[Z-man]

This is what I do, and it seems to work for me:

1. Buy a new car. Yes, I will eat the depreciation of the car, but I always plan on keeping a car around for a long time. However, the warranty on new cars are typically 4-5 years long, and in most cases anything major going wrong with a modern car will occur in the first 3-4 years. So the warranty offsets the depreciation of the car somewhat, and I can have worry free driving for a couple of years. The except to this rule is toy cars -- my next Porsche will most likely be a used Cayman S or 996, which I will buy used. (Buying a new track car is too expensive, especially when I start ripping the suspension apart!)

2. If I don't have cash in hand to pay for the car, I put as much $$ down as I can, and finance the rest at the best rates available. If I can pay off the loan early, I do.

3. Keep car for 10+ years. Case in point: I bought my 1995 Subaru Legacy new in 1995. Kept it around for 13 years, and nearly 200,000 miles. It was a solid reliable car that owed me nothing when I sold it for $500.00.

4. Pay attention to the law of diminishing returns: at some point, an old car (whether you bought it new or used) will cost more to maintain than starting the cycle over again.

5. Regarding resale value: I don't buy a car so I can sell it -- I buy a car to drive, so resale value means very little to me. By the time I am ready to sell my car, my expectation is that the resale value will be close to $0.00.