car purchase: new vs. used

[feh]

Hi folks.

I've purchased 4 cars in my life, and they were new each time. I had been planning on going the "slightly used" route for our next auto purchase, as is generally suggested here, due to the depreciation issue.

Well, it's now time, and I'm having second thoughts. Some reasons:

• I don't like not knowing how a car was previously treated
• I've heard used car prices are up
• I've heard new car prices are down
• we drive our cars until they die, which minimizes the depreciation issue

Thoughts/comments?

Thanks!

[bjl584]

Hi folks.

I've purchased 4 cars in my life, and they were new each time. I had been planning on going the "slightly used" route for our next auto purchase, as is generally suggested here, due to the depreciation issue.

Well, it's now time, and I'm having second thoughts. Some reasons:

• I don't like not knowing how a car was previously treated
• I've heard used car prices are up
• I've heard new car prices are down
• we drive our cars until they die, which minimizes the depreciation issue

Thoughts/comments?

Thanks!

Certain used car prices are up. Some are way up. Mostly fuel efficient models. I'm not really sure about new car prices being down. Most of what I have seen is the standard increase in price across the board for all automakers.

I've own several used cars and a few new ones. I do all my own maintenece and keep detailed records. I've always felt better about and had better luck with the cars that I've owned new. The used ones were bought less expensively, but I always ended up in the shop more with them or wrenching on them in my garage way more than the new ones. I realize my experience is a micocosm of the world of automobiles, but it has been my experience.

There is nothing wrong with buying new, especially since you plan on keeping it until it dies. Just be sure you can afford it. Pay cash, or (stealing Steve's rule of thumb) finance for no more than 36 months at no more than 10% of your monthly take home. If you are able to take advantage of 0% financing, that could also be an option if the numbers work and if you can park the money somewhere else and make a better return on it.

[feh]

There is nothing wrong with buying new, especially since you plan on keeping it until it dies. Just be sure you can afford it. Pay cash, or (stealing Steve's rule of thumb) finance for no more than 36 months at no more than 10% of your monthly take home. If you are able to take advantage of 0% financing, that could also be an option if the numbers work and if you can park the money somewhere else and make a better return on it.

We'll be paying cash for the car, unless we were offered 0% financing.

[bjl584]

We'll be paying cash for the car, unless we were offered 0% financing.

Just keep in mind that if they do offer 0%, it may be because they are foregoing some of the rebates or incentives. You will probably get a better total price on the vehicle by not taking the 0% option unless you are good at negotiating. Since you are paying cash, it may be more beneficial to take whatever rebates they are offering, negotiate a better amount for your trade (if you have one), then write your check for the purchase. You will just have to see how the numbers work.

[feh]

Just keep in mind that if they do offer 0%, it may be because they are foregoing some of the rebates or incentives. You will probably get a better total price on the vehicle by not taking the 0% option unless you are good at negotiating. Since you are paying cash, it may be more beneficial to take whatever rebates they are offering, negotiate a better amount for your trade (if you have one), then write your check for the purchase. You will just have to see how the numbers work.

I am pretty good at bartering, and there won't be a trade-in.

Last time we bought I didn't indicate we'd be paying cash until we had agreed on a price, which is also my plan this time.

[MonkeyMama]

"I don't like not knowing how a car was previously treated"

I don't think this particularly matters. I think you would generally save far more on the purchase price than any maintenance issues, on most newer vehicles. The OLDER the car is, the more its prior treatment matters. But didn't get the feeling you were going very old?

Though our M.O. when younger was to buy older models that had barely been driven, we have settled into buying prior rentals. 1-year-old vehicles with low mileage. The cost of these vehicles has ran us about 60% of buying new. So we will keep it 19 years instead of 20 years - and we saved $10k-ish up front. OF course, people think these are the worst cars to buy. I figured they were well maintained by the rental companies. We have a 2001 Ford that has had absolutely no issues. So, bought a 2005 minivan in the same manner. I would not buy a sports car or a popular vehicle (high mileage) as a prior rental. You know people really run those cars hard.

All that said, if you have the cash and really want to buy new, so be it. As a tip? If you can find a brand new car in last year's model, will save you a lot as well. I know several people who have saved a lot of money going this route. This is the time of year it seems the dealerships are clearing out older vehicles, if I recall correctly. Even if you find a used car with 500 miles on it, you'll likely save a fortune on depreciation.

I've seen some used cars going for higher prices than new cars. Just depends on the car. Don't buy used if it is cheaper new, of course.

[disneysteve]

Both of our current cars were bought used. Both were certified pre-owned Toyotas. We've had one for 13 years and one for 9 years. I think we made out okay.

That said, I have also read that the demand for used cars is up a lot and prices are up as well. I think you really need to compare new vs. used models of the same car and see what is out there. I've even read about used models bringing higher prices than a new model of the same car which is simply nuts. Obviously, the new car is the way to go in that case.

[maat55]

We'll be paying cash for the car, unless we were offered 0% financing.

Careful, 0% financing is a myth. In most cases, they will take less in cash. They usually want asking price with 0% financing.

[maat55]

Both of our current cars were bought used. Both were certified pre-owned Toyotas. We've had one for 13 years and one for 9 years. I think we made out okay.

That said, I have also read that the demand for used cars is up a lot and prices are up as well. I think you really need to compare new vs. used models of the same car and see what is out there. I've even read about used models bringing higher prices than a new model of the same car which is simply nuts. Obviously, the new car is the way to go in that case.

You can thank the government for higher used prices due to "Cash for Clunkers". It destroyed alot of affordable cars for the poor.

[disneysteve]

You can thank the government for higher used prices due to "Cash for Clunkers". It destroyed alot of affordable cars for the poor.

Not just the poor. Thousands of cars that qualified for destruction were newer and better than the car I currently drive. In fact, I had checked and my car didn't qualify or else I would have considered replacing it with the incentive.

Another problem was the drop in new car sales. That affected the usual supply curve.

[thekid]

Just keep in mind that if they do offer 0%, it may be because they are foregoing some of the rebates or incentives. You will probably get a better total price on the vehicle by not taking the 0% option unless you are good at negotiating. Since you are paying cash, it may be more beneficial to take whatever rebates they are offering, negotiate a better amount for your trade (if you have one), then write your check for the purchase. You will just have to see how the numbers work.

Manufacturers offering low financing incentives almost always also give cash rebates for cash purchases. You can check this online, on sites like car quotes.

One thing to remember (actually, the key thing to remember) when negociating a car is the distinction between manufacturer rebates/incentives and dealer rebates.

Manufacturers incentives don't cost the dealer a penny, those are gimmes. Then, you negociate with the dealer.

When you negociate, ask for the manufacturers rebates (cross check online first). Then, ask what the dealer will do for you.

for example, i'm currently shopping for a new cr-v and also paying cash. honda's cash purchase rebate is of 1500$. i'm waiting for additional manufacturers rebates closer to the release date for the 2012s. Those rebates, I already have before stepping foot at a dealer. If one goes in uninformed, the dealer won't even give you the full manufacturer's rebates (he'll pocket it!) much less any rebate on his own mark up.

[thekid]

To the OP, check what the average yearly depreciation is over the life of the car add some "older car" maintenance costs and compare that to the yearly depreciation for the first few years. If it's fairly similar, you're probably better off buying new. If not, you'll have to decide whether the premium you are paying is worth it.

For the CR-V's I've been looking at (also looking at slightly used), the depreciation in the first few years is not much steeper than that of later years (say years 1-3 compared to 4-7) so it makes little sense to buy used...especially after you factor in manufacturer rebates on cash purchases which are not available on used vehicles.

[Simplicity-]

an example for the OP, something to think about.

I own a 1997 Honda Accord LX with 143K Miles. I was offered by 3 carlots One Honda, one Ford, one GM 5,000$ for my car. This was Purchase value, not trade-in. I didn't sell it because i own 3 same body style accords, as I love them to much. Just something to make you think about the price of used cars. 2-3 months ago I was looking at 3k max selling value.

Depending on YOUR mechanical level, I always advised to buy new, certified pre-owned, or great condition used no older then 5 years old. I was born and raised in a garage so i don't mind old vehicles as I have the tools, know how, and love to work on them. Which in turn saves me booku bucks in the long run.

Just food for thought, either way CONGRATULATIONS! A new car(to you) is always a great day!

[feh]

We've decided to buy new (hopefully this weekend). I've never traded in a car, and I won't be this time either, so that simplifies the negotiations.

Thanks everybody.

[shanecurran]

Made me think of Akerlof's famous paper The Market for Lemons Here is a link to it: http://www.iei.liu.se/nek/730g75/art...tforLemons.pdf
and unlike most Academic articles in Economics you don't have to have a PhD to understand it.