Top Cars for smart people

financial independence
The Escape Artist

The Escape Artist recommends cycling or walking wherever possible. The main reason is not to save money (although the savings are huge over time). Its the extra life force, happiness and vitality that you get. Oh and great legs as well.

But you may want a car for longer journeys. Just remember that cars are Money Incineration Units…so choose wisely.  Generally: the smaller it is, the less money it burns.

Your car choice is a big factor in your spending.  And its not just the price of the car. Your car choice has big knock on effects on the fuel costs, the service costs, the cost of parts, insurance. It all adds up via The Aggregation of Marginal Gains.

You are in a poker game against the car industry and if you buy a BMW X7 you’ve shown them your hand.  Your choice tells them everything they need to know about what you’re prepared to pay for spares, insurance and related stuff.  They know you’re gonna pay £200 (or whatever) for a replacement key. The same key (pretty much) that Skoda will charge you £20 for (not the actual numbers but you get the point).

I’m no petrol-head so I asked a reader that I’ve called The FIREman (yes, he works as an actual fireman) to write about how to choose a car. If you have (constructive) comments, please leave these below.


The Escape Artist


One of the Pillars of Financial Independence is crushing car costs and investing the money saved into a compounding machine.

The problem is that, when buying a car, the options seem endless. The costs are scary and hard to compare. So, to help out, here is my attempt at objective analysis.

I’ll go through some of the issues, identify a shortlist, with links to help you track down your FI-friendly escape and evasion vehicle like a boss.

I’ve also included a spreadsheet with some sensible choices, which you can customise to your own circumstances.

New or used?

Buying a new car is a total sucker move. If you drive it out of the showroom and then sell it, you’ve just dropped 20 – 30% of your money.  Buying new cars and selling used is a money massacre.

According to What Car, the slowest depreciating car of 2017 is the Lotus Elise, with a list price of £37,150.  After 3 years you have lost a mere £13,350!!  Well-maintained modern cars are extremely reliable, so we’ll be buying used.  The financial difference is life-changing.

You can buy used cars from a dealer. Or, with 462,000 used cars on Autotrader, you can buy privately. This is where the real gems are found…especially low mileage cars that have been looked after. Look for former owners who are careful / old / non-male / vicars. Take someone along to the viewing who really knows their cars….or The AA and RAC will do inspections on your behalf.

And for the most part you can forget about leasing, hire purchase and the like. Whilst there can be some good deals from time to time, mostly these are for people renting a lifestyle they can’t really afford.

Fuel efficiency

We love efficiency in the FI community, and that includes fuel.  Diesels give the best mpg, and the newer ones are ‘clean’, so don’t believe media hype about diesels dying a death.

London’s congestion charge zone now has the T-charge (toxicity charge) of £10/day (on top of the £11/day congestion charge) unless your car meets the Euro 4 emissions standard or better.  The Mayor wants this extended out to the North and South Circular roads in 2019/20 and by then you’ll need a Euro 6 car (check ratings here) to avoid the charge.

All the cars listed below are used, achieve 60+ mpg and are in the ‘good’ end of the ‘Driver Power’ reliability surveys, and most are available at a wide range of prices to suit your pocket. Diesels are preferred as they’re much more efficient.

Fuel economy is important.  But there are lots of other factors at play here so perhaps the best way to navigate this minefield during your escape is to crunch the numbers.  Lucky for you, a handy spreadsheet isn’t far away…

Electric cars

Electric cars avoid both charges and cost pennies to ‘refuel’, but they have some issues that might rule them out for your personal circumstance.  To recharge at home, you really need off-street parking, as you can’t safely have the lead trailing down the street.  You can plug them into a normal wall socket, but a dedicated (£300-ish) wall charger is better.

Range (how far you can go on one charge) is an issue but is improving all the time. The effective range is reduced if you have the heating or air-conditioning on, and the battery can be degraded over time by frequent fast-charging.  The average UK car journey is only 6.8 miles, so range won’t be an issue for most, especially two-car households who can use their ‘normal’ car for occasional longer journeys


Many of the cars below are re-badged versions of more expensive cars.  You need to understand the concept of car platforms. In short, car makers put different badges and different prices on cars that (underneath) are essentially the same. This means that you can choose how much you pay for (essentially) the same car.

For example, VW/Audi group (VAG) make the Seat Exeo, which uses the same platform as the much pricier Audi A4.  The most efficient versions are Seat Ecomotive, Skoda Greenline, and VW Bluemotion.  VAG also make Bentley and Lamborghini cars, so you’ll be in good company.

How much?

£7k should get you a 2012-onwards car with no more than 60,000 miles on the clock.  Someone else has paid the bulk of the depreciation, and left you a nearly new car below half-price – Thanks sucker!

£3.5k should get you a 2010-on model which will still be nice inside and have plenty of life left.  Consider cars with below average mileage (80,000 or less) with a full service history.  These cars are still very reliable, running 150-200,000 miles or more without any expensive problems.  Go for cars with a full service history.

These cars are the stars…

Toyota Aygo / Peugeot 108 / Citroen C1 / Peugeot 107


These are all essentially the same car with different badges.  Interestingly, the older Citroen (2005-2014) had a diesel version for even better fuel economy.

Cheap to insure for younger FI’ers.

The older version is very basic, with a tiny boot.  The 2015-on models are much more swish.

Hyundai i10 / Kia Picanto


This car is cheap to buy, cheap to run (petrol, 68 mpg).

One of the most reliable cars around.

I hired one and found the throttle a little jerky, so try before you buy.

Tiny boot.

Seat Mii / Skoda Citigo / VW Up

seat mii

The same car with different badges.

Basically a VW Polo platform with a smaller body.

Very efficient on fuel (petrol, 78 mpg).

Really easy to park.


Toyota Yaris

A perennial source of great value motoring.

One of the most reliable cars around, practical, and cheap to maintain. Has that legendary Toyota build quality / reliability.

Available in diesel, petrol or hybrid form.

The diesel will do 78 mpg.

Seat Ibiza / Skoda Fabia / Skoda Roomster

skoda fabia

Same platform as the more expensive VW Polo.

My personal favourite is the Skoda Fabia Greenline estate.

This was What Car? Car of the Year 2015. This can accommodate my dogs in the boot and can manage 94 mpg!

The Roomster has van-like load capacity but looks ugly as sin unusual.

Peugeot 208 Blue HDi

peugeot 208

The Peugeot 208 had a mid-life refresh (65 plates onward)

The highlights are still the small steering wheel and the potential 83.1mpg economy from the 1.6 BlueHDi 100 diesel engine.

Has the latest Euro 6 compliant engines so will not be liable for the Toxicity Charge in London in 2019.

Alternatives: Renault Clio, Peugeot 308.

Nissan Leaf

nissan leaf

The Electric Car owned and modelled by Mr Money Mustache. Read his write up here.

Perfect for the London congestion charge zone (its exempt) IF you have off-street parking (for the charger).

Earlier versions had a maximum range of ~80 miles, but could be lower in winter.  New models can achieve over 150 miles in good conditions. Check local charging points on zap-map.

The batteries are either leased (from £70/month!) or bought (ie no monthly lease).  You should avoid the lease as it will eat up your fuel savings.  Like it or not, electric cars are the future, so you may as well get one now.  2013-on ‘Tekna’ model is much better car.

Toyota Prius 


Taxi drivers everywhere love them because they’re cheap to run.  Many reports of 250,000 miles plus with nothing more than routine maintenance.

The hybrid technology can take a bit of practice to drive at full efficiency.

Tyres need to be rotated every 5k to even out wear because of the regenerative braking, but the reliability is proven.  Claimed fuel economy of up to 94 mpg rarely achieved in practice though.

Skoda Octavia / Seat Leon / Seat Altea


Same platform as the more expensive VW Golf, Audi A3 and Audi TT.  The Skoda Octavia is another favourite taxi car around the world.  Spacious, comfortable, and reliable.

[ TEA note: I drive a Skoda Octavia. It’s reliable, incredibly well built, luxurious. Oh and it goes like shit off a hot shovel ].

Pro tip: Get the Greenline or Ecomotive version for fantastic economy (80 mpg).  Avoid automatic DSG gearboxes due to reports of poor reliability.  The Seat Altea XL’s boot is massive [TEA note: so no BS about needing an SUV to carry the cabernet sauvignon back from Waitrose please]

Seat Exeo / Skoda Superb


Based on the Audi A4 / VW Passat platform.

Perfect if you insist on having a large car.  The Skoda Superb Greenline is a truly exceptional car.

More rear legroom than a Mercedes S-class, yet achieves up to 74 mpg!

You’ll be laughing all the way to The Ambassador’s Reception.

Also sensible:

  • Ford Ka
  • Ford Fiesta
  • Mazda MX5
  • Suzuki Swift
  • Honda Jazz
  • Nissan Micra

The spreadsheet

This spreadsheet is easy to use and should allow you to calculate the 5-year Total Cost of Ownership (TCO) for different vehicles.  It’s pre-loaded with data (guesstimates!) for a selection of cars, which you can edit to reflect your own shortlist.  It’s not intended to be super-accurate, but it should allow you to make meaningful comparisons.

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  1. Edith E Esquivel · · Reply

    I have owned a Suzuki Swift since 2012 and it is awesome! It is a cute original car with low fuel consumption and low maintenance costs.

  2. I’d like to suggest the Chevrolet Volt (second generation) as well, especially if you have something akin to tax credits for the purchase of new electric and plug-in electric vehicles.

    For example, the company I work for here in New York State is PSEG, a power generation company. Until recently, they were providing $3000 to any employee who bought such a vehicle. This is in addition to a buying service the company is plugged into (pun intended) which routinely saves about $3000 on the purchase of a new vehicle.

    New York State has a $2500 state tax credit on the purchase of new PHEV’s and EV’s.

    The Feds have a $7500 tax credit.

    Having no other auto debt at the time, high miles on my car (150,000) and having a regular round trip commute of 100 miles per day fourteen days out of every twenty eight days minimum, and paying about $1800/year in gas with my Ford C-Max hybrid (non plug-in), I headed to the dealership to see if the numbers worked.

    The car I wanted, which did not come with all the bells and whistles, was $34,000. After my trade ($9000), company money ($3000), and buying service reduction ($3000), I drove off the lot with a $34,000 new car for $19,000.

    I bought the car in December (on purpose). Tax credits are reimbursed with tax returns when taxes are filed (which has to be done over here by April 15th, but I generally have it done by January 31st and the returns, if any, back by the end of February).

    Buying in December meant I paid one payment – January 2017 – at the higher $19,000 loan rate before the tax returns came back. When I received them, I plunked another $12,000 on the loan bringing the principle to roughly $7,000 ($7500 fed + $2500 state + $2000 of my own), refinanced with a .05% interest rate with a different bank still as a new car because it was within 90 days of purchase, and will have the remainder done at the end of 2019 paying more than double the payment since my gas costs have gone down by $1000 (I paid $600 in gas for 2017 + another $120 in electricity).

    Oh, and with the state tax credit on the roughly $400 level 2 charger, the charger ended up costing me $75. I installed it myself and have yet to burn down the house.

    The Volt has a nominal 53 mile electric range, but in reality I routinely received 55-60 from May through October. Winters are cold here, so from about mid November to mid April range on the battery drops off to 37-45 miles. Still not bad. The Prius Prime has better MPGe, but I’ve discovered MPGe is irrelevant if your electric range is enough you can stay on battery the entirety of your commute.

    Anyway, there’s my long winded food for thought. Oh, and I agree on the cycling. I have a Felt DD70 fat bike and Terratrike Sportster recumbent trike which I ride everywhere when I’m not in commute mode.

  3. We’re on our 2nd Leaf. We currently have the 30kwh model. Real world range of 130 miles mixed driving and 100 miles of 70mph motorway driving. Battery regen is very good. Heating and Aircon in this model makes no difference to range. As a commuter car or 2nd vehicle it’s a no brainer and we have solar panels on the roof so the fuel cost is very low. Try one, the change to electric vehicles is are coming much faster than most people think and fossil fuel cars are going to depreciate like rocks.

    1. Thank you…I have updated the article to reflect the fact that more recent versions of the Leaf have higher range. I think you are right…the solar / electric revolutions are coming faster than most people think 🙂

      Let me know if you want to write a more detailed post for the site on these subjects!

  4. I think the article needs a word about cash flow. We have two great cars about 8-10 years old. We are however, preparing for the inevitable demise, and therefore saving £200 a month into a car maintenance fund which not only deals with servicing, tyres, repairs, insurance but slowly builds up so when the cars are ready to scrap, then we can just make a cash payment for the new vehicle, at which point we will start saving for the one after that! However our fund was just rinsed by a £2000 repair bill for one of them!

    1. The FIREman included a useful summary about maintenance in his draft but the post ran too long with it included…so I’m thinking of coming back to the subject in a later post. Would love to hear from people that do their own servicing / maintenance…or those with other top tips for low cost motoring

  5. I bought my current car new over ten years ago. And while I still drive it (after all, I said current car) I don’t think I’ll ever buy a new car again. Financially, it just doesn’t seem worth it.

  6. Great article for anyone considering a car update. I have a Renault Clio Estate diesel which was a demo car I bought new 7 years ago. Vehicle tax is only £30 per year. Fuel consumption is a bit disappointing at only around 60mpg. Most expensive repair so far has been front suspension components when they wore out. I like these small estates as you can open the back lid and sit on the back and change walking boots which is great when getting old and creaky and big stuff doesn’t have to be lifted into the boot like on a hatchback. So I would look at the used Skoda estates next time. The best thing I did was find a reliable independent local garage / mechanic I trust to do servicing and repairs when required. Cheaper than main dealer servicing of course and also the local guy does not find lots of picky stuff on MoTs that doesn’t really need doing because he doesn’t want to annoy you and lose business. Another thing running an older car is to go to tyre dealers that just do tyres – they don’t tend to crawl all over your car and try and scare you into replacing stuff like shocks and brake disks when not required. Just be aware of what is getting worn out and get it replaced when required, or have someone who knows this stuff check it out regularly.

    1. Thanks for the tips!

  7. Good article. I’d say the one key factor that’s missed is how much you should spend on a car.

    As can be seen from the costs breakdown, depreciation is pretty nasty.

    The guideline that I use, but admittedly break, is no more than 2.5% of net worth spent on a car.

    I’ve broken this rule, but life is too short!

    I drive a 2004 Nissan 350Z. (Previously a 1 litre 2001 VW Lupo!).

    Depreciation is non-existent, and I do low miles (4000 / year), so fuel costs aren’t too bad.

    I’ve lots of no-claims bonus and I’m over 35, so insurance is in-line with the costs in your table.

    Road tax for pre-2006 is reasonable (Well, ~£250 pa).

    Total cost after resale is £4100!

    Highly recommended!

  8. Great post TEA. As someone who loves cars and has decent knowledge of them and the market, I agree with all that you’ve said here.
    I wanted to add some food for thought though.
    As someone who loves his cars, none of those suggested would interest me in the slightest and whilst I understand that enjoyment isn’t top of the agenda I this post, I feel that I’ve found a niche that meets our financial goals and gives enjoyment.
    I bought a Porsche 997 4S four years ago for market rate, I spent £900 at an independent Porsche specialist over three years on one minor and one major service (on a two year interval).
    I then sold the car after three years for the same price I bought it for.
    This is only possible because it’s a toy not an everyday car because MPG is bad, tax is high and spares are expensive (but Porsche are VERY reliable generally and I didn’t require any parts)
    As I say, food for thought for those that want a financially sensible car but also want to indulge their passion for them. Just make sure you buy a marque that’s a cult classic and as rare as possible.

    1. Thank you Steve…love the back up from a petrolhead and someone that knows their cars! As you can appreciate, this post is all about low cost, low risk car choices.

      It is absolutely possible to MAKE MONEY from vintage / classic cars…if you REALLY know the market, are mechanically minded and super-savvy.

      So you won’t get any preachiness from me about vintage / classic cars…they can be fun and hold their value. Enjoy your Porsche!

  9. I’ve got a Prius and it is the best car ever…..ok it now has many scratches, some very dodgy paintwork….but it always passes it’s MOT and never breaks down.

  10. Points I would raise:
    1. If you do a lot of short journeys, a Diesel engine is a bad idea – messes up the filters and catalytic converter I was told, and you won’t benefit from better mileage.

    2. Reference is made in the post to the Skoda DSG automatic gearbox. This “dry” gearbox has had a lot of complaints across VW, Audi, Seat and Skoda vehicles. Four to five years in (or circa 50k miles), a sizeable minority have needed new gearboxes: not a prudent financial outcome!

    3. I’m planning to get a new company car – Toyota Yaris hybrid- which genuinely makes financial sense for me, because of the oddities of my company car scheme, since I’m entitled to stuff like a Q5, and I’ll get net cash back from the company to offset the benefit-in-kind tax, which results in me getting a fully-insured car, serviced, repaired and maintained at their expense for the next three years for an overall cost to me of £97pcm. I don’t have a car fund built up to buy secondhand et, so I shall save up for the next three years and I shall buy it at retirement in three years’ time, knowing how well it’s been looked after. I’ll then keep it for ten years longer. Worth number crunching a company car scheme in case you (like me) are one of the rare creatures for whom it’s good financial sense to choose the car, not the cash alternative. But do pay attention to the new regime from 2017/18 tax year as well.

  11. Thanks for a great post. Now I know what car to own. Another related topic on which I’d love to hear your thoughts would be when to own a car. The economics of owning outright vs. renting / or using a car-sharing app whenever needed seem very complex. Not sure if it can ever make sense to own a car when living in a large city with decent public transports and easy access to car-sharing and/or taxis.

    1. Its very simple…if you live in London, RIDE A BIKE!!!!

      1. Ken@thehumblepenny · · Reply

        I’d probably add – if you have life insurance 😉

  12. Ken@thehumblepenny · · Reply

    We drive the 2013 Nissan Leaf Tekkna and it’s the best thing we have bought in a long time!

    We do about 1,000 a month (mainly school run) and it costs about £30/month in electricity although it helps that we fixed our electricity price.

    It’s an absolutely beautiful car and it’s packed full of extras… Highly recommended. Best part is the drive into central London with the kids to visit the museums etc. Near zero parking costs is a really handy benefit too.

    But as you say, you need off road parking, although the fact that the government pay for the Podpoint or whichever you choose makes this even more attractive.

  13. Matt Roszak · · Reply

    I bought a 2002 Honda Civic Max with 30K miles in 2015 for £2,500. It’s a very old car by UK standards, but hasn’t needed much repairs at all. The biggest ongoing expense for me is the car insurance as I’m still quite a young driver, and I don’t get any sort of discount for driving very little.

    The car’s more of a luxury than anything. It’s very useful on occasions when I really need it, but if I needed to save money it would be the first thing to go. Also I’m sure I’d be fitter without it.

  14. @FitFunemployed · · Reply

    “Diesels give the best mpg, and the newer ones are ‘clean’.” Sorry, I have to take issue with this. They’re really not – quite aside from manufacturers rigging the test figues, whilst diesels can emit lower levels of CO2, NOx emissions are higher, especially once the filters clog up as Denise points out above – and the filters don’t strip out Nitrogen dioxide. TEA, as a fellow runner & cyclist, I’m sure you’ll know how much more unpleasant it is to get stuck behind a diesel than a petrol car…

    1. The FIREman · · Reply

      This is an interesting point, and one for which there is no simple answer.

      The independent group Emissions Analytics (EA) carries out real-world testing of car emissions, and are the people who ‘caught’ VW cars exceeding the emissions standards in real-world situations and was the catalyst (pardon the pun!) behind the emissions scandal. After carrying out further tests, it seems that almost all cars exceed the official emission limits.

      But it’s more complicated: See

      In short, I agree that for most cars built over the past 20 years that may still be in use, petrol may be less polluting overall than diesel. But newer, well maintained diesel cars built to the latest standards have similar emissions to new petrol vehicles.


      So which car should we buy? An electric one and a bike of course, as recommended, but if electric doesn’t ‘fit’ your home or driving requirements, then you’re going to have to compromise.

      According to Which? Magazine:-
      VAG group, Toyota, Peugeot and Citroen cars are generally have to lowest emissions, so once again, choose any of the recommended cars. Life is always full of choices, and if you can’t buy an electric car, then you have to compromise on pollution. Here, we like to compromise in favour of Financial Independence, so you won’t go far wrong sticking to the recommendations.

      1. @FitFunemployed · · Reply

        Thanks, great to see your more detailed thinking behind the recommendations and that this was a factor. I agree – Fiat Panda* here (1.2l petrol, 58k on the clock, 2011, bought for £2400 18 months ago) – but I only use it once a week or less & cycle all other journeys.

        *James May owned one, so it has some petrolhead credentials – sort of..!

  15. Ron Cameron · · Reply

    I wish we had more of the listed cars here in the US. I love tiny, fun cars! Having said that, I own both a Fiesta ST and an MX-5/Miata. Stay away from the Fiesta! I’m in the middle of having Ford repurchase it from me as it’s had tons and tons of issues that the service center has declared “normal”. And if you can get by with a small rear wheel drive, nothing beats the MX-5 for the money! Mine’s 18 years old and running great.

    1. Hey Ron…maybe there’s money to be made here? An enterprising person that wants a side-hustle could maybe import some of these cars into the USA for a niche FI market?

  16. arcyallen · · Reply

    Haha, you don’t know Americans! 🙂

    I’d love to do something like that, but there are two problems;
    1) There’s generally a 25 year waiting period to bring in foreign cars. Our government believes old foreign cars are WAY too dangerous for US roads. Until they’re 25 years old, then they’re just fine. The most recent one I saw and loved was a 1991 Honda Beat. I’d love that car, if I knew parts were available and winter driving (with the corrosive salt we use on the roads) wouldn’t kill it. And, after 25 years, nothing is really efficient about them.
    2) We Americans are fat. We like fat cars. For fat asses. And butts. The bigger, the better. But like you said, the FI community needs their efficiency! So get Leafs and Versas.

  17. Any ideas on making the most of the car you have? I have a Hyundai i20 which I think isn’t too ridiculous, essentially I want to use it as long as possible and try to take care of it (5years old – 30k miles.)

    However, I’m far from a car enthusiast and other than getting it serviced yearly and basic maintenance, I’m not sure what to do or where to look for advice. For example I’ve heard much better tyres can improve MPG etc, would you have any tips here or where I could look for tips?

    Thank you,


    1. the FIREman · · Reply

      Hi Nick,

      The i20 is a great car choice, and should serve you well for many years, but yes, there are ways to improve a car you already have:-

      1) Don’t drive. Bike, walk, or don’t go at all.

      2) Look at your front tyres by turning the steering wheel all the way to one side. If they’re worn on one edge, get your tracking adjusted because they’re ‘scrubbing’ which means they’re wearing out faster and causing drag, ie using more fuel. If they’re worn on both edges, your tyre pressures are too low, also reducing efficiency.

      3) Pump up your tyres and check tyre pressures regularly. I set mine to the highest recommended, plus one or two psi because you lose a bit when you release the airline. Next time you check them, look to see how much they’ve gone down by. If it’s more than say 5psi, then you need to check them more frequently.

      4) Remove your roof rack. It’s like towing a parachute.

      5) Accelerate slower. You don’t have to hold people up, just don’t pretend you’re at Santa Pod Raceway. Every time I accelerate I imagine a little cup of fuel tipping away…

      6) Reduce your top speed. Driving at 60 on the motorway instead of 75 can save you £££:

      7) While you’re driving at 60, you can ‘slipstream’ lorries for added saving. Don’t tailgate, but they will punch a hole in the air for you to glide through.

      8) Use cruise control if you have it. With the best will in the world, we’re all a bit ham-fisted on the accelerator, and when it comes to fuel efficiency, smoother is better.

      8) Brake less. Look ahead as far as you can and anticipate slowing down before you have to hit the ‘stop’ pedal. The way I think of this is that every time I apply the brake, I am wasting the hard-earned fuel that I burned when accelerating. Your brake pads will last longer too. Mine were replaced at 180k!

      9) When you service your car (you do service your own car, don’t you) make sure to replace the air filter on time. Less air getting into your engine means too much fuel for the amount of air. Using too much fuel is bad!

      10) Enjoy your driving. By taking the sensible steps above, you won’t feel guilty by driving fast when there IS a good reason (eg massive dinosaur in your mirror). By constantly thinking about your driving and anticipating, you will stay awake (a good thing) and be more aware of what is going on around you, which will make you a safer driver.

      11) If you love reading but hate being bored to death, listen to podcasts while you drive. You will turn a double negative into a positive, and will achieve FI ninja status!

      Further reading here:-

  18. paulctc · · Reply

    Are any of the recommended cars 7 seaters? We’ve got 4 kids…

    1. The FIREman · · Reply

      Autotrader lists used cars and allows you to select (amongst many variables) the minimum number of seats.


      Of these cars, I would suggest the Renault Grand Scenic or the Ford Grand C-Max.

  19. Graham P · · Reply

    Thanks TEA another great post, I have bought two new cars over the years (what an idiot I was!) now I have a six year old Honda Jazz (serviced at the local garage) which my wife uses, and because I needed a car for the role I’m currently in (paid mileage though) I bought a 12 year old Diesel Ford Focus, 100k miles from a friend, and still going strong a year later with only 2 new tyres needed…I now annoy my friends by talking about MIUs all the time 🙂

    Classic cars can be a money pit but I had some money left over (after investing) so I bought a Land Rover Air-Portable (reasonably rare) which has gone up in value by 30-40% in five years. With classic cars – have a dry garage never under a tarpaulin! It helps to be mechanically minded and get stuck in as labour is the biggest garage cost, parts are relatively cheap – so fun and an investment!

  20. As someone who does buy new cars I am struggling to understand why it is such a silly thing to do. The article tells me a new car may lose around a third of its value over 3 years. My responses are:

    1) So what? I bought my current car 15 years ago. I really do not care what it was worth 12 years ago. I plan to give the car to my daughter when she starts learning to drive next year and when she has passed her test will buy another new car for myself which I would again intend to own for 10+ years. Like the stock market I only care about values when I buy and when I sell.

    2) I need to buy a pair of shoes. Using the new vs used car argument in the article buying new shoes would be a “total sucker move”. My new shoes will almost certainly lose far more than a third of their value over 3 years. However, I suspect few people, even those fully signed up to FI, will be buying second hand shoes any time soon. Ditto shirts, underwear, tennis racquets saucepans etc etc.

    3) Second hand cars also depreciate. And, unless you personally know the cars history, who knows what has happened in that car. Repeated travel sickness for example.

    I can totally agree flipping new cars with money you do not have is not going to get you to FI but would love someone to explain to me why buying a new car from your 4% (or other SWR) is a stupid thing to do.

    1. I don’t think it’s stupid to buy a new car IF you’re hanging onto it for 10+ years, but the vast majority of people won’t. Or, they say they will but then don’t.

      If it’s worth the premium to you to know no one else treated it poorly, ok. Financially, however, it’s rarely the most cost-efficient move. If you bought a three year old car and kept it those same 15 years, it’d be likely not have many more problems, and would cost you a third less to buy.

      A lot of people in the FI crowd do buy used shirts, etc. Again, it comes down to value for each person. You save money in the low-value areas so you can spend it in the high value areas. If your high value area includes new cars vs old, I get it.

      Used cars DO depreciate, just not as fast as their new counterparts. The most blunt way to think about this is imagine you’re buying a car. You can buy a new 2019 VW for $25k, or wait until next year and buy the same car (in like-new condition) from the original buyer for $21k. Is that worth $4k to you? From an emotional standpoint of potential repeated motion sickness involved, maybe not. Financially, however, it’s likely a slam dunk.

    2. The FIREman · · Reply

      Hi PJ,
      Welcome to the world of FI and thanks for asking such good questions.

      To begin with, the central pillar of FI is investing enough to provide sufficient income to support yourself without having to work. This investment has to come from somewhere, and the general idea is to revaluate our spending, cut out all the cr*p and invest it instead. Cars are a prime target for some FI magic, so here goes…

      So what?
      Let’s assume you are looking for a new car for £25k cash, and you intend to keep the car for 12-15 years.

      Option 1 is to buy a new car for £25k. Assuming it depreciates at a typical 20% per year, after 1 year it is worth (£25k x 80%) £20k. After the 2nd year it is worth (£20k x 80%) £16k. After the 3rd year it is worth (£16k x 80%) £12,800. After 15 years it is worth £880.

      Option 2 is to buy the same car but 3 years old for £12,800 (as above). This leaves £12,200 in your pocket, which you invest in the stock market (in a tax-free ISA) at an average return of 5% above inflation. After 12 years of compound returns, you now have £23k in the bank. You can still give the car to your (lucky) daughter, but you can give here a suitcase full of cash as well!
      That’s what.

      There are times to buy new, and times to buy used. Nobody I know minds buying a used house, and nobody I know minds sleeping on a used mattress when they stay at the Ritz. I draw the line at used food, unless it’s my wife’s leftovers. And yes, you can buy lots of very nice used clothes from charity shops in affluent areas.

      My point is that as soon as you drive your new car off the forecourt, you are driving a used car. When your brand new car is 3 years old, it is EXACTLY THE SAME as buying a 3 year-old car… apart from having a massive pile of cash in your bank that would otherwise be in the hands of Volkswagen shareholders ($21.5 Billion profit).

      Spending from SWR
      This is my favourite part!
      FI is about only spending YOUR money on what gives best value to YOU. If you already have your stash and can afford a new Ferrari every year from within your 4% Safe Withdrawal Rate, then go ahead if that is what gives you best value. Buy one and enjoy it!

      If you haven’t yet achieved FI, but want to be FI, then you have to examine each and every bit of your spending. This definitely includes money incineration units cars.

      Lastly, if anyone reading this wants to drive a real FI multi-millionaire’s car, I might be selling mine in a year or two. It’s a lovely 10 year-old VW Golf Bluemotion with only 235,000 miles on it (so far). I bought it at 4 years old with 93k miles, for £7k.

    3. Thanks for your kind responses – it is good to be here. I get the sums. The bit I disagree with is “EXACTLY THE SAME” In my view this is not the case as in three years time I will know the exact history of the car whereas if I buy a three year old car from Joe Bloggs I do not know the history. This knowledge has a value. I accept that value will vary from person to person (it may be zero for some people) and thus may well be much less than the price differential as explained by your sums. I guess for me the knowledge value is worth more than the price differential and for you it is not. All fair enough.

    4. PJ: We buy/sell/recycle clothes and shoes. My baby is sitting in my arms right now wearing some other baby’s clothes.

      1. AAJ – Congratulations. We do the same. In fact my teenage daughter has decided my old T shirts are her perfect bed wear! I was simply trying (probably badly) to make the point that the often used arguments against buying new cars apply equally to the purchase of pretty much all new consumer goods.

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