When does a used car make the most sense?

[corn18]

Ever wonder why OTR trucks last for literally hundreds of thousands of miles, many passing a million miles without a sweat?

Nothing on OTR trucks lasts a million miles. By the time they get to that point, the whole truck has been repaired or replaced. Proper maintenance is what gets them there.

[maat55]

I'm concerned less about the year of the auto as I am the miles, condition and reliability history. My current search criteria is for trucks with less than 75k miles that may range from 2007-2012. I've set a maximum price and will attempt to get the best truck I can. I may find a suitable truck for below my max and pocket the savings.

I will not buy new under any circumstance. There is just too much depreciation the first 2 years, IMO. I'm not knocking those who buy new, someone has to do it.

[disneysteve]

I will not buy new under any circumstance. There is just too much depreciation the first 2 years, IMO. I'm not knocking those who buy new, someone has to do it.

Another reason not to buy new is that new cars, especially new models or newly redesigned models, often have issues that haven't yet been identified. Once a car is 2 or 3 or 4 years old, those issues have usually come to light. The last new car we bought was recalled 4 times in under 5 years. I prefer to let someone else deal with those headaches.

But as maat55 points out, I hope other people keep buying new cars so that the rest of us have a steady supply of used cars from which to choose.

[greenskeeper]

Nothing on OTR trucks lasts a million miles. By the time they get to that point, the whole truck has been repaired or replaced. Proper maintenance is what gets them there.

Most go at least 500k before any kind of rebuild needed. There is always the exception to the rule with anything mechanical.

I purchased my truck from a 'Veteran' driver, which had detailed maintenance records from the day it was purchase new.
Had 750,000 on it without a hint of engine/drive train leak.

I finally gave my truck up at 2.25 million miles.
One 'In Frame' overhaul at 1.75 million miles, original transmission, original differentials, and one clutch (1.75 million when we dropped the crank for the in frame.

http://www.thetruckersreport.com/truckingindustryforum/questions-to-truckers-from-the-general-public/144025-how-many-miles-does-tractor-last-3.html?

Just one of many examples available online, plenty more with speaking from actual truckers and mechanics I know who run these trucks.

[jIM_Ohio]

Most go at least 500k before any kind of rebuild needed. There is always the exception to the rule with anything mechanical.

http://www.thetruckersreport.com/truckingindustryforum/questions-to-truckers-from-the-general-public/144025-how-many-miles-does-tractor-last-3.html?

Just one of many examples available online, plenty more with speaking from actual truckers and mechanics I know who run these trucks.

Especially if the engines run 8-16 hours per day- I have heard taxis in NYC get more miles than most cars because their engines are rarely shut off

[ua_guy]

Especially if the engines run 8-16 hours per day- I have heard taxis in NYC get more miles than most cars because their engines are rarely shut off

It's not uncommon for a taxi to see anywhere from 200,000 to 400,000 miles++. Most of them are ex-police units purchased at auction with between 80-100k. Talk about a hard life...first being used for police duty, then, spending the next 200k going from fare to fare. Ford Crown Victorias are built like tanks.

Anyway, to answer the OP's question--my philosophy has always been to buy the newest and lowest mileage car I can afford. I've bought new a couple of times--leftover units from previous model years with stacks of cash on the hood between manufacturer rebates and dealer incentives. I picked up my last car for 18,700 (MSRP just under 25k) and that basically paid for the first 1-2 years of depreciation, plus I got a brand new car with full warranty and a rider that doubled the manufacturer's powertrain warranty from 100k to 200k.

Good resale is only important if you plan to sell a vehicle purchased new; otherwise you're paying a premium to buy a used car. And, reliability in my experience has been more about care and maintenance than some arbitrary Consumer Report rating. There are certainly more exciting options out there than the Toyota Camry, a lot of cars that are a better value in the used market too, but I can see why people see it as a safe choice. Good luck with whatever you decide; I'd go with the newest/lowest mileage example you can afford within your budget.

[NetSkyBlue]

I guess it depends on what you intend to do with the money saved.

I can buy a 2015 for $23k that I pulled out of my savings, today. Let's say it will last 10 years before giving up the ghost.

I can buy a 2012 for $17k, invest that extra 6k, and at the end of 8 years (because I'm assuming the car dies after 10 years), I've got over $9,500 assuming 6% returns. $3,500 in investment returns.

Or I can buy the 2009, for $8,500, drive it for 6 years, invest the extra $14,500, and have over $23,000 after those 6 years are up. $8,500 in investment returns.


Although the reality is probably more like the car will last for X number of miles, rather than years.

The first used car was driven 10k miles per year, the second 25k miles per year. The "average" driver drives somewhere between 13-15k miles per year, so let's say YOU drive 14k miles per year.

Let's say that the car will last 200k miles assuming you're caring for it.

You could drive the new car 14 years for $23k and invest nothing.

You could drive the 2012 car for 12 years ((200k-30k)/14k), and invest your 6k savings. You end up with over 12k in your investment at the end of 12 years. $6,000 in investment returns.

You could drive the 2009 car for 7 years ((200k-100k)/14k), and invest your $14,500 savings. You end up with over $21,000 investment account. $6,500 in investment returns.


Short story: consider how long you will TRULY use the car, based on its condition (a rusty car, or poorly maintained car won't last you as long), its mileage, and your annual mileage. Of course, all of this depends on your actually having the money to buy the car in-hand.


Also, gas mileage comes into play when looking at which car to buy. A car driving 14k miles per year, at 42 mpg, $2.50/gallon gas is costing you $833/year in gas to drive. A car getting only 23 mpg is going to cost you $1521/year. Over 7-12 years, that's going to have an even bigger impact on your finances than purchase price.

[MKKShah]

I guess it depends on what you intend to do with the money saved.

I can buy a 2015 for $23k that I pulled out of my savings, today. Let's say it will last 10 years before giving up the ghost.

I can buy a 2012 for $17k, invest that extra 6k, and at the end of 8 years (because I'm assuming the car dies after 10 years), I've got over $9,500 assuming 6% returns. $3,500 in investment returns.

Or I can buy the 2009, for $8,500, drive it for 6 years, invest the extra $14,500, and have over $23,000 after those 6 years are up. $8,500 in investment returns.


Although the reality is probably more like the car will last for X number of miles, rather than years.

The first used car was driven 10k miles per year, the second 25k miles per year. The "average" driver drives somewhere between 13-15k miles per year, so let's say YOU drive 14k miles per year.

Let's say that the car will last 200k miles assuming you're caring for it.

You could drive the new car 14 years for $23k and invest nothing.

You could drive the 2012 car for 12 years ((200k-30k)/14k), and invest your 6k savings. You end up with over 12k in your investment at the end of 12 years. $6,000 in investment returns.

You could drive the 2009 car for 7 years ((200k-100k)/14k), and invest your $14,500 savings. You end up with over $21,000 investment account. $6,500 in investment returns.


Short story: consider how long you will TRULY use the car, based on its condition (a rusty car, or poorly maintained car won't last you as long), its mileage, and your annual mileage. Of course, all of this depends on your actually having the money to buy the car in-hand.


Also, gas mileage comes into play when looking at which car to buy. A car driving 14k miles per year, at 42 mpg, $2.50/gallon gas is costing you $833/year in gas to drive. A car getting only 23 mpg is going to cost you $1521/year. Over 7-12 years, that's going to have an even bigger impact on your finances than purchase price.

Very interesting perspective. The number in your investment account at the end of years 6 / 12 is indeed eye popping. But the above numbers assumes that you will "pay cash". What if you finance? Right now many new car dealers are offering 0%-1.9% offers. Used loans for someone with good credit is 2.99%. How does it play in your calculations. Finance your car purchase and invest your capital.

In this case, it seems to me that the new car probably gives an even run for your money.

[MKKShah]

It's not uncommon for a taxi to see anywhere from 200,000 to 400,000 miles++. Most of them are ex-police units purchased at auction with between 80-100k. Talk about a hard life...first being used for police duty, then, spending the next 200k going from fare to fare. Ford Crown Victorias are built like tanks.

Anyway, to answer the OP's question--my philosophy has always been to buy the newest and lowest mileage car I can afford. I've bought new a couple of times--leftover units from previous model years with stacks of cash on the hood between manufacturer rebates and dealer incentives. I picked up my last car for 18,700 (MSRP just under 25k) and that basically paid for the first 1-2 years of depreciation, plus I got a brand new car with full warranty and a rider that doubled the manufacturer's powertrain warranty from 100k to 200k.

Good resale is only important if you plan to sell a vehicle purchased new; otherwise you're paying a premium to buy a used car. And, reliability in my experience has been more about care and maintenance than some arbitrary Consumer Report rating. There are certainly more exciting options out there than the Toyota Camry, a lot of cars that are a better value in the used market too, but I can see why people see it as a safe choice. Good luck with whatever you decide; I'd go with the newest/lowest mileage example you can afford within your budget.

Good point about taxi's and trucks. But given that these are commercial vehicles, the maintenance dollars spent on them will far outstrip the actual purchase price of the vehicle.

[MKKShah]

Especially if you are buying something reliable like a Toyota or Honda for a car, a used vehicle has been my choice for over 20 years. I got over 200K out of my 1995 Camry. And 3 years ago I purchased a 2010 Camry from Hertz Rent2Buy program. I liked it so much, I purchased a RAV for my wife a few months ago the same way. If you get the vehicles right from the rental location, you save like $1,500 to $2,000 before they go to the hertz car sales lots. And I got a 12 month powertrain warranty for free, yeah!

As far as a daily driver, they work great and both have been impeccably reliable.

I am not sure I would buy a known rental car. They get driven hard, and generally abused but the discount on their price is not any more that say a used car out of a lease.

[MKKShah]

I know it's a high commission item, but why not the extended warranty if you are THAT worried about repairs during a certain time period/prescribed mileage? (and I admit a high repair item would bum me and stress me if it was 6 months after I purchased).

In NJ, it's considered an "insurance policy" and they refund you a pro-rated difference of what you didn't use with the mileage/prescribed time, that is, if you trade it in, sell it.

Now you sort of own a "new car", at least on the warranty side of things. Yes, I always keep mine past the extended warranty but I never have that huge initial outlay for a new car.

Just bought a 2006 Chevy HHR for $8900 w 45K on it. . .warranty goes up to 91K.

I dunno. . .I am aware when dealing when you put an extended warranty on the table, car salesmen salivate, but you know. . .I want it. And I use that to my advantage. I am aware that they think they are doing YOU a favor if you finance through them but I know they get commission on THAT as well. . .so I know what's on the table and what's not. And it's a transferable asset and able to be financed. (I still assume most of us are paying a small car payment at least for a little while)

Not for everyone I know. . .I am aware standard financial concept is a car repair is an emergency fund item. And I won't challenge that.

But add in a furnace repair, a major roof leak, fridge goes kaput and now a bad transmission. . .when it rains it can pour. Why risk your method of earning income?

I am not so sure about the warranty part. Searching online, I see a ton of complaints about companies not honoring their warranties. Collecting on genuine insurance payments say when you are in an accident is bad enough, good luck with those warranties. I think there is a reason why car dealerships get such a huge commission on used car warranties.

[MKKShah]

In recent years, this was often true, especially after the cash for clunkers period. Used cars were in short supply and prices spiked up to where it was sometimes virtually the same price to buy a new model intead of a used one. In those cases, the new car was almost a no-brainer.

Used car supplies and prices have been trending back down to normal ranges though so the gap between new and used is getting wider again.

Brilliant point. I was thinking the same thing. New car sales plummeted by 50% during the great recession of 2008-09. So if you were looking for a 3 year old car in 2011-2012, well they were in an incredibly short supply. Add in the cash for clunker program, and used cars were in real short supply. In fact, so bad was this shortage that several hundred used car dealers went out of business just because they couldn't find enough used cars to sell, and when they did find any the margins were low.

Also agree with you that somebody's gotta buy new for us to be able to able to buy used.

[NetSkyBlue]

Very interesting perspective. The number in your investment account at the end of years 6 / 12 is indeed eye popping. But the above numbers assumes that you will "pay cash". What if you finance? Right now many new car dealers are offering 0%-1.9% offers. Used loans for someone with good credit is 2.99%. How does it play in your calculations. Finance your car purchase and invest your capital.

In this case, it seems to me that the new car probably gives an even run for your money.

Ok, you put 10% down on the new car ($2,300) and invest the remaining $20,700. You finance at 1.9% for 5 years, and pay only the minimum. Monthly payments would be 361.92, according to bankrate.com, so let's say each month you withdraw that amount from your invested capital to make the payment - at the end of the month, even, to give you more time to compound interest. (Not going to mess with transaction fees/capital gains taxes for this scenario, but that would hurt you further). At the end of 60 months, you have just over $2600 left in the investment account, and 9 years left on the car's mileage-lifespan. At the end of those 9 years, you have $4,510 in your investment account. Still not a better deal than used.

(All this assuming 6% returns)