New Versus Used Calculation

[DweezilAZ]

Recently purchased a 2022 Yukon. Being in the military, we put a lot of miles on our vehicles and generally consider that we will wear them out before they age out of daily use.

Given this, when car shopping I generally subtract new price from resale value at the end of useful life (say 200k), then calculate per mileage depreciation. Good used value is anything substantially below the depreciation per mile. This is assuming the vehicle will wear out before age out. Could do this time-based too.

For our recent purchase, went like this: 70k new - 10k used @200k miles (conservative?)

That's $60k to depreciate over 200k miles. For a used model with 50k miles, 60/4=15k. It's burned through 15k of mileage based depreciation; thus, retail value should put it at 55k. A good deal to me for dealing with the uncertainties of buying used would be anything below 50k.

Those who have been tracking the used car market know that the past couple years have had insane valuations. Thus we made the decision to buy new.

Financing was 0 percent at the beginning of the year, so no cost to hold a larger loan ... in fact a better rate than used financing and no opportunity cost over purchasing with cash.

Additional factors for us were the body style changes on the recent Yukon giving more rear legroom and cargo space, plus the peace of mind with a new vehicle. Given that this purchase may last the entirety of our child-hauling years - it was the right choice for us.

Good way to break it down, makes sense given the miles you drive.

Everyone's got legitimate reasons here. None of them sound like rationalizations for buying new cars and I have read some convoluted, tortured claims over the years.

So many I have wanted to scream: "Just say you like having the latest and newest at whatever cost and stop trying to convince yourself there's a good financial reason for your automotive debt load." No shame in that. Don't try to justify it. Just enjoy it.

I don't see that sort of nonsense with BITOG member posts.

Crap, all my drinking, tobacco, gambling, hobby and chasing money is tied up in cars and car stuff. But not new cars. Everyone has something they indulge. I probably spend too much on them. Could have bought a new car with what I've spent on what I have.

But: The idea of going into debt for a new car gives me the bloody vapors. I've had more fun, more value from my three than a new one would ever give me [done it, twice]. After the new wears off and the excitement levels off.... there are the years of debt ahead.

Not something I want. YMMV.

 

[Cruisin'n5thgear]

Good way to break it down, makes sense given the miles you drive.

Everyone's got legitimate reasons here. None of them sound like rationalizations for buying new cars and I have read some convoluted, tortured claims over the years.

So many I have wanted to scream: "Just say you like having the latest and newest at whatever cost and stop trying to convince yourself there's a good financial reason for your automotive debt load." No shame in that. Don't try to justify it. Just enjoy it.

I don't see that sort of nonsense with BITOG member posts.

Crap, all my drinking, tobacco, gambling, hobby and chasing money is tied up in cars and car stuff. But not new cars. Everyone has something they indulge. I probably spend too much on them. Could have bought a new car with what I've spent on what I have.

But: The idea of going into debt for a new car gives me the bloody vapors. I've had more fun, more value from my three than a new one would ever give me [done it, twice]. After the new wears off and the excitement levels off.... there are the years of debt ahead.

Not something I want. YMMV.

Very logical and rational post. Yeah, it's not my first choice. It will be a happy day when I make the last payment. 0 percent given where the market is going was hard to turn down.

 

[2strokeNorthstar]

I would agree that frequent trading of certain type of vehicles is very easy-and soft on the pocketbook if you know what your are doing. OR-at least it has been. Hard to know with the escalation in new car prices (the last three years) if one will still be able to do so. However-some on here are risk adverse to a car payment and being able to drive a late model vehicle.

I must not know what I'm doing

 

[CKN]

Good way to break it down, makes sense given the miles you drive.

Everyone's got legitimate reasons here. None of them sound like rationalizations for buying new cars and I have read some convoluted, tortured claims over the years.

So many I have wanted to scream: "Just say you like having the latest and newest at whatever cost and stop trying to convince yourself there's a good financial reason for your automotive debt load." No shame in that. Don't try to justify it. Just enjoy it.

I don't see that sort of nonsense with BITOG member posts.

Crap, all my drinking, tobacco, gambling, hobby and chasing money is tied up in cars and car stuff. But not new cars. Everyone has something they indulge. I probably spend too much on them. Could have bought a new car with what I've spent on what I have.

But: The idea of going into debt for a new car gives me the bloody vapors. I've had more fun, more value from my three than a new one would ever give me [done it, twice]. After the new wears off and the excitement levels off.... there are the years of debt ahead.

Not something I want. YMMV.

AS I said-the majority of those on here have an aversion to either-
A) Spending major dollars on a late model vehicle
B) Not wanting any sort of payment

It sounds like you fall under both A&B.

Not judging.

 

[CKN]

I must not know what I'm doing

I wouldn't say you don't know what you are doing-nor did I imply that. The resale truck market (pre-pandemic) for example-it was extremely easy to trade up with very little increase in payment. But then again-one would always have a payment. Based on your vehicles-you are probably long past any payments-with the implication you don't want one.

 

[MrGraybeard]

These days I worry about the high demand direct-injection technology places on engine and drivetrain. So I bought new to eliminate the chance that a previous owner might have subjected my vehicle to abuse and/or neglect. Engines don't get repaired anymore, they get replaced. And I want to know that the fluid in a 10-speed transmission has been replaced early and often.

Also, in my part of the country there's the issue of rust. I've bought plenty of used cars, but the best ones came from the South or West. You don't find vehicles like that in my area without going on an extended hunt for them.

 

[miden851]

3-5Yrs well taken care piece is your sweet spot

everything else goes above or below the equilibrium line

 

[CKN]

Ha! The internet is full of people ready to throw OPM around. Their free-handedness amazes me. It's just $5000. YOLO and all that BS,
They're all dental floss empire heirs, dontchaknow.

Yes: initial purchase price. Keep forever, zero worry about depreciation . I'll put $$$s into a car worth $500 because it still has utility and has always had impeccable care.

In 40 years I have purchased six cars. Two new. I still have three of them. Traded one in. Another was destroyed in a rear end collision. The third I gave to my little brother who still drives it.

Their ages are 60, 36, and 18 [as of Jan.13th 2023]

New? I see nothing I'd buy.

Additional input on your end in regards to this statement would be interesting. Why don't you see anything to buy? I refuse to believe they are not reliable enough for you-so there are other factors at play in regards to your thinking.

 

[macarose]

The answer is Oldsmobile.

 

[2strokeNorthstar]

I wouldn't say you don't know what you are doing-nor did I imply that. The resale truck market (pre-pandemic) for example-it was extremely easy to trade up with very little increase in payment. But then again-one would always have a payment. Based on your vehicles-you are probably long past any payments-with the implication you don't want one.

I like not having a payment but I also like not having to worry about repairs. Comes down to having true disposable income. If I had nothing better to do with my money for sure I would be trading in vehicles all the time.

 

[Vil_Riker]

One more thing about used cars is the options. Well optioned cars would fetch premium $$$ for new but as used vehicles the difference between bare or well optioned vehicles is not vast.

 

[Brons2]

But I tend to buy either new or really really used. New I'll keep for 10yr and over 200k, so I'm probably not a typical case study.

I am the same and my wife hates it!

 

[Gunnar#1]

I usually buy a relatively new, one or two year old, vehicle with low miles. The last couple have been brand new because of the crazy used prices. The absolutely cheapest way is to buy a salvaged title car with low miles that's been repaired correctly, then drive it forever. I just sold a 2008 Pontiac Vibe, same as a Toyota Matrix, with the 1.8 motor. I bought it in 2009 with 8000 miles on it for $8000. it had been hit in the rear but fixed. I drove it, my wife drove it, my mother drove it, my daughter drove it, and my son in law drove it and I just sold it with 230,000 miles for $2500. Regular oil changes about every 5000 miles, a couple of AT transmission fluid changes, brakes, tires, an ac fan motor, and intake manifold gasket, one set top iridium plugs, front struts, 2 windshields, oil dip stick tube, and I think my son in law did an ac compressor last year and that's is it. it got about 30 mpg and had a more spacious cargo area when the seats were down than most full size suv's, and it had the headroom of a pick up truck, I am tall so that's a big deal to me. I don't think you can drive any cheaper than that on 4 wheels.

 

[b_b]

I usually buy a relatively new, one or two year old, vehicle with low miles. The last couple have been brand new because of the crazy used prices. The absolutely cheapest way is to buy a salvaged title car with low miles that's been repaired correctly, then drive it forever. I just sold a 2008 Pontiac Vibe, same as a Toyota Matrix, with the 1.8 motor. I bought it in 2009 with 8000 miles on it for $8000. it had been hit in the rear but fixed. I drove it, my wife drove it, my mother drove it, my daughter drove it, and my son in law drove it and I just sold it with 230,000 miles for $2500. Regular oil changes about every 5000 miles, a couple of AT transmission fluid changes, brakes, tires, an ac fan motor, and intake manifold gasket, one set top iridium plugs, front struts, 2 windshields, oil dip stick tube, and I think my son in law did an ac compressor last year and that's is it. it got about 30 mpg and had a more spacious cargo area when the seats were down than most full size suv's, and it had the headroom of a pick up truck, I am tall so that's a big deal to me. I don't think you can drive any cheaper than that on 4 wheels.

ill call you on your last statement. 2005 grand prix, purchased for $5000 with 110k in 2007. drove it for 11 years, did nothing to it except front hubs, spark plugs and a water pump, all done by me. otherwise it was fluid changes and brakes a few times. ( lots of highway). sold it in 18 for $2000 with 250k miles. so i drove it for 11 years and put 140k miles for $3000.