Why do 10 year-old luxury cars lose so much value?
"They are overpriced to begin with.  One reason is the fact that they are luxury cars.  A second, related reason, is that they tend to push the technology envelope.   All cars depreciate drastically the minute they are driven off the lot.  This a good argument for buying a car that is 1-2 years old.  The higher you are, the more you can fall.   Repairs and maintenance are typically still expensive on these cars, due to relative rarity and the lack of necessary expertise.  Here is where that advanced technology bites you.  This is a reason that a 5 year old Civic may be worth more than than a 10 year old Benz.  It may simply not be worth the hassle of maintaining/repairing a luxury car.  This is especially true for an aging luxury car.  There are some people that only buy domestic, precisely because of the maintenance costs.  Also, a 10 year old car is still a 10 year old car, regardless of the make.  (There are a few notable exceptions, like the NSX.) Hondas and Toyotas have a great reputation for reliability and (long-term) total cost of ownership. ""Better"" is a subjective issue, that depends on a variety of variables.  A Civic is certainly not better in terms of technology, comfort, etc.  But, it is likely better in terms of maintenance, reliability, etc.  Which ""better"" you focus on, is up to you." Few people actually buy BMW's. Most are leased, because if you're the type of person who wants to drive a BMW, you're going want a new one regularly.  Here's the lifecycle of a BMW or other luxury car: By the time you hit ten years, you have a rapidly depreciating asset because the average Joe doesn't really want an old BMW and hassles that come with it or any luxury car. That said, there are great bargains in this space. I used to buy 5-6 year old Cadillacs when they weren't cool for like $7-9k, and resell them a year later for about $1,500 less that I bought them for. (lower TCO than a Civic) You need to have patience though, because maintenance is always an expensive pain in the rear with luxury cars. +1 They are over priced to begin with - More specifically they are expensive to create exclusivity, which raises their value to people who value that kind of thing. Perhaps folks who buy those cars aren't buying them for value or quality or performance, but are buying them for the badge and the intangible factors.  I frequently hear about rich people who earned their millions driving around in cars Consumer Reports rank highly, so it isn't because they are so much better than a mid priced car. A car for $140,000 is either equipped for the A-Team or is a status symbol.  The status symbol notion is very expensive, but fades very quickly, hence the mighty depreciation. There is usually a bunch of reasons for this, some psychological and some entirely practical. Let's start with the latter: If I wanted an older luxobarge, I'd buy something from the early to mid 1990s in good condition. These cars tend to be a little less complex and thus a little easier to repair, plus you can find them for prices that makes them to 'disposable'. "I think this can be answered by answering the question ""Who buys 10 year old cars?"".  Generally speaking those buyers are very price conscious.  They are looking to save money on transportation rather than following the herd of people participating in the car payments merry-go-round.   The cost of parts, repairs, and gasoline for those cars do not go down over time.  Remember that many of those cars require the use of premium gasoline.  This drastically reduces demand for those vehicles, thus lowers the price. Luckily I have a really good and reasonable mechanic near me, and I can float repairs and the higher gas.  I love driving my 1999 Mercedes and it is one of the least expensive cars that I have owned while also being one of the most comfortable." Personally, I buy newer luxury cars for two reasons.   1) Status symbol Newer cars have the latest looks, performance, and features like heated side mirrors and sensors that adjust cruse control speed when in heavy traffic etc.   2) Older cars have more wear and tear. No one has spent any significant amount of time in the car before and therefore you know the history of what the car has been through, like buying a new pair of pants.  You know that no one has pissed in them ;). After I have pissed in and tore up my now older luxury car, I sell it off and get a new one.  Cars wear out and as they get older, they need parts replaced.  My brother's Mazda, for example, just blew the head gasket after buying the car new and driving 130k miles over a four year period.  Part of the luxury for owning a new car is the luxury of time, not having your car spend any significant amount of time in a garage being worked on, unless you buy a Land Rover of course ;). The answer is very simple. Part of the luxury is having the cutting edge technology with the very latest features. The price premium is not just from increased build quality; it's simply a perception. Additionally, 10 years takes its toll on a car. The smooth suspension gets rougher over time, and all the little features start to break down. Part of the price of that car factors in the expense of expected repairs. That's true of every car, but the repairs are more expensive when there are lots of gadgets to break down, especially on imports. They start at a higher price and repairs are more expensive than with a standard car. From my experience, many luxury cars get too expensive to keep after about 10 years due to increased maintenance costs. I believe one of the main reasons cars -- luxury or otherwise -- depreciate so quickly is that many auto accidents can cause serious engine/frame damage but are easily cosmetically repaired.  If you smash up the car but get the body fixed, and you don't go through insurance, it will be indistinguishable from the same car that hasn't been in a crash.
I must say, I can't completely agree with the tone of most of these answers.  I think there may be a good reason to buy a new car, or a luxurious used car. For years I drove old, second hand cars that were really cheap. and unreliable.  I can't count the number of times I was left stranded because my car didn't start, or the alternator burned out.  I could have bought more recent models, but I was trying to save money. But in 2010 I found a very low mileage 2008 Smart Car for small money.  It was a good deal at the time.  It was almost new, having very low mileage, and about 60% of the price of a new, less well appointed Smart.  I found out that I really like driving cars that won't break down and leave me stranded in sleet or ice storms.  When my wife's Mazda hatchback finally rusted to the point that it wouldn't pass the safety inspection and couldn't be repaired, we bought a new 2013 Toyota Rav4.  We are really happy with it.  It's probably not a luxury car to you, but having reliable heat and air conditioning seems like luxury to us, and we are happy with our decision.  I get the Smart serviced at the Mercedes shop.  They have very nice coffee and pastries, and very fast free wifi. Your plan isn't bad, but it probably isn't worth the cost for the small amount of credit building it will achieve. If you do decide to continue with it though, you'll save in interest if you make the big payment now rather than in 6 months. In other words, you can take the minimum payment, multiply it by 5, subtract that amount from the total you owe and pay the difference immediately. This way you'll still get the 6 months of reporting to the credit bureaus, but you'll pay less interest since you'll have less principle each month. I would recommend applying for the credit card right now. I believe you'll probably get approved now. If you do, then pay off the car loan without thinking about it. (If you don't get approved, think about it, then probably still pay it off.) Regarding the full coverage insurance, even after the loan is paid off and you aren't required to have it, you may still want to keep it. Even if you're the best driver on earth, if someone hits you and doesn't have insurance, or they have insurance and drive off, or a deer runs in front of you, etc, you'll lose your car and won't be reimbursed. Also, as Russell pointed out in the comments below, without collision coverage your insurance company has no incentive to work on your behalf when someone else hits you, so even if it's not your fault you may still not get reimbursed. So, I wouldn't pass on the full coverage unless your car isn't worth very much or you can stomach losing it if something happens. Good luck, and congrats on being able to pay for a car in full at 19 years old. "If you're making big money at 18, you should be saving every penny you can in tax-advantaged retirement accounts. (If your employer offers it, see if you can do a Roth 401(k), as odds are good you'll be in a higher tax bracket at retirement than you are now and you will benefit from the Roth structure. Otherwise, use a regular 401(k). IRAs are also an option, but you can put more money into a 401(k) than you can into an IRA.) If you do this for a decade or two while you're young, you'll be very well set on the road to retirement. Moreover, since you think ""I've got the money, why not?"" this will actually keep the money from you so you can do a better job of avoiding that question. Your next concern will be post-tax money. You're going to be splitting this between three basic sorts of places: just plain spending it, saving/investing it in bank accounts and stock markets, or purchasing some other form of capital which will save you money or provide you with some useful capability that's worth money (e.g. owning a condo/house will help you save on rent - and you don't have to pay income taxes on that savings!) 18 is generally a little young to be setting down and buying a house, though, so you should probably look at saving money for a while instead. Open an account at Vanguard or a similar institution and buy some simple index funds. (The index funds have lower turnover, which is probably better for your unsheltered accounts, and you don't need to spend a bunch of money on mutual fund expense ratios, or spend a lot of time making a second career out of stock-picking). If you save a lot of your money for retirement now, you won't have to save as much later, and will have more income to spend on a house, so it'll all work out. Whatever you do, you shouldn't blow a bunch of money on a really fancy new car. You might consider a pretty-nice slightly-used car, but the first year of car ownership is distressingly close to just throwing your money away, and fancy cars only make it that much worse. You should also try to have some fun and interesting experiences while you're still young. It's okay to spend some money on them. Don't waste money flying first-class or spend tooo much money dining out, but fun/interesting/different experiences will serve you well throughout your life. (By contrast, routine luxury may not be worth it.)" You're losing money. And a lot of it. Consider this: the inflation is 2-4% a year (officially, depending on your spending pattern your own rate might be quite higher). You earn about 1/2%. I.e.: You're losing 3% a year. Guaranteed. You can do much better without any additional risk. 0.1% on savings account? Why not 0.9%? On-line savings account (Ally, CapitalOne-360, American Express, E*Trade, etc) give much higher rates than what you have. Current Ally rates are 0.9% on a regular savings account. 9 times more than what you have, with no additional risk: its a FDIC insured deposit. You can get a slightly higher rate with CDs (0.97% at the same bank for 12 months deposit). IRA - why is it in CD's? Its the longest term investment you have, that's where you can and should take risks, to maximize your compounding returns. Not doing that is actually more risky to you because you're guaranteeing compounding loss, of the said 3% a year. On average, more volatile stock investments have shown to be not losing money over periods of decades, even if they do lose money over shorter periods. Rental - if you can buy a property that you would pay the same amount of money for as for a comparable rental - you should definitely buy. Your debt will be secured by the property, and since you're paying the same amount or less - you're earning the equity. There's no risk here, just benefits, which again you chose to forgo. In the worst case if you default and walk away from the property you lost exactly (or less) what you would have paid for a rental anyway. 14 years old car may be cheaper than 4 years old to buy, but consider the maintenance, licensing and repairs - will it not some up to more than the difference? In my experience - it is likely to. Bottom line - you think you're risk averse, but you're exactly the opposite of that. Many reasons So in general you are paying more for peace of mind when you buy a new car. You expect everything to be working and if not you can take it back to the dealer to have them fix it for free. There is another aspect too for the high prices of GOLD. After the current economical crisis people are no more investing in property and a big chunk of investment has been diverted to GOLD. Wall Street is livid because WF is their competitor. WF is mostly an investment bank - they make the majority of their money from equities, bonds, currency trading, corporate services, etc. Small time auto loans aren't a huge portion of what they do. Why would something that's 1% of their business cause a 15% drop? It's the rate of return on new opportunities. The rate on existing projects isn't relevant. If you buy a bond 10 years ago when market Interest rates were 8%, and you have cash to buy another bond today, it is today's interest rates that are relevant, not the rates 10 years ago.