Nick1994
$100 site donor 2024
Trying to think here if it makes that much financial sense to buy cars used over new? Or beaters over slightly used?
Let's look at another example:
All of this is excluding dealer doc fees and taxes, but taxes should be relative to it's value and would apply either way whether you're buying new or used (outside of private party, depending on the state). Another thing to consider is that although my examples are of very average cars, they tend to hold their value better than some models. Also, I pulled the values above from KBB for my area (very good condition) and got the retail used price looking at AutoTrader for my area (Phoenix) and kinda averaged them together.
Another thing to consider, is that maintenance and repairs for a new/newer car should be less/minimal compared to an older car, so if we look at the depreciation being pretty linear, I'm not seeing much of a savings for buying a used car over a new one. For example, buying a 2017 Accord or RAV4 means it might need a repair/maintenance coming up soon like struts, tires, etc. which would increase the annual cost outside of depreciation.
What does this all wrap up to mean? I'm not sure it is that big of a difference in the end to make it a clear choice. Though if you need to finance the car without a large trade-in or down payment, you might need a used car to make your monthly budget work. But at the bottom dollar, I'm not sure it matters.
One more thought is to buy an old used 14yo 200k mile example of the above cars private party, say for $6k with the intention to drive the wheels off of it, until 300k miles. If that takes 7 more years and the car is worth maybe $3k at 21 years old, that's $450 a year in depreciation. But how much in annual repairs and maintenance for it's life from 200k-300k miles?
What are your guys' thoughts?
- Say you bought a 2017 Honda Accord Sport for $24.5k new. Today after 100k miles it's got a trade in value of $12k, about $1800 annual depreciation.
- Say you bought a 2021 Honda Accord Sport for $25.5k new. Today after 50k miles it's got a trade in value of $20.5k, about $1500 annual depreciation (we're at the end of 2024, 3.5 years I calculated).
- Today a used 2017 Honda Accord Sport with 100k miles is going for around $16k retail. I'm not sure what the value would be after 7 more years and another 100k miles, but currently a 2010 200k mile Accord sells private party for about $5,300, and was $24k new, so $1,350 yearly depreciation from new, losing 78% of it's original value. If we assume the same depreciation for a 2017 to go 7 more years, that would mean it would cost about $1,500 a year in depreciation for it's life from 7 until 14 if we bought it used at 7 years old.
Let's look at another example:
- 2017 Toyota RAV4 XLE, which was $25.5k new. Today after 100k miles it's got a trade in value of $13k, about $1800 annual depreciation.
- 2021 Toyota RAV4 XLE, which was $27.5k new. Today after 50k miles it's got a trade in value of $22.8k, about $1350 annual depreciation, using 3.5 years.
- Today a used 2017 Toyota RAV4 XLE with 100k miles is going for around $17k retail. If we look at a 2010 RAV4 Sport, it's worth $6600 private party, was $23.5k new so $1200 annual depreciation from new, losing 72% of it's original value. If we assume the same for a 2017 RAV4 XLE, it'll be worth $7,140. That would mean it would cost about $1,400 a year in depreciation for it's life from 7 until 14 if we bought it used at 7 years old.
All of this is excluding dealer doc fees and taxes, but taxes should be relative to it's value and would apply either way whether you're buying new or used (outside of private party, depending on the state). Another thing to consider is that although my examples are of very average cars, they tend to hold their value better than some models. Also, I pulled the values above from KBB for my area (very good condition) and got the retail used price looking at AutoTrader for my area (Phoenix) and kinda averaged them together.
Another thing to consider, is that maintenance and repairs for a new/newer car should be less/minimal compared to an older car, so if we look at the depreciation being pretty linear, I'm not seeing much of a savings for buying a used car over a new one. For example, buying a 2017 Accord or RAV4 means it might need a repair/maintenance coming up soon like struts, tires, etc. which would increase the annual cost outside of depreciation.
What does this all wrap up to mean? I'm not sure it is that big of a difference in the end to make it a clear choice. Though if you need to finance the car without a large trade-in or down payment, you might need a used car to make your monthly budget work. But at the bottom dollar, I'm not sure it matters.
One more thought is to buy an old used 14yo 200k mile example of the above cars private party, say for $6k with the intention to drive the wheels off of it, until 300k miles. If that takes 7 more years and the car is worth maybe $3k at 21 years old, that's $450 a year in depreciation. But how much in annual repairs and maintenance for it's life from 200k-300k miles?
What are your guys' thoughts?