Does it really make financial sense to buy used over new?

Nick1994

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Trying to think here if it makes that much financial sense to buy cars used over new? Or beaters over slightly used?

  • 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?
 
Trying to think here if it makes that much financial sense to buy cars used over new? Or beaters over slightly used?

  • 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?
I think you cannot cross shop a 200,000 mile car with a new one. Either you can afford all that comes with a new vehicle or you can't. A vehicle is a depreciating asset. Yes-most vehicles after 200,000 miles are going to need work. BTW-on this forum-very, very few buy newer cars-most probably don't even spend $20,000.00
 
I think used cars only make sense in sub-$10k range and cash.

Financing anything higher than that usually comes pretty close to a monthly payment on a lowest priced brand new car, due to lower interest rates and fees on a new vehicle.

Sincerely, a BITOGer and an automotive enthusiast who refuses to daily drive anything above $5k. Because I usually get a car, drive it for as long as I want, and then sell with little to no depreciation, and sometimes even with profit.

¯\_(ツ)_/¯
 
Under a certain price point $10k-$15k it’s far cheaper used….

All cars cost money and are consumable.
 
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Cars are not an investment, I wouldnt bother trying to see it as one unless you are a professional car salesperson in the business and can sell a car within a timeframe where you can make a profit. Covid was a rare opportunity and that wont happen again in your lifetime.

Instead see the cars as always needing maintenance, and that cost can be variable if you decide to fix it yourself instead of paying someone. Age is also a variable.
 
Toyota cars have recently become decent used values around here, as nearly everybody wants a CUV/ SUV/ truck. Their trucks are out-of-this world expensive.

This question always boils down to value, and the things the buyers value vary, otherwise they'd all be chasing the same car.

When I started buying my own cars in the year 2000, many, many people thought a car was "worn out" at 100- or 150k miles. It was a formula that worked in the past, but fuel injection and better rustproofing gave these cars more life than expected. Still, they were dumped on the market, cheap, because no one was buying them. Got a five year old Saturn with 88k miles for $1950, for example, and drove it another nine years.

So, like stocks, you've got to play the arbitrage, that is, you have to know where the gap in knowledge is on what a car's REAL value is, to you. To me it's something that needs an easy fix, the symptoms are well documented, yet for some reason "real" mechanics mis-diagnose it all the time. Yet, once fixed, the car needs to stay fixed, and exist with only nickel-and-dime repairs, what many consider "maintenance." So for me my happy buying point is the "mid-life crisis" where a car needs struts, brakes, and tires all at once, but with a solid power train. I "used to" get cars needing clutches or transmissions, back when they were more modular (Saturns) and people considered the expiration of said part the end of a car's life, so they want "whatever they can get" for it.

My pickup trucks have been, until the current one, single cab, RWD, with small motors. I've bought them when they were in the price trough of "total beater" but owned them until they were classic, antique "square bodies", and worth more, LOL. People can (plan to) get lucky with cars with a following-- Miatas, many VWs, the typical sports cars... and get out of them what they put into them after years of enjoyment.

Cars are an expense, but living is an expense. A reliable car is an investment in your future time being put to use for more productive purposes-- either making money at work without taking time off for repairs, or for living life in your free time, which is, pardon the cliche, priceless. If the car itself is entertaining then you're paying for that entertainment-- don't lie to yourself about it, you only live once.
 
I know some will go with used with not lot of miles mainly because they want a high option vehicle yet do not want to pay what it takes to get it new. Sometimes they can find the loaded one at a cheaper price that they can afford or dont mind paying in the used market.
 
In my lifetime I have had several MG's and a couple of Triumph's. Always bought used. Family cars I always bought new.
 
Most of the cars I ever purchased are used. Can't afford new. I look for the lowest miles for the best price and drive them into the ground. On average, The car is 5-7 years old, and then I get at least 10 years out of it.
For many years we bought used and new ones. Just depended on the times and what we liked or found. Used came first time when putting our sons thru $private$schools$. That is the time we realized you can find great used deals. I will look at both new and used next time also before making a choice. I have always had an obsession with seeing just how long I could make them all last.
My record longest one is 18 years with one of them. We are lucky and can say we never got a bomb or lemon as some have mentioned, new or used.
 
It appears so much closer when you talk about a $26,000 new car. Where things come off the rails is buying a $70,000 pickup truck when you are only hauling air with it.
Pickups are a good point. Let's look at some numbers for one with some options:

A 2017 Silverado 1500 LTZ Z71 crew cab was $49.5k new. Now with 100k miles the trade in is $24k. So $3,600 a year in depreciation. Looks like their used retail is around $28k.
A 2021 Silverado 1500 LTZ Z71 crew cab was $52.7k new. Now with 50k miles the trade in is $36k, so $4,700 a year in depreciation. Looks like their used retail is around $41k-$42k.
 
Nick, great question.

One supplemental part of the conversation is urgency to buy. On both the used and the new side, how quick one needs a vehicle is definitely part of the decision making criteria.

Need a vehicle today, unless a awesome used vehicle is available, new is often a safer bet. Have time, to include months, one an often in a much better position to negotiate on a new vehicle, or find that perfect used vehicle.
 
I've owned 45 vehicles in my 61 years not counting motorcycles. I have never bought any of them new. Out of the 45 I have only financed 2 of them. I paid those 2 off early. The most I ever spent on any of them was $11,500. I drive at least 50 miles a day and haven't had any reliability issues. I have only been towed twice that I can remember. Buy a new car? Not ever!
 
I buy regular people's cars. The cost minus fuel expenses should average less than $2k a year of ownership. Most of my vehicles are around $1.5k a year and dip below $1k after I sell it off.

If it costs more than that, I get a new one. I don't splurge and I don't sunk-cost.
 
Cars are not an investment, I wouldnt bother trying to see it as one unless you are a professional car salesperson in the business and can sell a car within a timeframe where you can make a profit. Covid was a rare opportunity and that wont happen again in your lifetime.

Instead see the cars as always needing maintenance, and that cost can be variable if you decide to fix it yourself instead of paying someone. Age is also a variable.
100%

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OP: I've never looked at any of my purchases for "Re-sale" "Value". Those that chase that tail are often disappointed. Either in the "Trade-In" value they received when they went to get another car or not happy with what they bought w/the trade in. Then you have the folks that think they want to "Game" the system of getting the most bang for their buck on trade-in just to turn around & do it again in a few years.

I may be the one going against the grain but..
The best "Value" is the car you keep.
 
About 5 years ago I was looking at an Aston Martin for $32K with 26K miles on it, I have no problem working on it but once I saw what the most basic parts cost I didn't feel so good about it. It was similar to this one with a V12, hand built car and engine with a new price for conv almost 200K. That is a huge hit for 26K miles. To me this is a real car for less than a new POS.

Some cars can be an investment, my doc owns an old Volvo SW for daily drive but owns a Ford GT he bought new that is worth 3X what he paid for it.

 
100%

💯

OP: I've never looked at any of my purchases for "Re-sale" "Value". Those that chase that tail are often disappointed. Either in the "Trade-In" value they received when they went to get another car or not happy with what they bought w/the trade in. Then you have the folks that think they want to "Game" the system of getting the most bang for their buck on trade-in just to turn around & do it again in a few years.

I may be the one going against the grain but..
The best "Value" is the car you keep.
My intention wasn’t to game the system, it was to just look at what the average Joe might do, and buy something simple like a new RAV4 or Accord every 4-5 years or so and trade the old one in. Or, buy a slightly used one, and drive it for a few years and trade in to a newer used one again. Doesn’t sound like it matters all that much.
 
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