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    new versus used car depreciation

    So I'm just trying to figure out the sweet spot for cars and just doing some thinking. I had an oil change yesterday and was offered a chance to trade in my toyota minivan for what I thought was a lot of money and get a deal on new minivan. Slick. But I was just thinking I was offered like $15k in the mail from another dealership. Anyway we bought it in 2017 for $28k and it was regular price like $50k. So about a 40% depreciation hit in 2 years. Now 4 years later it's down another 50% from what we bought it from. And down 70% total depreciation. I'm curious what point is the real sweet spot for used cars?

    Does it depend on the make and model? Or is there a better rule of thumb? Should I not have bought a 2 year old car and waited longer? But now things are starting to need work like brakes and more maintenance.
    LivingAlmostLarge Blog

    #2
    If you bought it for $28k and it's now worth $15k sight unseen, then you've only seen 46% depreciation over 4 years. It's roughly even with the rule of 50% over 5 years, assuming you could probably up that $15k offer if you sold it private party or actually negotiated it as a trade in.

    Our best car deal is still my husband's Jeep. We bought it new in 2013 with like 5 miles on it, drove it for 100k miles and sold it in 2018. It cost $33k new, and we got $26,5k cash for it in the end. It was a fantastic vehicle and we did use it for its intended purpose on many occasions. Literally the Swiss Army Knife of vehicles.

    My mantra has always been to buy standard-optioned loss leaders, new. Only with incentives, even better if it's last year's model, generally with dealer cash on the hood. Not stripped--there's frugal, and there's cheap! You're generally buying enough options in that strategy to make for compelling resale if you need to, and comfort while you own it. But you're not overpaying, and not loading it up with options that add little value.

    Edit: It used to be the "sweet spot" was just before 100k. Hitting 6 digits on the odometer had significant impact to the value. That's not really the case anymore. 150-200k+ is fairly common on a car these days, so I'd say that goalpost has been moved to at least 150k. Some cars require more significant maintenance before then, like timing chains. But if your vehicle has been good, putting a set of tires and brakes on it and driving it well over 100k doesn't seem like it would make sense to just buy new.
    Last edited by ua_guy; 07-11-2021, 03:11 PM.

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      #3
      Sweet spot for resale/trade-in?

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        #4
        Bogleheads are talking up Carvana for trading in your vehicle and getting good deals and easy transactions for trade ins

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          #5
          I think 2-3 years old is still the target Steepest depreciation has already happened and the car still has many good years ahead. They’re often coming off lease where there was a mileage cap and people kept up on maintenance to avoid extra charges.
          Steve

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            #6
            I believe most depreciation happens in the first few years.
            It then levels off and slowly loses value until it gets over 10 or 12 years old.
            Then it drops significantly

            Brian

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              #7
              Originally posted by disneysteve View Post
              I think 2-3 years old is still the target Steepest depreciation has already happened and the car still has many good years ahead. They’re often coming off lease where there was a mileage cap and people kept up on maintenance to avoid extra charges.
              This is our “sweet spot” for shopping for new (to us) vehicles. 2-3 years old and typically with mileage in the 30k-40k range. We’ve had great luck and scored some reasonable deals with this approach. We’re currently looking and the market for used vehicles is definitely frothy. Will see if we can convince DD to wait a bit before we shop in earnest.

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                #8
                Originally posted by LivingAlmostLarge View Post
                So I'm just trying to figure out the sweet spot for cars and just doing some thinking. I had an oil change yesterday and was offered a chance to trade in my toyota minivan for what I thought was a lot of money and get a deal on new minivan. Slick. But I was just thinking I was offered like $15k in the mail from another dealership. Anyway we bought it in 2017 for $28k and it was regular price like $50k. So about a 40% depreciation hit in 2 years. Now 4 years later it's down another 50% from what we bought it from. And down 70% total depreciation. I'm curious what point is the real sweet spot for used cars?

                Does it depend on the make and model? Or is there a better rule of thumb? Should I not have bought a 2 year old car and waited longer? But now things are starting to need work like brakes and more maintenance.
                I am little surprised as well. Have you looked at other sources, too, to see what the private sales price might be? The sienna has a very good reputation and the resale value usually holds up very well.

                Comment


                  #9
                  Originally posted by ua_guy View Post
                  If you bought it for $28k and it's now worth $15k sight unseen, then you've only seen 46% depreciation over 4 years. It's roughly even with the rule of 50% over 5 years, assuming you could probably up that $15k offer if you sold it private party or actually negotiated it as a trade in.

                  Our best car deal is still my husband's Jeep. We bought it new in 2013 with like 5 miles on it, drove it for 100k miles and sold it in 2018. It cost $33k new, and we got $26,5k cash for it in the end. It was a fantastic vehicle and we did use it for its intended purpose on many occasions. Literally the Swiss Army Knife of vehicles.

                  My mantra has always been to buy standard-optioned loss leaders, new. Only with incentives, even better if it's last year's model, generally with dealer cash on the hood. Not stripped--there's frugal, and there's cheap! You're generally buying enough options in that strategy to make for compelling resale if you need to, and comfort while you own it. But you're not overpaying, and not loading it up with options that add little value.

                  Edit: It used to be the "sweet spot" was just before 100k. Hitting 6 digits on the odometer had significant impact to the value. That's not really the case anymore. 150-200k+ is fairly common on a car these days, so I'd say that goalpost has been moved to at least 150k. Some cars require more significant maintenance before then, like timing chains. But if your vehicle has been good, putting a set of tires and brakes on it and driving it well over 100k doesn't seem like it would make sense to just buy new.
                  So it lost 40% in 2 years and then from 2015 to 2021 it lost another 30% so a total of 70% lost in 6 years? Does that sound right? I think it's just for trade in looking online at used cars I think I could probably get $25k I think with lots of 2017 models being $30-40k still and I see a few at dealerships 2015 for $27k. So what's real?
                  LivingAlmostLarge Blog

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                    #10
                    At least where I live, road salt begins dissolving most cars in under 10 years. Along with the depreciation of a new car, having it rust out would give me a great deal of anxiety! We're OK buying CPO and southern vehicles that have easy parts availability. My southern truck had 148k miles when I bought it, and I promptly undercoated it myself to make it last longer. (I'm also in the process of undercoating all our vehicles, even the ones with significant underbody rust.)

                    Also for us, a vehicle is simply a tool to get us from one point to another. We put almost no value on "handling" or "fun" and don't need to drive it like we're qualifying. Give us a safe, reliable, comfortable, affordable used vehicle and we're happy to drive it for 10-15 years!

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