Buying an old used car (anything over 10 years) can be risky, but buying an old luxury car can be very risky. In fact, I’ve seen more MAJOR problems with older used luxury vehicles than any other type of vehicle. The moral here is simple — don’t make the mistake of buying a nice older car (like a 95 Mercedes) when you could have had a cheap newer car (like an 01′ Toyota) for the same price.
When you buy an older luxury vehicle, you’re taking a huge risk. Although it’s really cool to tell your friends and family you just bought a late nineties Range Rover with leather and a V8, the reality is you’ve bought a vehicle that’s incredibly expensive to repair. The fact is that most luxury vehicles don’t age very gracefully. Repairs can be very expensive and irritatingly frequent on older luxury vehicles such as Cadillac, Mercedes Benz, Land Rover, BMW, Lincoln, Audi, Porsche, etc. The reason is really simple – these cars ALWAYS have expensive and complicated parts that require special training to replace. Often times, these parts have to be imported from another country. Add it all together and you’ve got an expensive repair that a lot of people can’t afford.
Think of it this way – when that luxury car was brand new it had all the latest and greatest features that money could buy. In fact, some of the features on that older used luxury car were cutting-edge at the time the car was built. Cutting edge features are always more expensive to repair and less reliable than older, tried-and-true features. That means that when you buy a used luxury car you’re buying a car that is more likely to break down and more expensive to repair as it gets older.
Compare a 100k mile 1995 Mercedes Benz E320 to a 60k mile 2001 Toyota Corolla LE. Both have a retail value of about $7k (as of Sept. 07). The Corolla should run problem-free for another 60k miles (if not much, much more). The E320 (a beautiful car) should run 20k miles before it likely develops a problem. Please understand — I’m not saying the E320 is a bad car. I’ve just found that on average, most cars run about 120k miles before requiring a major repair. Because the Mercedes is so expensive and complex, it will cost 2 to 5 times as much to repair as the Corolla. Because the E320’s miles are so much higher, that repair will occur MUCH sooner.
Either way, you buy a car for $7k dollars. However, with the Corolla, you get to drive it for years before you make a repair. With the E320, you get to drive a year or two before you make a repair. Oh yeah – when you do need a repair, it will cost a lot more with one than the other.
It doesn’t take a CPA to figure out which option makes more financial sense.
I know some of you are saying “Mark, I don’t want an 01′ Corolla. I want a Benz.” Please. You don’t have to tell me about that because I know. I want one too. But here’s the deal – people that can afford to buy a new Mercedes got their money because they made good financial decisions. If you ever want to own a new Mercedes some day, start now by making good financial decisions and saving money. Don’t buy a car you know is going to be expensive to repair and likely to break soon. Besides, if you really need a nice car to impress someone, you can always rent something…