I spent many years buying used cars because that’s what I could afford. I’ve had a few new vehicles now. Sure the up front cost is more, but there’s a lot less surprises in new cars. That’s not to mention some of the lack of maintenance you find in some used cars. I’ve had some horrific luck over the years.
Does it really make financial sense to buy used over new?
- Thread starter Nick1994
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JHZR2
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Used cars have never been a great value to me. Japanese manufacturer used cars and especially. The old adage theat a car loses 50% value when it rolls off the lot is just silly. When you amortize the repair and service costs over a shorter mileage duration, it means it’s all coming much sooner, and at a higher per operating mile cost.
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I calculate value based on mileage depreciation, with assumptions of 150 to 200k lifetime mileage for my daily drivers (depending on make model). Estimate a residual value and then look at a linear depreciation curve, or in this case, line. Any vehicle with value above that line are overpriced, anything significantly below the line might be a good value.
This does not factor in added maintenance needed if buying used, or higher financing costs used vs. higher overall interest paid on a more expensive vehicle. Also does not take into account changing used market conditions. Still a valuable tool though.
This business-based decision model assumes that the total purchase price is irrelevant and maximizes the per-mile-driven economy. Also assumes a fairly constant rate of miles driven, and a fixed mileage point of sale at end-of-life. Obviously, if I'm able to keep a vehicle longer than the initial estimate, my costs will be lower.
Example in round numbers from my purchase back in 2016:
Mazda6: 20k purchase price in 2016
Drive to 200k, sell for 4k
16k over 200k miles, $0.08 per mile
Used w/40k: depreciation of $3,200
Any vehicle with 40k and less than 16,800 would be less expensive per mile driven to 200k.
Figure an opportunity costs of 2k for unforseen maintenance needed on a used vehicle and you'd be at 14,800.
That was numbers from 8 yrs ago but the logic still stands. When I ran the numbers for full size SUVs a few years ago, new was the logical choice given the crazy post Covid market.
Also have to consider the possibility of getting a buyback or otherwise "lemon" vehicle, especially in the 2 to 3 yr old used market and among those makes and models with high product infant mortality rates.
This does not factor in added maintenance needed if buying used, or higher financing costs used vs. higher overall interest paid on a more expensive vehicle. Also does not take into account changing used market conditions. Still a valuable tool though.
This business-based decision model assumes that the total purchase price is irrelevant and maximizes the per-mile-driven economy. Also assumes a fairly constant rate of miles driven, and a fixed mileage point of sale at end-of-life. Obviously, if I'm able to keep a vehicle longer than the initial estimate, my costs will be lower.
Example in round numbers from my purchase back in 2016:
Mazda6: 20k purchase price in 2016
Drive to 200k, sell for 4k
16k over 200k miles, $0.08 per mile
Used w/40k: depreciation of $3,200
Any vehicle with 40k and less than 16,800 would be less expensive per mile driven to 200k.
Figure an opportunity costs of 2k for unforseen maintenance needed on a used vehicle and you'd be at 14,800.
That was numbers from 8 yrs ago but the logic still stands. When I ran the numbers for full size SUVs a few years ago, new was the logical choice given the crazy post Covid market.
Also have to consider the possibility of getting a buyback or otherwise "lemon" vehicle, especially in the 2 to 3 yr old used market and among those makes and models with high product infant mortality rates.
If I'm an "actual person" selling a used 5 year old car with 120k for $13k, who's got that kind of cash and would be willing to spend it on someone unable to warranty or finance that vehicle? Sadly that's where dealers are "needed".
See? If you had contacted me I would have talked you out of it. You would have been rocking a Lexus instead. So many Kia and Hyundai lawsuits these days!That’s what I did last year buying my 2018 Genesis G80 for 47% of it’s new price.
Except its’ value has dropped a whole lot since last year, and it certainly won’t last 18 years
As I stated. WRX. Ordered from Japan. $31K~. Drove for four years. $28K sold.
Consider car being a liability as opposed to investment, car is a $$ loss all in all. Personally, I didn't expect any money back on the cars we bought; to me it was 100% plus loss. If you get any money back, especially more $$ than you paid - consider it you are a lucky person!
certain market oddities may have helped there..
I had a 19 cherokee drove it for 4 years and 50k miles traded it in..(not even private party) for 25k
new was 28.5k+tax sticker was 39k.
Of course they don't make cherokees now but a 2023 you would likely take a bloodbath on to the tune of 12k+ vs 3500.
Me thinks this is not as exceptional as it was 10-20+ years ago - but yes, if model is in demand, then of course more$
That said, I was not unhappy to get some $ out of our well used cars over the years. The Honda Odyssey the Volvo 850 both over 10 ten years old, maintained but tired. I think they were in the 30% of new price range when sold. Who would complain about that?
OH I just thought of the 1985 SR5 little pick-up. Bought new for $7K or so (maybe a little less), sold for $5K in 2005!
Inflation!
A car or truck is a tool. So not sure there should any surprise.
I guess the newest used car I've bought was in 2013, 6 years old, 30k miles, for $8500 private sale, ~35% of new price. Pretty good deal, and I would buy used cars every time like that.
My buddy smashed it in 2019, so he bought me basically the same car for $2200, 13 years old 130k miles. Between the two cars I've only spent maybe $2000 in repairs and parts in 16 years/170k miles, other than tires and brakes, but I do almost all the work myself.
Its worth only $1k in scrap now due to rust but that works out to $~600/year for repairs and depreciation, but this only works for KISS non-japanese car which are getting rare! I've got a year or two left to find the next one.
For buying new I think our best case scenario is with depreciation and repairs, is $2k/year. You do get 6-7-8 years without repairs but after that it certainly is a used car!
My buddy smashed it in 2019, so he bought me basically the same car for $2200, 13 years old 130k miles. Between the two cars I've only spent maybe $2000 in repairs and parts in 16 years/170k miles, other than tires and brakes, but I do almost all the work myself.
Its worth only $1k in scrap now due to rust but that works out to $~600/year for repairs and depreciation, but this only works for KISS non-japanese car which are getting rare! I've got a year or two left to find the next one.
For buying new I think our best case scenario is with depreciation and repairs, is $2k/year. You do get 6-7-8 years without repairs but after that it certainly is a used car!
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I've never purchased a new car, and I may never do so, but this is due to the fact that I do all my own repairs, and I'm fully aware that puts me in a different scenario than most. Further, cars are liabilities not assets, everyone knows this. Now, don't get me wrong, with creative accounting, the liability and associated costs of car ownership can be mitigated, but that process does not apply to me because our household income is below the overall average. What I can say though is, I've always been a saver, and financially responsible, I don't window shop. Finally, just because I can buy a new car, which I can (but nothing exotic), doesn't mean that I should, I have other priorities in my life (education, home ownership expenses, etc.)
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Not crazy over either, but if less than 5 years old, I'd rather do new, have full warranty etc. Thing is, new has additional registration and insurance costs to be factored in, while unless if one can drop $$$ in cash, the financing costs more. And I rarely go back to the dealer, so what good was the warranty anyhow?
My old Ghetto Ride 68 Corvette might be worth 10x what it cost new. It is also worth a lot less than I have into it.
"Wow, you must be rich!" "I used to be...".
"Wow, you must be rich!" "I used to be...".
4WD
$50 site donor 2025
Well, to stay married with my current savings - new is fine …
Some cars keep their value very well (Honda, Toyota). You buy them new.
Some cars depreciate rapidly (BMW). You buy them used but in pristine condition. No matter what, they depreciate fast.
When I bought my 528i, the 5 series had depreciated more than 50% in 3 years. A 3 series (which was a much less expensive car when new) would have been about the same price. At 3 years old either one had a full year of warranty. So I bought a highly optioned 5 series and made sure it was mechanically perfect when the warranty ran out. It was a reliable car in my hands. Other than routine maintenance (tires, brakes, battery, wiper blades) it only needed a radiator hose, hood opening cable, rebuild of the ABS module, mystery electronic component that controlled fan speed, and a power steering hose in 18 years of service.
A couple of years before the BMW, I bought a new Toyota Solara - which we gave to our daughter when she needed a better car. A couple of years later we bought a new Honda Accord which is now 17 years old and still going strong.
Some cars depreciate rapidly (BMW). You buy them used but in pristine condition. No matter what, they depreciate fast.
When I bought my 528i, the 5 series had depreciated more than 50% in 3 years. A 3 series (which was a much less expensive car when new) would have been about the same price. At 3 years old either one had a full year of warranty. So I bought a highly optioned 5 series and made sure it was mechanically perfect when the warranty ran out. It was a reliable car in my hands. Other than routine maintenance (tires, brakes, battery, wiper blades) it only needed a radiator hose, hood opening cable, rebuild of the ABS module, mystery electronic component that controlled fan speed, and a power steering hose in 18 years of service.
A couple of years before the BMW, I bought a new Toyota Solara - which we gave to our daughter when she needed a better car. A couple of years later we bought a new Honda Accord which is now 17 years old and still going strong.
Nick1994
$100 site donor 2024
Despite me making this thread, it’s very possible my next car will be a 5-ish year old used one. I don’t know that I want a car payment again next time. The Genesis is just shy of being paid off.
We’ll see how the car market is in a couple years.
We’ll see how the car market is in a couple years.
I use a similar process. My consensus is buy new or 10 years old. The middle seems like a waste of money. However I am fortunate that the up front purchase price is irrelevant to me.
Having said that, my young daughters will get used cars. I am factoring the likelihood of running into things into the equation.
I certainly don't want another payment; while I like the idea of buying new, getting the best years and all, I'm coming into an expensive part of life (college for the kids). less payments is better.
That works--right until they do, and then you have to replace said car! I still haven't figured it out yet.Having said that, my young daughters will get used cars. I am factoring the likelihood of running into things into the equation.
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