and you don't have to factor its financing into your burn rate. My experience worked out well for me. In light of that I would figure out what the graduate's budget is and get the safest used car you can in that price range. Forget financing a used car. It is a mug's game. Buy the cheapest car she can stand to be seen driving.

I would echo the statement above about car payments being a silly way to establish credit. It is not that it won't work; it is just that it strikes me as more rationalization than reality. "OOooh, get the car you think is sexy AND ESTABLISH CREDIT AT THE SAME TIME . . " Nope. That is just a sales pitch. If she pays her credit card bills (doesn't have to be paid off, just not paid late), phone bills, student loans on time and your student will be fine. By the time she is ready to buy a home, she will have years of these payments to show the credit rating agencies. They don't care what you bought on credit, just that you make payments regularly. Tell her not to fall into the trap of thinking the car is a fashion or lifestyle statement (at least not her first car). It is just for rolling you down the road and keeping the rain off you while that is happening.

[Tony Collins]

There has been a ripple of outrage over UK poor who have to prepay for domestic gas and electricity being charged significantly more than post paying customers. The poor have almost limitless ways by which the system makes them poorer. Lack of facilities for cooking and storing fresh food leads to expensive and bad eating, inability to get credit puts them into the hands of usurious Payday loan companies, spurious government welfare to work schemes which cause the trainee extra expense. The poor are penalised by the inability to pay upfront for public transport season tickets, pawnshops profit by undervaluing their possessions. All overseen by an Establishment motivated to keep down wages to boost the wealth of their corporate supporters. (Recommended reading The Establishment and how they get away with it by Owen Jones)
For a good car deal in UK look out for ex Motability lease scheme cars previously supplied to disabled drivers.

[Ross]

Option 1: 10 year old Toyota or Lexus with service history. Should cost $4k or so.

It costs more to keep up with the Joneses, especially if it involves depreciating assets.

[BenCR]

When I was in University I went with option 1. I allocated $600/year in my budget for repairs and on average that worked out. I only had the car 4 years before it developed a mystery electrical issue that no one could fix and it became worthless. But I only layed out $3000 up front, say $5400 with repairs over over years (ignoring time value of money and all that). Because it was a junker I only paid insurance for 3rd parties (any damage to my vehicle would have been on my dime) and I saved a ton of money that way.

Another option you didn't mention there is taking over someone's lease. If you accept that a car is a diminishing asset, then leasing (at the right terms) can make sense - especially over the short term. If you can find someone desperate to get out of a lease, and hopefully that someone put a decent downpayment on the car, then you can end up with a car only 1 to 2 years old at a low monthly price (and under warranty). You are just renting the car, but it can be a lot cheaper than carrying a newly financed car. When the lease is up, if you like the car then you can buy it (with dealer financing), or if you are in a better position financially you can look for a new one. Only thing to watch out for on leases is the mileage limit.

I would personally still go with Option 1, but thought I would throw an option 4 into the mix.

[Michael Bearman]

A classic first world problem.

[So you're saying you're a third-world person yourself? --Mike]

[Wayne]

It’s very true, when you have little money things usually end up costing relatively more. Cars illustrate this even better than many other things. Older, less expensive cars can be very expensive to keep running due to repairs. The cost of repairing older cars today is ridiculously expensive due to the pollution control and safety devices. In other words, repairs are not good value.

Based on over forty-five years of car ownership, mostly used, I would recommend (in this case) Option #2. Buy a used car from a trusted new car dealership. Knowing someone at the dealership is best, otherwise you have to be careful. A used car about five years old with about 60,000 miles on it will probably have about the same years and mileage left without having to spend excessive amounts on repairs. A Toyota Corolla or Honda Civic are probably the two best bets, reliable, economical cars. Buy only a used car on Consumers Reports recommended list. Statistics are definitely on your side in this game. A trip to your local public library could save thousands. Have the car checked over by a trusted independent mechanic. If the car dealership won’t allow this, walk away. In fact, this is a very good recommendation generally. Always be prepared to walk away - don’t fall in love with any car. Take your time and don’t be in a hurry. It could take weeks or longer to find a good buy. Do your homework first. Check car prices with pricing publications and online services to make sure the asking price is in the ballpark. Read Consumer Reports to find information about cars being considered, and read the buying guide in CR. Be prepared to negotiate.

Re: Option #1: You can get very good vehicles by buying privately, but this requires a lot of knowledge, experience and savvy, and you have to be prepared to spend a lot of time and effort.

Re: Option #3: Buying a new car is probably not a good option in this case, not only because of the cost, but also because young and inexperienced car owners can often make stupid (i.e. costly) mistakes about driving and maintaining the car, not to mention accidents.

[Jim R]

Go with option #1 and have her save whatever she can towards her NEXT car. Some facts: most car wrecks involve people under 25; and you're right it DEFINETLY costs more to be poor. So if she can survive the invetiable, and hopefully minor accident, and save some $$$ towards her next car she'll have a better chance of not being too poor. Next to buying a house, buying cars is likely the biggest single expense in one's lifetime. Ask any financial planner worth his ethical oath and they'll tell you staying out of debt for cars is a big deal.

[Robert Roaldi]

IMO.

If she knows or has access to people who are car savvy, or knows the person selling the car and its history, and it's a reliable brand, Option 1 can work and save you money, albeit with a little more risk.

Option 2 is probably safest for her at this time.

If she were just starting her first job and expected real money to start rolling in, Option 3.

[hugh crawford]

I have always gone with option one. An older mid level luxury car will have depreciated to the same as a slightly newer economy car, and by the time a car is 10 years old it will have earned a reputation for being reliable or not, and running costs will be a known quantity.
I have never in my life bought a new car, I can't stand the smell for one thing, and it seems like an expensive way to buy what is eventually going to be a used car.
I usually have owned a camera that I paid more for than my car.

One tip, don't buy a cheap jaguar but cheap volvos and subaru are a pretty good deal.

One other tip, check the internet to see if the car you are interested has a reputation for an unreliable anti theft system. The computer freaking out and not letting you start the car seems to be the only thing that goes wrong on cars these days that isn't obvious like rust or cheap and easy to fix.

I have to confess that I actually like the sense of adventure inherent in spectacularly impractical cars, like say a 50 dollar mercedes , which I have always had pretty good luck with, but wouldn't recommend to anyone else.

[JG]

On average, the least expensive car to own and operate will always be a used car that has reached the bottom of its depreciation curve or at least the point where it starts to flatten out.

Provided one has sufficient discipline to not spend all of the money saved on other things (or sufficient income to juggle things around for a bit if an unexpected bill arises), saving $3-500 (or more!) each and every month by not making a car payment will pay for quite a lot of maintenance and repairs over the ownership period of the car.

With one exception, I personally buy five-to-eight year-old used luxury cars with 80k or so mileage on them and typically pay cash for them in amounts that are roughly what the downpayment would be for a new one of the same make and model.

I do this not because it saves me money (although it does) or because I can't afford to buy a new (but lesser) car, but because I like to drive fancy cars that are otherwise beyond my reach. That I'm able to do most of the maintenance and repair work myself certainly helps quite a bit, but even if one must pay a mechanic to do this work for them, it's still possible to make this approach cost-effective if the ownership term is long enough.

But I'm a "car guy," so the cars I drive are important to me. If this recent college graduate views cars merely as a method of getting from one place to another and nothing more, I'd recommend Option 1 and instead of having the parents agree to co-sign a loan, have them agree to provide an emergency loan should expensive repairs ever be necessary. Bank the savings every month from not making a car payment and reassess the situation after a few years on the job, when (presumably) one has more financial flexibility than when they are just out of college.

[Severian]

I've kept spreadsheets on the math, and as it turns out, I have analysis for all three scenarios, because I've done all three in the last 12 years between all of us in the family.

In any ordinary circumstance, #3 will be far more costly. Insurance, taxes, registration and similar fees scale with the acquisition cost.

#1 can be substantially cheaper than #2 if you do your homework - and homework includes a "buyers checkup" at a reliable mechanic, use of tools like Car FAX and a suspicious companion along to help check the seller and the car out.

Other things to be aware of:

1) Even on a vehicle that is three or four years old, depreciation will still likely be a large portion of your total cost to own.

2) Whatever our plans, sometimes we can't keep a car "forever". (Because some moron wrecks or steals it, or because you now have twins to haul around in your Miata or whatever). So never buy with the dream that "I'm going to drive this for 15 years so it doesn't matter what I pay for this car". If it is totaled next Tuesday, it very much *will* matter what you paid.

3) For younger drivers, insurance cost varies hugely by the vehicle and not always in obvious ways. If there is a young driver (< 22, sometimes older) on the policy, be sure to get a quote on the make/models *before* you buy. The differences can become dramatic between various cars in ways you never see as a lower risk adult.

[Robert]

There is an almost unlimited number of Option 1's, many of which will be in very good condition.. There is another consideration though - safety.
Option 3's are the latest cars and safety continues to improve. It is an old round factor-passive; airbags, basic construction, glass, lighting and so on - active; brakes, steering, mirrors, warnings, automatic reactions e.g. Auto braking and many other mechanical aspects, which keep improving. Probably not on your list but an example would be the latest Volvo's, which provide excellent and constantly improving safety support.
So, if the main criteria is cost, it is Option 1 but if the main criteria is the daughter, it is no question from my point of view.

[Frank P]

Cars are coffins, get a bike and use Uber when needed.

John Camp for the win though.

[Dan]

Option 1 every day of the week.

FWIW, a good 1997 MX-5 / Miata shouldn't cost too much to buy, there is nothing that can go wrong that you can't afford to repair, she'll never be able to carry four drunk friends encouraging her to do anything silly, you can fit a lot of camera gear in the boot AND they have pop-up headlights. Going back to the original query - it won't decrease much further in price, so no money lost.

[Arg]

Ask around the family if anyone is about to let go of an older good car. At least the history is known, and bonus, if it goes pear-shaped you might have the pleasure of ostracising a family member you always wanted to.

I recently shopped around with my 25-yo daughter for a cheap, small car. We bought privately and with cash. With patience, we eventually found a car with one owner from new, elderly couple retiring and getting that 'retirement new car' for themselves. It had always been their #1 car (in fact, their only car), so had full maintenance and attention to detail, and was a reliable brand (Honda).

That is easily the cheapest way to own a car (apart from buying a collectible and praying for mercy); you only have to be patient and wait for the right one to come along.

[Juan Flores]

Why not a mixture of 1 and 2, in which you purchase a cheaper certified used car from a dealership, but pay upfront? You mention that most dealers don't bother with used cars cheaper than about $10k, but you don't need most of them to do it - just one. If you can shop around, I'm sure you'll find one. The warranty is of tremendous benefit when buying a used car - about ten years ago we purchased a car in seemingly good condition from a dealership (and our regular mechanic checked it over and found no faults), then during the course of the six-month warranty the dealer was obligated to repair the various faults that arose, which ultimately exceeded the price we had paid for the vehicle. The car then gave us five years of faultless service. I believe that many latent issues a second-hand car might have will be more likely to become evident early on, so a short warranty nicely offsets the premium you would pay vs purchasing a used car via AutoTrader. I also believe in avoiding financing whenever possible.

[Gato]

Regarding cars and the cost of being poor, good used cars are hard to find these days. We had a period of slow new car sales during the economic slump which has left people tight for money competing for the available used cars. Not good for us poor folk.

I have used option 1 for many years, usually buying from individuals but sometimes from used car lots. However, I have enough cash reserves to absorb a loss should I make a bad deal. Which does happen even with an with my experience - maybe one out of five I buy is a loser. Partly that is an economic choice - I have been able to keep myself in clean, reliable transportation for about $50 to $100 a month - and partly I just like cars and shopping for them.

However, 5 or so years ago I could pretty easily find a decent car - nice looking, not too high miles, good mechanically - for around $2,000. Now those cars are running more like $5,000 to $7,000, which makes the option much less attractive.

[Crabby Umbo]

...sort of a "Plus 1" for John Krumm...when you're working all the angles and finances, I realized a long time ago that the really cheapest thing you could do was buy a bottom of the line, stripped, Honda or Toyota, and ride the hell out of it (who cares about resale!)..with regular maintenance (even at the dealer), you might be able to go 8 or 10 years without replacing a substantial part: just tune-ups, oil changes, tires and brakes, and then it'd still be worth while, after that point, to just get it repaired for a few more years. Most of my Toyotas have easily made 10-15 years, 180,000-200,000 plus miles (that's a minimum of 6-7 years with no car payments).

Remember, of course, that my goal was to have the most dependable vehicle, that cost the least, and never stranded me anywhere, so I would never even have to think about it. Good luck talking to a sub-30 who also wants the car to be "stylish" and "hip", or something they'd want their friends to see them in. Managing large groups of younger people over the years, I've watched the beginning of a lot of sub-30's descents into money problems and poverty begin this way (i.e. by not matching their income, and potential income to the best solution for affordability). There are years my selection of a car has allowed me to travel Europe, and keep a freelance business running, because I was not at the mercy of high car payments or ridiculous repair costs (I'm talking to you, almost all American brands!).

A word about cars in general: I've looked up almost every Toyota I've ever owned in Consumer Reports over the years, and have been amazed at how accurate the listing of "problem areas" have been. I have no idea how accurate things like J.D. Power's listing for dependability is, as it could be based on "opinion" and not actual problem tracking.

A word to the wise, I've been involved in car discussions for years, especially to defend my choice of cheap and dependable. One thing I learned about American car owners in general: when they say "I never had any problems with that car", what they mean is: "Well, of course, I replaced the starter, all the electric window controls, the locks stopped working, alternator went; but that happens to everyone, that's normal." They don't get the possibility that when you get a Honda or Toyota, that there's a very good chance that none of that will happen, ever, for the life of the car, until you just get tired of owning it!

Free car advice is worth what you pay, and beware of peoples opinions about what is dependable!

[JG]

@Dan:

Your response above made me think of this:

http://www.cafepress.com/mf/96497654/the-answer-is-always-miata_tshirt?productId=1494951101

[George Sinos]

You didn't bring up the option of leasing a car. Difficult for many to understand because the numbers aren't easy to obtain or compare, but often you can find a new car with a very low monthly lease payment. When you consider the car will be new, have a factory warranty you will likely be eliminating sudden, unexpected large expenses from the budget of a person that needs predictability of cash flow. If it does need repairs they will be done at the dealer where you will either be given a loaner or a courtesy ride to and from work. Eliminating another problem from the young persons life. Many, if not most, leases include emergency road services. I'm not saying this is the best option for everyone. But there are more things to consider than the dollars and cents. It can be the best option for some.

[Nate]

For someone just starting out there is really only two options: one or three. I've seen too many people get burned on used "certified" dealer cars. If she has the mechanical knowledge or willing to learn, get any old 1986 and older domestic pickup truck. Super simple, they still make every single part for 'em and gas is still cheaper than a car payment. If her paycheck can swing it, a new Toyota or Honda is a solid choice.

[Roger Botting]

I have only ever Bought new cars. First wife came with a disaster of a 3 year old van that taught me that some used vehicles are disaster plus.
Japanese made cars are reliable, at least Honda and Toyota. Cryslers are rolling break downs waiting to happen.
Best car move I made was getting the longest extended warranty available on the Crysler. It paid for several major defects, 2 transmissions for example.
Worst car move was the one that came with the ex wife.

[hugh crawford]

@Dan

"FWIW, a good 1997 MX-5 / Miata shouldn't cost too much to buy, there is nothing that can go wrong that you can't afford to repair, she'll never be able to carry four drunk friends encouraging her to do anything silly"

When my little sister went to college, this was the reasoning behind getting her a Jensen Healey.

Never had to give more than one person a ride at a time, never had to move anybody, and we never had to worry about her driving in the rain.
Not only that, but a very nice guy who is now my brother in law restored it.

We missed getting her a Lotus 7 by about an hour, now that would have been even more practical.

[Paul Van]

Option one! And buy as cheaply as you can plus keep records of every expense. I once bought a Lincoln for $300, kept it for three years with $1,200 in repairs. Net cost was $500 per year, cheaper than any car payment.

If you do not have a warranty, pay as little as possible to have money in reserve for the inevitable repairs. Watch out for wear items (brakes, tires) as you can spend money quickly and you don't want to spend all your cash on a car you can't afford to fix.

[John Ironside]

Buying used from (or selling used to) a good friend or family member is a good idea, because if there is a good level of trust and integrity both will get a better price. With an known and trusted counterparty, neither has to price in the risk of dishonesty.
But it requires a buyer who recognises that there could be a latent fault that the seller doesn't know of. It's particularly worthwhile if the alternative is a dealer who has to pay taxes (VAT) on his margin, as he would have to in Europe. I've been buyer and seller in several deals like this and experienced mild regret only once.

[Romano Giannetti]

In my Colorado year, I bought from a Nissan official dealer a 10-years old Pathfinder. Cheap because it was manual shift (never drove anything different since forever...). Paid $5000 and sold it one year and 25000 miles after to the same dealer for $3000. I think this could be the ideal first car. But well, I really do not understand (literally - what's that?) the credit rate thingy, so...

[Richard Parkin]

@John Camp "Then take the $3,500 and make a wholesale marijuana purchase, and start dealing to the other low-level college grads at your workplace. ... and are content with a relatively small network of regular, well-vetted users ... "
I haven't read any John Sandford books but anyone who has read any Elmore Leonard will see how that would turn out ;-) You may choose the downstream but you can't control the upstream.

[Bryce Lee]

Any motor vehicle is expensive! Vehicles are lasting longer in terms of operational ability than ever before. Problem is, if any vehicle is involved in even a minor fender-bender, the cost of repair
can easily exceed the value of the vehicle. And too often a 1-3 year old vehicle is often not that much less in price than a new vehicle.
I tend to keep my vehicles until they either fall apart from age or
until something catastrophic happens. Have purchased one vehicle from new, 1998 Honda Civic saloon in October 1997, modified so I could fit into it (I stand 6'8" tall, weigh about 350 pounds)and it lasted until 2011 and had well over 600,000 kilomtres on it when traded, still in good condition, it was starting to rust. Bought a dealer demo Honda Ridgeline truck and made a few internal adjustments to make it fit me. Barring an accident hopefully shall keep it 10-15 years; to replace it if the new Ridgelines were available, would be well over C$55,000 plus 13 percent sales tax.
Shall purchase either a dealer demo or used next time around.

[Gabe]

Practical Advice?
Don't even think about reading any car mags - they think cars are fun.
Read Consumer Reports (cars are appliances)
Follow the advice of John Camp ... Make some dough
Read Consumer Reports (how to get 112 mpg)
Move to NYC - you'll never care about cars again
Read Consumer Reports (baby carriage crash tests)
Date an Uber driver
Read Consumer Reports (what your socks say about you)
Use a bicycle ... ONLY on the sidewalks of NY
Read Consumer Reports (best & worst waterproof toasters)
Marry, move to Long Island where the station wagon is still king.
Read Consumer Reports (embedded smart phones - a bad fad?)
When the kids become teens, it's your turn to learn about cheap, safe, cars.
Read Consumer Reports (pacemaker comparison tests)
Don't bother with photo mags either.
Read Consumer Reports (rating 45x zoom pocket cameras)
Life can be planned & executed. (Pre-need plot shopping)

[CK Dexter Haven]

Pay $75-100 to an independent mechanic for a PPI / pre-purchase inspection on ANY used car. I wouldn't even trust a dealer certification.

[Chris]

Maybe things are different in the US - I don't know, I've never been there. I live in France, and 99% of my travel is by bicycle. I have 2 children who live in England, neither has or needs a car. I find it depressing that the car is still an obsession for most people, especially in the context of increasingly evident climate change. Let's start thinking outside the box - there are solutions to our travel needs that pollute our world a whole lot less than the car.

[James Liu]

Here is option 0, a sort of even more austere version of option 1:

Reconsider the whole notion of "needing" a car? Between a bike, public transportation, carshare, and taxis (broadly understood), your friend can have $5000 in emergency savings in the bank, or be $5000 closer to a downpayment on a house.

I'm 32 and haven't owned a car in my entire adult life. (I did drive a parental car around for a year in HS). I do live in Chicago, which has great public transportation, but you don't need great public transportation in your whole town, just good enough for your daily commute. I understand this doesn't work for everyone, but I think people dismiss the option without giving it enough thought out of a habit of owning cars.

A need is a want that has been satisfied more than once or twice.

Failing that, option 1 for sure. Debt is a monster that consumes you. No need to get into it early in life for something so pedestrian as a car.

[Tom Kwas]

Plus One for Gary Bliss...

...every time I go out car shopping, the Japanese models I want, used, with 75,000 miles on them, are not much cheaper than buying a more stripped down model new.

I'd rather pay 16K for a new car without much, than 14K for a 5 year old model with 75,000 miles on in, loaded with features I really don't care about...

[Paul H]

Cars are expensive no matter what, so seriously consider whether or not she really NEEDS a car.

In many cities, a bike (electric / assisted), coupled with public transport, car share schemes and the occasional rental where needed, should work out much cheaper.

Buying a car on credit should be avoided wherever possible (same applies to any depreciating consumer good).

And this from an avowed car nut with multiple vehicles....!

[Mike Butler]

Your laundry cogitations mirror the angst I'm experiencing with water filtration.

I can get a gallon of RO water at byo dispensers for $.25, or a gallon of water at the grocery store for $.75 or so. It adds up, but you balk at the cost of a $200-$350 under-sink filter.

In the rare event I have a couple of dollar bills on me, I have to go out of my way to buy something stupid to create quarters, which also leads to an abundance of pennies.

I'd get a filter just for the convenience, but then there's the environmental guilt factor. RO flushes a few gallons or more down the drain to create a gallon of ambrosia.

Anyway, hope the tap water is sweet in the Finger Lakes.

[Earl Dunbar]

My choice would be Option 2, with Option 1 the next choice if 2 is not possible. I bought my first CR-V new and don't really regret it; I traded it at 165K+ miles simply because the A/C was kaput and I decided I wanted a newer CR-V that got better mileage. I bought a used (55K miles) CR-V at a dealer with Honda Certified status, and I bought Honda Care extended warranty. Some would say I overspent since the vehicle is very reliable anyway, but I really didn't want any surprises, however unlikely.

The dealer happens to have reasonable service rates, so I have them do ALL the service, even changing from summer to winter tires. That way, combined with the Honda Care warranty, if anything goes wrong I'm covered, no questions asked.

I have employees who, with one exception, usually have to buy cheap, used cars, and it's a crap shoot. When something goes wrong, they miss at least one day of work, which affects their net pay (remember, it costs more to be poor!) and my company's productivity. If I had the ability to go car shopping with them and had money to loan for a better purchase, I would.