new vs. 1-3 year 'pre owned' - long term value

[JHZR2]

I would like to get some opinions on what people think about buying a 'used' one or two year old car. Most likely a honda or toyota.

I have taken the opinion that my parents have. Its not worth it to buy a car thats a couple years old. It always appears to me that to buy a honda, toyota, etc. that has a few tens of thousands of miles, a year to three years old, the savings are really only a few thousand dollars. Saving 2 or 3 thousand on the purchase of a $10k+ car is hardly worth it, considering that you dont know how it was broken in, might not have much of the warranty, if any left, etc. If the plan is to drive the car until 100k+ miles or a major issue makes it not price-worthwhile to repair, it seems that the extra life eeked out from having it since new is worth it. Even $3000 to get an extra 1-2 years of typical life is better than having to buy another car sooner.

My girlfriend looks at it in the way that if you are buying a car that is bound to depreciate anyway, you might as well save a thousand dollars or a couple thousand dollars, and even if an issue arises, chances are it wont be very severe, and youll still end up doing better in the long run, and could even swap cars sooner without loosing as much money.

I know a lot of people buy slightly used cars, have good success with them, and then make out real well. Personally, Id rather buy a good car with all maintenance reciepts for a low price and 100k on it, than a 15k mi car with no records, and just having a shiny new look. The older, cheaper, higher mileage car may very well last just as long because of the maintenance regimen.

Has anyone ever really considered if anything is actually saved in the total cost or cost per mile, etc for a slightly used car? My GF is looking at potentially getting a civic coupe that is a year or two old, and from looking at the honda certified site, she'd do much better to catch a good deal near invoice on a new civic coupe with a few options that she might want. The discounts are quite insignificant compared to a brand new car, and so the depreciation that should be had due to 10k+ miles doesnt really seem to do much for the price. Maybe from a private owner it would be different, I cant say, but then again, from a private owner you only get the balance of the factory warrantee, and not necessarily anything else.

So, Im curious to see others' opinions on this topic. I like buying older used cars, 10+ years old, well kept, etc., but get really uneasy buying a newer used car, and have never done so. I keep my cars forever just about, so am I really doing that bad for myself?

Thanks,

JMH

 

[GROUCHO MARX]

On the low end, new car prices are too close to used car prices when buying from a dealer. The trade in value is another story.

 

[andrews]

If you usually keep cars "forever" and have a good income, low debt, and practice good maintenance, it may be a good choice to purchase new. Just be sure to have a fair sized down payment, get the vehicle at a great price, and finance it at a low interest rate.
On the other hand, if you don't have a good income, suffer from debt, and have a habit of impulse buying, it would be best to buy a good used car. The choices are up to what you feel most comfortable with, not always what makes the most economic sense. A very large percentage of our populace will pay a huge sum of money, just to get the "right" car for them. So many of my friends end up wishing later that they purchased either used or less expensive cars. For me I almost always get new vehicles since I know that they haven't had a chance to be abused. I just "feel" more secure about doing that. But if I could be totally sure that a particular used car had been babied and very well taken care of, I would most likely be fine purchasing it. It's just one of those choices that can sometimes be tough to make.

 

[Jimbo]

You really have to look at the depreciation curves. This may vary by locality, that is, which makes and models in demand. Some dealers travel to auctions hundeds of miles away to get used cars that are in demand in their market.

Domestic sedans, Taurus, Impala, etc., tend to drop quickly, and therefore are a better buys used. This is due to the flood of late model fleet cars of this type.

The cars with low initial depreciation, BMW, Honda, Lexus, Toyota and most pickup trucks, IMO, are poor buys used. BMW 3-series "certified pre owned" three year old lease returns are about 80 percent the price of brand new. They are well on the way to needing new tires and brakes, wear items not covered by the extended warranty. Financing a used car is usually more expensive, tipping the balance again toward buying new.

 

[JHZR2]

after 50k, unless the car has every maintenance record and you can determine the owner's habits well, you can be pretty sure stuff will need replacement... 50k? Time for tires, maybe brakes... Timing belt? Well that $400 is coming along shortly. Probably time for a tuneup too before too long. O2 sensor? Even in good cars these can go at 80k... thats another $100.

Was that accord the current model or the previous one? That can make a big difference. And, even at 40%, is it worth it to pay $9000 for a 3 year old civic with 50k on it, when, especially if you can get a deal or maybe forgo an option or two, can get one for probably $14k? And have a warrenty, new tires, etc? Maybe $5000 difference is worth it, maybe not? Depends on how long you plan to keep it. I think if youre going to have it beyond 100K, $5000 is pretty good for doing approximately doubling its life, so buying new is a good choice, IMO.

I wouldnt touch a car with 50k. At 100k plus, I would consider it with the right records and credentials. You know if its still a specimen that the owner took good care of it. But at 50k, I think youre at the weakest point as a buyer, and have the most reason to get rid of the car as a seller. All in all makes for a not so good deal.


Patience is a virtue, and sure there are lots of good cars out there, but its a lot of work, effort and potential expense to go out finding private party sellers in your area with the car you want. And, unless all the records are provided, often times it is important to have a mechanic look at the car, if its out of the range to conveniently do it yourself. The dealer provides convenience, which is why there is a premium. Haggle a bit and it can be worth your while to buy from a dealer, rather than going all over the countryside.

Thats how I see it at least

JMH

 

[kenw]

we got another thread on this subject elsewhere, just let me repeat my opinion:

Buy a one year old first quality car and drive it forever.

you still have the bulk of the factory warranty. Many are lease-return and better maintained than average. You eliminate the bulk of the depreciation (20-25% for year 1). And there are tons of them out there.

Unless you are looking for a car that tends to be raced before it's repo'd, this makes all the sense in the world.

Risk? sure. So is driving. Be a smart buyer and be a smart driver.

 

[Drew99GT]

I for sure wouldn't buy a lease returned vehicle, EVER!!!!!!!!!!!!

Why not buy a car with 50K on it? Even if you have to buy new tires, maybe throw a timing belt in it in 10K miles, do a few routine maintinence items. Doing all that will still cost less than an even newer car, and you'll have to do the maintinance on it ANYWAY at some point!!

I still think private party 1 owner cars are the best to get, IF the owner will produce good records. Warrenties, especially the aftermarket ones, are a joke. I wouldn't buy a car for 5 grand more just because it has 15,000 more miles left on a powertrain warrently.

 

[Drew99GT]

And, trusting a dealer to go over a car with a fine tooth comb? Haha!!!!

 

[JHZR2]

Well at least a dealer has some sort of reputation to keep up. And even if you buy as-is, you have some leverage if a lot is wrong, even if you buy as-is. I dont think a dealer will necessarily go over it that well, but at least they did the initial finding, and typically, if you know a little about cars, you can go over it, ask whats been done, demand some of the work that should have been done, etc. and build it into the price, giving greater value. What do you get from a private party? Hopefully some reciepts. Not much else.

You hit the nail on the head: If they provide good records. However, in my experience, people who take the pains to keep such records, etc., are also the ones buying the car for the long term, reaping the value from long periods of ownership.

Regarding the 50k mile car... Say you get a civic, initially priced at $15k for 55% of its value, 3 years old and with 50k miles on it. The car is selling for $8250. If youre not a do-it-yourselfer, youre typically looking at doing the following soon after purchase, given the age and mileage. You may think other things or less should be done, but this is what I (and thus she) would want maintenance to be done:

New tires (good ones): $400
Alignment: $100
Timing belt: $400
Tune Up: $250
All fluids changed: $250
New battery: $50

So youre doing $1450 of maintenance. Make it $1500. All of a sudden your $8250 car is $9700. A new one, maybe with a few options less, with a good deal is $14k. Sure the car options and initial price arent equal, but you seldomly make out with recouping the price of options anyway, and she would sacrifice a bit to get a new car; thus Im making the scenario as realistic to our situation as possible.

So youre saving $4000, on a car, which has probably 1/3 less life left on it. Assuming both cars go to 150k:

$9700/100k (remaining life) = $.097/mile
$14000/150k (full life) = $.093/mile

Now the new car case will be a bit more because youll have to do the same maintenance at 50k as in the first scenario... This makes the new car case, with all things now equal $.103/mile. A mere fraction of a penny more per mile to have a new car, as opposed to a used one.

Thats how I see it... Maybe Im off, it seems like there is mixed thoughts. I know if I was changing cars every 3-4 years, Id get a late model year or two old car, take the depreciation and come out ahead. But for a long-term owner, I dont see how its all that beneficial.

JMH

 

[Whimsey]

I'm a cheap bas*ard so I keep my cars till they scream to be put out of their misery. I try for at least 10++ years of ownership. The American pick up trucks go longer, 13++ years. I order my vhicles new from the factory the way I want them. And my choices are bare bones to say the least. But I like them that way, less to go wrong

. I have to admit that I like having the new vehicle warranty, feel and knowing someone else hasn't F'd the vehicle up because they were going to turn it in in 2 to 3 years anyway and didn't care how it was cared for. As long as it "drives" to the dealer at the end of the lease or at the 2-3 year trade in period they don't care how bad it was cared for. It's the current buyer's problem

. Before I ordered my 2002 F-150 in Oct 2001 I looked for left over and used 1-2 year old trucks. It was less expensive for me to order the NEW TRUCK the way I wanted it instead of buying a left over off the lot or worse buy a 1-2 year old truck. They were sometimes more expensive than ordering the new truck

!

Whimsey

 

[Patman]

It all depends on the car. For example, when we bought my wife's 2000 Civic new, it was $21,000. On the dealer's lot they had a used 98 model for $18,000. It made zero sense to me why anyone would buy that used car, when the monthly payments would likely be very close (the financing on the new ones was something like 4 or 5% so it was a lot better than the financing on used ones at the time, which was closer to 8 or 9%) In fact I still don't understand how the Civic hold's it's value so well here in Ontario when the market is literally saturated with them! In fact you can still see tons of 2000 Civics in our Auto Trader up here for $14 to $15k, even though they are five years old!

On the flip side, there are a lot of other cars which drop in value big time in the first year or two. Cadillacs are like that actually, so you could pick up a two year old one for $15-20,000 less than a new one, so why would you not jump at a deal like that?

Just because a car is used doesn't make it junk. Keep in mind, there are lots of people out there who are just as picky, if not more picky, than we are. The previous owner of my 98 Corvette was definitely like that. He kept the car in near showroom condition, and I picked it up with under 32k on it for $33,000 Canadian. A new 2004 Corvette with the same options would've cost me $60,000 plus. But I got a car which is pretty much as good as new for almost half the price. I intend on keeping this car for a very very long time so it won't bother me if it depreciates at this point, although I've noticed the prices have stabilized somewhat on the C5 Corvette, after dropping rapidly prior to that (due to the anticipation over the C6 Corvette)

 

[Pablo]

Yes it depends on the CAR and the AREA. I tell you used GOOD 1-2 y.o. cars here in the very NW corner of the USA (contigous)...are barely cheaper than new. It makes no sense to have such high prices and it makes less sense to buy one.

Same 2 points I made before

:

1) Everybody wants this same dream deal (supply and demand)
2) People want certain models (supply and demand)
3) The prices aren't dropping (supply and demand)

Now Cavaliers and Metros and stuff well.....OK I dunno the prices of those...

 

[Audi Junkie]

Buy new. At resale, it's a year newer and less miles +$2000. Another year of factory warranty, +$1000. Not having somone elses's problems, priceless. Seriously, it's a Honda or Toyota, not gonna break the bank for a new one.

 

[XS650]

quote:

---

Originally posted by Audi Junkie:
Buy new. At resale, it's a year newer and less miles +$2000. Another year of factory warranty, +$1000. Not having somone elses's problems, priceless.

---

You also get the benefit of being able to buy exactly the model and options you want. I normally keep a car about 10 years and drive it well over 100k miles. I don't want to spend that 3,000+ hours behind the wheel driving someone elses choice of cars.

I did luck out on the one used car I have bought in over 30 years and got exactly the major options and color I wanted.

 

[Drew99GT]

I dunno where you guys get the 1,000 to 3,000 dollar difference between new and used cars!!!!!!!! After 2-3 years and 50,000 miles, most used cars have depreciated 30-40%, even 50 %. (50% for the domestics). My neighbor just bought a perfect 1 owner Accord V6 for 13,500 with only 40,000 miles. New that car was well over 20 grand. You just have to look for the deals! Try looking at private party 1 owner cars first. It'll take you longer to find the right car, but when you do, you'll be happy because it'll be roughly 1500 to 2 grand less than dealer retail, and you'll know the previous ownership history.

 

[Shannow]

I've always bought used (6 plus years old), and been happy.

When we had out baby, I decided to go for a 2/3 year old car, which had 6 to 12 months warranty.

We ended up getting novated leasing (part paid for pre-tax, part post tax, and a 50% residual)in at work.I did the sums, and the difference in that system to driving what we were was about equivalent to a 2/3 year old car. Except, I knew exactly how it had been maintained.

 

[shortyb]

quote:

---

Originally posted by Jimbo:

The cars with low initial depreciation, BMW, Honda, Lexus, Toyota and most pickup trucks, IMO, are poor buys used. BMW 3-series "certified pre owned" three year old lease returns are about 80 percent the price of brand new. They are well on the way to needing new tires and brakes, wear items not covered by the extended warranty.

---

Just recently purchased an 01 330i with 42K on the clock. Another year and 8K worth of factory warranty but purchased an extended contract that mirrors BMW's for 2K more. It goes out to 125K and 7 years and includes roadside. Car was 26K and change and with the warranty, taxes tags etc., came out to just under 30K. Beautiful car and was a lease return at that. Worried about maintenance but a service history and UOA confimed a solid car. New, with extended warranty it would have cost around 45K so I believe it was worth it. And the place I got it from is an independent that scrutinizes the cars MUCH more than a franchised CPO. They replaced everything that needed it including tires before I took her home.

Now I realize that my case is an exception rather than a rule, but if you are careful, and look around, it could be very worthwhile. Good luck and happy hunting

.

 

[JHZR2]

So jimbo was right... A 330 is what, $33k or so? 80% of that is about $26k... So now you have a 42k mile car that cost just under $30k. Thats a lot of money to pay IMO. Granted, BMWs are great cars, but I know personally that I would be terribly uncomfortable buying a car with those miles on it at that price. Especially when I got my 04 saab 9-3 for $23k because it was the end of the year, and its brand new. Now you might have been set on a BMW, and thats fine...

Personally, Id have got a base 325, which is still more than nicely equipped, and brand new for $28,500, MSRP. That to me is a better value, but then again, I personally like newer car, owned for a long time, MPG, less frills, and simpler design in a great car. To each their own. But, in 5 years, all mileages put on equal, etc., Ill bet that I can make up the difference between my $28,500 and your $26k in sales price since mine will be younger and have lower total mileage. Consider that you paid $30k, and I would come out way ahead.

Im not saying anybody is wrong. Different folks value different things in their auto purchase, and most folks like more gadgets and fanciness, and want to get rid of their car more often. to each their own. So long as theyre not commuting 1 person in a 9 mpg SUV for 80 miles a day (in which case I think theyre dumb and unpatriotic), I wish them the best.

I just cannot see any real justification and/or savings in buying a preowned car, particularly if you forgo anoption or two, save a thousand bucks and drive away with a new car and drive it for a number of years, say more than 3-4.

IMHO,

JMH

 

[shortyb]

JHZR2-Just remember to compare apples to apples. As I said, my car new would be 45K. I may have failed to mention this includes all of the options for this series and the extended warranty, which from BMW is about the same as my extended. Ergo, my "savings" for getting a solid car with nominal miles (should go quite far IMO) is approx 33%. Big chunk of change but like you say, to each his own.

And your base 325 vs my 330i may be closer than you think. Again the extended warranty is a good resale point if there is appreciable milage/time left. Factor in another 2K. Another 1K for taxes, reg etc. That 28.5K is now closer to 31K. And the last time I checked my resale figures, a 330 loaded is getting better residual than a 325 base. Once you get past 3 years and 30K miles, the resale curves are not as critical and it boils down to what the vehicle itself has to offer. Not trying to bust any balls here but ya gotta look at this on equal terms.

Again, good luck with your choice. Let us know what you get and give it some BITOG lovin'

 

[JHZR2]

quote:

---

Originally posted by shortyb:
And your base 325 vs my 330i may be closer than you think. Again the extended warranty is a good resale point if there is appreciable milage/time left. Factor in another 2K. Another 1K for taxes, reg etc. That 28.5K is now closer to 31K. And the last time I checked my resale figures, a 330 loaded is getting better residual than a 325 base. Once you get past 3 years and 30K miles, the resale curves are not as critical and it boils down to what the vehicle itself has to offer. Not trying to bust any balls here but ya gotta look at this on equal terms.

Again, good luck with your choice. Let us know what you get and give it some BITOG lovin'

[/QB]

---

The thing is, what the car has to offer never has a good payback value... You never regain the value of the options, partiicularly in euro cars where an engine upgrade costs $10K sometimes, for barely a few more hp. After 3yr/30k from now, what the cheaper car has to offer is a lot lower miles and a younger car. All things equal, your car will have 70k, mine will have 30k. I think there will be a lot more buyers for a 30k car than a 70k one... Plus the required maintenance that the higher mileage car had to go through, tires that are pricey, etc.

Think about keeping it out to 100k+, you paid $30K for about 60k of service, I paid say $31k for 100k miles of service. and lets face it, a BMW is a BMW, theyre fun to drive regardless. Based upon my knowledge of pricing (I own an E30), a stripped 318i doesnt command hardly any less money than an equivalent age and mileage 325 with more options. Granted these cars are now at least 13 years old, and most have 100k+ (mine has 94k fortunately) but once again, a BMW is a BMW.

Fortunately I dont have to buy a car (I just bought an 04 saab 9-3 over a 325i because it was a better value and gets 34 mpg) as I have three. But I do give them the BIOTG loving!

Im not trying to bust your balls either... Just trying to make a point as I see it and have a good discussion.

Thanks!

JMH

[ December 09, 2004, 09:05 PM: Message edited by: JHZR2 ]