Buying New vs Used Amortization / value calculation?

[SC Maintenance]

I am in the market for an additional car. My last 3 I bought new - because back starting in 2008 I perceived total value of new being better than used. I think its even more so now as crazy as prices are?

Lets disregard taxes, insurance, etc - since those vary by state and person, and there easy enough to add back in. In my case I will be paying cash and state sales tax is capped at $500

For example - looking at a new Rav4 - I got prices for $33 to $36K dependent on some trim choices.

Looking at used, a couple years old, low mileage seem to range in the $31-$34K. Literally 10% discount at best. Maybe negotiable - would it be worth it for 20% discount? I still wonder?

Looking at same generation 2019 up, out of warranty so > 60K miles - Most here seem to be in the $25 to $29K - so 20-30% discount. Still seems paying 2/3 of new for a car with all the non trouble miles used up is a poor idea.

Going to 10-12 years old seem to be 10-$14K - so lets call that 30-40% of new. Seems like a lot still, given it likely needs some hidden problems fixed, might be a total lemon, or looking at it compared to new - I could drive the new one to this point for around $2500 per year. Why fight with something that old for $2500 per year.

Not going to get into complete beater. Not going that route for this purchase - this one will be driven by my recent grad children, so its a different thought process.

Maybe this is different for other brands - I picked a car notorious for holding its value. I could consider something else if not buying new.

I will need to do the same thing again in another year.

Thoughts on how you process this decision?

 

[JHZR2]

Ive always found that “cars lose 50% when they drive off the lot” type logic to be incorrect.

Foreign cars with high resale values are extremely poor values in the used market. Why would I take a car with 30-50k miles and only save a few $k? Not worth it.

 

[John105]

Ive always found that “cars lose 50% when they drive off the lot” type logic to be incorrect.

Foreign cars with high resale values are extremely poor values in the used market. Why would I take a car with 30-50k miles and only save a few $k? Not worth it.

context: I've never bought a used car over $2k, until 2016. At that time, I bought a 10 year old LS430 for $14,000 cash. that's another thing I never did, pay cash for a car over $2k.

The LS is a self-fulfilled prophecy. Now I've had it 6.5 years and nothing broke. I actually like the car, it's the flagship. Outdated electronics, free XM where I had to replace the antenna, and 14 mpg since my commute is all city. It was a good 2500 more than a comparable Audi A8 of the same vintage, where the Audi would have been more than 15k higher (just under 80k) when both cars were purchased in 2006. Could be the above experience would not be true of the Audi, who knows.

At any rate, I think it goes like this. When I was thinking of a S63 AMG P30, new was not even a consideration. $40k used was what I had in mind. And all the outrageous options, they have little to no value once the car is 6-7 y.o. on the used market. So that leather that cost $3k more than one would never have gotten on a new car, or the P30 itself, one can get it used. That's what used is for. I agree with your thinking that it's not really that the original purchaser got beat up so badly and the used car buyer swooped in and took advantage.

Also, many performance vehicles likely got thrashed by the previous owner(s). Try to get a 6 y.o. AMG with one owner, often there were already 3. This is where the used grandpa cars like the LS430 shine

 

[Tdbo]

I never have really found the 50% depreciation rule to hold much water.

When I bought my Accord new, I found the same car used with 15K on it on a lot. Buying used would have saved me a whole hundred dollars. The wear on the tires and brakes would have cost me more than that.
Years ago, I bought a new 2004 Ranger off the lot. Found its carbon copy (down to the color) used with 17K on the lot of another Ford dealer for 2K more than I paid new.
When I bought a new Taurus in 2000, there was a 1K difference between new, and the same car with 20K on it. I still bought new, for the same rationale as I explained on the Accord.

The only time that I saw the 50% rule play out was when my Mother was still living, she got the idea that she wanted a Lincoln Town Car.
I went shopping (this was 1993) and found that I could buy a 1992 TC with 19K that stickered for over 38K at he time for just a hair under 20K. American luxury cars back in the day have been the only vehicle that I have seen the 50% rule hold any water.

My rule has always been buy new at the end of the model year (or better yet, at the end of that calendar year) on new leftover vehicles and aim for the depreciated book value. Have always had good luck with that strategy. I'd rather make my own used cars.

 

[KrisZ]

It’s a crazy market fueled by crazy people overpaying.

 

[John105]

It’s a crazy market fueled by crazy people overpaying.

It's not good when say a car I was eyeing in 2019 used, has the same price today in 2023, yet 4 years have gone by and the mileage is even higher.

 

[SC Maintenance]

It’s a crazy market fueled by crazy people overpaying.

I agree but its still been expensive even before that - IMHO. Back in the late 90's - early 2000's I bought 3 late model used for 60% of new - ish - all were just outside warranty miles. I haven't seen anything close to that since.

 

[KrisZ]

I agree but its still been expensive even before that - IMHO. Back in the late 90's - early 2000's I bought 3 late model used for 60% of new - ish - all were just outside warranty miles. I haven't seen anything close to that since.

How do you eat an elephant?

Same thing applies to “you will own nothing and be happy”. People think it’s crazy talk because they expect someone show so at their door and take stuff from them.
In reality it has been happening for decades. The transfer of wealth is real, we are now near the, “critical mass” so changes are much more noticeable and drastic.

 

[John105]

I agree but its still been expensive even before that - IMHO. Back in the late 90's - early 2000's I bought 3 late model used for 60% of new - ish - all were just outside warranty miles. I haven't seen anything close to that since.

Why I don't think that % is meaningful. As mentioned in my own experience, I paid $14k for a 10 y.o. car that listed for $65,300, in 2016. At that time, an Audi which listed for $78k, was around $12k. So since both were 2006's in 2016, by your reasoning, the Audi was a way better deal. Why I didn't buy the Audi is I felt the ownership experience was going to be way different going forward. I'm also into DIY and not into removing the front clip for routine maintenance

 

[b_b]

the sweet spot when i was younger, the value of a vehicle was based upon a 100k service life. what people hadnt caught on to at the time, was vehicles could make it to 200k. so the trick was to buy 70k ish a couple years old. The vehicle was 50% of what is was new, if not less. and still had a lot of life left.

 

[John105]

the sweet spot when i was younger, the value of a vehicle was based upon a 100k service life. what people hadnt caught on to at the time, was vehicles could make it to 200k. so the trick was to buy 70k ish a couple years old. The vehicle was 50% of what is was new, if not less. and still had a lot of life left.

People still hadn't learned with used Lexus. It's well documented that 300k is likely, 1 million miles exists.

So you have a car with 80k selling for $14k, and one with 23k selling for $20k. What possible benefit is the low miles, on a 10 y.o. car, when 300k miles is shooting fish in a barrel?

 

[JMJNet]

The 50% price depreciation after driving out of the lot is not valid for Toyota (Lexus) and Honda (Acura).
In some cases, now, they are more expensive than the new one, especially if you try to buy it at stealership.
This is based on what I see now.

I usually don't care about the mileage in a Toyota or Lexus too much as stated @John105.

 

[JTK]

There was a time when it was pretty close to 50% for 1-3yr/old domestics, but this was close to 20yrs ago.

In 2003 I had bought a 2001 Ford Windstar ex rental with miles in the teens for $12K.

In 2006 I bought a 2005 Chevy Trailblazer LS 4x4 ex rental with miles in the teens for $16K.

Both were about half off original MSRP.

I remember Impalas and Taurii of that era easily being 50% off as well.

 

[SC Maintenance]

Why I don't think that % is meaningful. As mentioned in my own experience, I paid $14k for a 10 y.o. car that listed for $65,300, in 2016.

14/65 is about 21%. So you paid 21% of new for a 10 year old vehicle. Seems like a good deal to me.

21% of a new Rav4 is about $7K. This seems reasonable - but 10 year old Rav4's are up to double that.

So maybe the answer is - it depends on the vehicle and vehicle class - each one is different?

 

[John105]

14/65 is about 21%. So you paid 21% of new for a 10 year old vehicle. Seems like a good deal to me.

21% of a new Rav4 is about $7K. This seems reasonable - but 10 year old Rav4's are up to double that.

So maybe the answer is - it depends on the vehicle and vehicle class - each one is different?

This was part of the real decision back then. A 2014 Camry (not a 2014.5 as there was a revision) was the exact same price. I was asking myself, how many people choose the car with 8 cyl, 8 years older, and with 45k more miles? Is this vanity lol? The Camrys were service loaners that had hit 35k or so. but I guess what I'm saying is the decision to me is more meaniful if I say what cars can I get for $14k? Not that this car I like and am considering, was $65k new....

 

[ecotourist]

When I bought my '00 BMW it was 3 years old and had 51,950 km (32,000 miles). It was a somewhat rare car even then - with an M-sport package, interior appearance package and 5 speed manual transmission. Including some refurbishing I paid about half the replacement cost. That seemed like a good purchase at the time.

It was a terrific car. If the body had stayed pristine I would have kept it forever. But it had some body rust after only 18 years in my care which I believe arose from those 3 years when I didn't own it. Local BMWs of the same vintage (typically) don't have any significant rust. And the cost to repair the body ($4,000+) and to put it in perfect mechanical order ($4,000+) for a car worth maybe $8,000 didn't make any financial sense.

So I sold it to a nephew who needed a car. He'll take care of it and mile it out.

So considering the end, should I have bought a new one instead?

 

[macarose]

Let me help you with this...

A full-size car is usually a far better value in the marketplace than a compact SUV.

The sweet spot if you live where rust is minimal to non-existent is approximately in the 10 year / 100,000 mile range assuming all the maintenance and needed repairs have been done.

Defunct brands, discontinued models, stickshifts in non-sporty vehicles, and any midsize or larger Mitsubishi that has been well kept will be exceptionally high up the value chain.

Finally, a car that you truly love and keep until you can drive it no more is the ultimate value play.

So with that said... what do you drive right now?

 

[eljefino]

There was a time when it was pretty close to 50% for 1-3yr/old domestics, but this was close to 20yrs ago.

In 2003 I had bought a 2001 Ford Windstar ex rental with miles in the teens for $12K.

In 2006 I bought a 2005 Chevy Trailblazer LS 4x4 ex rental with miles in the teens for $16K.

Both were about half off original MSRP.

I remember Impalas and Taurii of that era easily being 50% off as well.

Yeah the automakers owned the rental companies back then and pushed bunches of vehicles through the fleets. You'd see ex-rental cars with 6000 miles being sold as "program cars" at a decent discount.

They did this because they wanted a parallel market selling cars that didn't interfere with their own business of selling new cars. I suspect they also had supplier and labor contracts, at the time, that pretty much required that they keep stamping things out whether or not they were making money.

Plus people (somebody?) cared if the Taurus or Accord was the best selling car, for bragging rights. This was back when people bought sedans.

 

[PWMDMD]

Ive always found that “cars lose 50% when they drive off the lot” type logic to be incorrect.

Foreign cars with high resale values are extremely poor values in the used market. Why would I take a car with 30-50k miles and only save a few $k? Not worth it.

Clearly...I've watched people pay more for a 2023 Tundra with 18k miles on it than it cost new.

 

[leadcounsel]

Traditional rules would have been buying a quality vehicle that has about 65-75% of its design life expectancy remaining, but at ~30% of the new value. For instance, a 2010 Honda Accord ranged from the low 20s to low 30s, let's just say $25,000. In 2020 buying a 2010 Honda Accord with say 70k miles for $6-7000. This car, well maintained, can expect to last another 30 years and 300,000 miles. But you're only paying 1/3 of the original sticker price, for a car that is only 25%-35% used up and will last most of the entire life expectancy remaining. Getting a car with 2/3rds left for 1/3rd the price, effectively. I did this with many vehicles, so it's not a theory. But this is all twisted upside down now, and folks want $12,000 for that car today.