Your footwear is going to have a bigger impact on your life than the car you drive. Really. So will your vacations. Your investments. Your consumption of coffee, chocolate, cheese . . . heck reading up on the oldest sport in the world would literally give you far greater bang for the buck than a car. I’ll be blunt: When it comes to all the things you can spend hundreds of hours a year working for, a new car is simply not worth it. Even a car nut like me would rather go on fifteen or twenty sojourns with the family (or spouse) this year versus spending it on a new car. To me that’s worth far more than the glorified transportation modules of the modern day.
For starters, most cars these days are about 25 to 40 percent cheaper after their first year. Even more if it’s a Chrysler, Suzuki, or a soon-to-be-defunct model. Those who want to invest in a quality product can still get 80 to 90 percent of a car’s life for anywhere between 40 to 65 percent of the new car price at the two-year level. Want a warranty? Buy a certified pre-owned (CPO) vehicle. The warranties are usually longer than their new car twins. They’re designed to rip you off, too, but at least you’ll make less of a mistake. For those who really want to do it right, I have a short series on TTAC dedicated to making the used car purchase work.
Also consider the fact that most cars for non-enthusiasts are expensive as hell and death defyingly boring to drive in the real world. Very few of us commute along winding one lane roads that have hairpin turns and 55+ mile per hour speed limits. Car commercials and ’net ads will try to suspend our reality. But in the real world of commuting, we will never wring out even half of the level of horsepower and performance that a new $20,000+ vehicle will give us on a daily basis.
As for advertising and the other elixirs of modern day commerce, let’s face it. They’re never going to change. Why should they? Fear, greed, anger, smugness, and any other lower order emotion du jour is routinely given in exchange for rational thinking. Most of the time it works. Would any automaker ever show you the math? Hell no! In fact these days they’re exclusively dependent on those who can’t add. Most consumers simply fail to do the “new car” numbers or they would never buy new in the first place.
Some say that’s capitalism in the US of A. We need those who make stupid decisions so that life’s easier for all of us “holier than thous” who know better. I don’t believe that. At least for me, I’ve always seen capitalism as little guys outsmarting the subsidized big guys. Only the politicians, the involuntarily poor, the inbred elite, and those who are struggling with simple mathematics should ever find their way spending their way into “new car” servitude. The rest of us literally have millions of used cars to choose from that can take their place in a minute’s notice at a fraction of the price.
What says you?
[Send your car buying/selling questions to Steve Lang at carselect@gmail.com]
Another laser like set of observations. Something I really needed to hear.
And I think it even applies to used. Lately I have had a love jones on for a bloody Caliber [yes, I know but after owning a 63 Valiant for a couple of decades I have a soft spot for small Mopars]
and have been reading everything I can get my hands on about it.Not new, but used and cheap. But I already have a perfectly good car with only 36,000 miles on it and it’s nearly paid off.This makes no economic sense whatsover.
But just say; I never felt about my current car the way I feel about the Caliber, critics and B&B aside.And I hated it when it came out.But now I want ot: “Grab Life By The Horns” and “Put A Dodge In My Garage, Honey” to quell this “Dodge Fever”.
Hopefully just doing nothing will let this impulse lapse and good sense will prevail.
What was the othet question you asked in another article: after the 1st 6 weeks and the new has worn off where are you ? The same place you were before you got the new car. Only deeper in debt.
Thanks. This was just the thing I needed to read. And still….if I lose my job and need something to live in….. plenty of room for the bird cages in the back.And it could haul a lot of junk if I have to sell the house and move.
Perhaps spending the money on a shrink or simply renting one would be the dash of cold water to bring me to my senses.
Great article. More Hammer Time!
I think it goes even further beyond this. Cars are supporting the suburban CANCER that is spreading around the world. With oil pumping reaching its peak, we will never be able to fully meet the energy demands from here on in. This will cause serious economic problems for everybody everywhere. I think people are going to get a serious reality check in the next 10 years.
We are borrowing from our children to live beyond our means.
That being said, as soon as I pay the credit line off I’m buying a Mini Cooper in British racing green with the white roof and bonnet stripes. I spend 2 hours a day in a car, it might as well be a good time. Yeah, I’m financing it. But I like cars. Cars make me happy.
EDIT: I’m currently driving a 7 year old Honda Civic Si Coupe. It’s paid for and at that ripe age and milage to sell it just before it becomes worthless. I still haven’t had to service it, so I would love to quit while ahead later this year.
This may be too much truth-about-cars for some. Good article.
Cars (and the want to own a specific one) are often ranked too high on the list of personal life-priorities. Many people feel they’ve “made it” if they can just pay payments on it. “You complete me.” This is why you see a leased Escalade in front of a $20k house in Detroit.
Their priorities are so screwed up it’s not funny. Savings, retirement, kid’s education (or theirs), good housing, family activities/vacations, all take a back seat to the ‘God Automobile.’
Disgusting.
Sir, I very applaud you for what you just wrote, and completely agree. I love cars, but could never bring myself to spend big money on a new or powerful car, not when so many other activities offer as much pleasure for a fraction of the price. The only real justifications for buying an expensive car are:
– taking it to the track, often, where sensations will beat any “gran turismo” video game
– enjoying the envious looks of your neighbors, i.e. for the social status
For the rest, we’ve reached such a point that any $10,000 used car will give more than enough speed, security and comfort to make no objective difference with a $40,000 new car.
Oh, and by the way, the same reasoning applies to expensive clothes and jewelry and up to a point to housing: people put far more money into it than it’s worth simply because they are status symbols. The one good thing to come out of this recession is the fact that showing off one’s money is “passe”
What is a CPO vehicle? And please post a link to your short series on used car purchases. Thanks for the dash of cold sense.
nothing new really
you can pay anywhere from $1,500 – $2,000 and up for just year registration fees and insurance
but the issue seems to be that one NEEDS a car with the way most non European Western societies have evolved
no-one takes public transport unless absolutely necessary
I get the feeling that Western people sneer at cars like the Tata Nano but I get the feeling that this may be the car for Western society if the economy spirals in the way we’re expecting.
Certified Pre-Owned.
Licence to steal. Most of the 200 point “inspections” documents are forged.
Ashtray? Check.
Visor illumination? Check.
And so on.
It’s certainly true that switching to used cars has saved us a lot of money. For some people, though, the concern is about getting ripped off with something that’s unfit for the road and will cost more than it’s worth in repairs, so it seems safer to buy new. We have been burned that way. But we are going to continue to buy used.
Steve, an excellent article and perhaps you’ve popped a few bubbles here. It’s hard to take exception to the logic, especially as it applies to the average guy. It occurs to me though that there is one exception that I know about personally: I use my leased Audi in my business and get to deduct it and all expenses incurred in its upkeep. The government, in effect, ends up subsidizing me rather substantially. I’m surely not alone. Get rid of that deduction and maybe I buy a Mazda 3 or some such. So that’s another aspect, no? And of course, some people are so flush that it’s never a question of either/or. Not my problem though!
I used to be the “Buy Used and Save” type. I carefully researched my vehicle, and bought a gently used domestic with thorough service records straight from the prior owner. I thought I made a steal. I even had a mechanic look at it who was GM certified. I paid well under KBB for it, too, since the seller just bought a new car.
Then I spent an average of $300.00 / month just to keep the car running. It was simply due to crap breaking (HVAC headunit) , not even due to prior owner abuse.
Long story short: buying used doesn’t always save you money. Buying used, even if you buy for a good price, can be a total wallet rape.
I thought I’d accidently linked to the Consumer Reports website. Your points are true, but also painfully obvious. If your mindset was adopted by the masses, the global economy would collapse for keeps. Then we’d all be livin’ in a van down by the river-Matt Foley style…
This should be required reading before people stumble into a new car dealership and sign their life away on a depreciable asset.
My father only busy new cars (Chevy trucks, actually). He works for 3 months to get “deal” and then trades them in like clockwork every 2-3 years for the next deal, taking up to a $20,000 loss.
He couldn’t believe that I bought an 1990 BMW E30, put 40k miles on it, then sold it for what I paid for it, basically. Good used cars and a modicum of fiscal and mechanical sense will get you far.
I just weep for the VW Jetta, Pontiac GTO, and MINI Cooper I bought brand new. Probably coulda had my mortgage paid for if I’d just had some sense…
Oh, and another thing…used cars can be tremendous savings on insurance and in states with yearly property taxes on cars.
(Climbs off soapbox)
I see nothing wrong with these cheap compact cars like the Koreans and some Japanese that have 5 to 7 years warranty.
If you need a car and have kids and want some reliable unpretensious transport I can think of worse ways of spending $20k.
OK, Steve, you’ve said this many times in so many different ways but there’s one IMPORTANT way you missed: a piece you can push in front of your spouse/sigother to keep them from buying a new car.
My wife deliberately waited until I was away at a music/dance camp when she bought her last new car…and almost every time she’s done it, she’s regretted it.
The piece needs to make its points in the logical equivalent of bolded, italicized, 48 point type.
It needs to tactfully explain what an utter idiot you are to buy a car as a fashion accessory. How you don’t really have to worry that your used Honda with 70K is going to strand you by the side of the road (the case last time with my wife; I told her:”Forthelovapete, the car was just broke in!”). That the first or second big repair bill is a whole lot less than even 3 monthly payments, that you can start a Christmas Club your your car’s repair for a half or third of monthly payments and have champagne every weekend instead of losing a major chunk of each paycheck. Buy yourself a Chanel dress or an Armani suit a month…….
Do the partnered world a favor……..
My four last car purchases were used cars in the $11K-$13K price range, aged 6mo to 4years, with 20K-35K miles. This seem to be a first sweet spot for the used cars. The next sweet spot is $5K-$7K cars with 60K-90K miles. But to buy at that spot, you better at least have an idea that cars need to be serviced and even sometimes (gasp!) repaired.
Big part of the financial advantage of buying used is the ability to pay cash. If you are buying a popular model 2-3 years used, your payments may be comparable with the payments for a new car and you might need to pay for out-of-warranty repairs before you’re done paying off the loan.
No mention of the massive inconvenience of repairs and the self-mutilating act of taking your car to the shop for maintenance. A new car with 0 miles should theoretically offer a little more insulation from service-writer hell than that 2-year-old certified model with 24,000 miles. Might be worth a few grand extra to some…
mikeolan
Does “gently used domestic” actually mean “rental Cavalier”? I see no other explanation for spending $300 a month on a supposedly well-maintained vehicle. The typical beaten-for-12-years Corolla will go longer than that without needing money, and something actually maintained should pass 120k with only a repair or two. I think you got a lemon that someone was divesting themselves of.
Matthew Danda
You have to get paid a lot of money before arguing with a dealership is taking up $3000 of time and hassle.
Nice read. Fitting with the theme here at TTAC and helpful.
Here’s my deal. I need to get something. Soon. As I pretty much always have for the last 25 years, I want a mid-size car with a manual transmission, preferably a four-pot (mileage – ease of maintinance). I’m pretty much open to a lot of different brands, some more than others.
Do a web search for used vehicles, as above, within 50 miles of me here in Vermont. They are few and far between. You can find Hondas, but this 20% used for 40% less than new thing goes right out the window. A Fusion? Good luck with the manual thing. An Altima? See Honda. Etc., etc.
So, walked in to my local Ford dealer because he has a new Fusion SE, 4-banger, manual on his lot. My first brief conversation with him the other day he made a point of telling me the car is $22k. I have a coworker that recently bought a new Fusion, more or less like what I want except auto and he paid a little over 17k new about 5 months ago. I will pay no more for this and if they can’t sell it for that then there’s no deal.
Yet, still, I need a rig.
While I wouldn’t say that buying a new car is exactly a terrific value, that doesn’t mean that it’s always the worse option for the average person.
For myself, buying used wouldn’t have been a good choice at this particular moment. I need to drive a fashion accessory of sorts for business. If I drove a beater, I would cost me money because it could compromise a relationship. It would be a pennywise, pound foolish move on my part to drive the “wrong” car.
Depending upon what you buy, the money saved in buying used can be lost in the extra time required to find it. If you buy new, you can just focus on negotiating the price. If you buy used, you have to make sure that the individual car that you’re buying is a good one, which requires a knowledge of cars that not everyone may have and a lot of time to look at several individual cars in order to find a good example. Depending upon circumstances, that time and knowledge required may or may not be worthwhile.
If you need to borrow money to buy a car, then the interest rate will probably be higher for a used car loan. That spread can also negate some of the savings of buying used.
Also, used Hondas and Toyotas tend to hold their value a little too well to buy late model used versions. In many cases, you’d probably be better off just buying new and haggling aggressively, particularly now when there are incentives available.
Some cars don’t make a good used car buy because the odds are high that the prior owner abused them. Some cars don’t tolerate abuse as well as others. For example, I would be hesitant to buy any used sports or sporty car with a turbo, particularly if it’s a model that the enthusiasts like to chip. Blown turbo + no warranty = Unhappy days.
By definition, cars are not an investment, so you can’t approach them that way. Except for the odd collectible, every car that you buy will lose you money, it’s a matter of how much you lose.
In my view, the answer to that is to not buy more car than you need, and to pay as little as possible for whatever it is that you do buy. If you do your job right, the dealer should be writhing in pain on the floor by the time that you’re done with him. It also helps to avoid really bad cars, to maintain it well, not abuse it, and to drive it as little as possible, so that you can preserve its condition and make it last longer.
Following up on ttacfan’s comment, there is a third sweet spot – the 12-13 yr old car with 100-120k miles in the $3-4k price range. At this age, good maintenance is apparent and bad maintenance is clear as a billboard. The target seller is an idividual in his/her early 70s who is probably the original owner. The car will never have been trashed by kids and will likely have spent its life in a garage. If your tastes run towards big GM/FoMoCo luxocruisers, all the better. I have driven this wsy for many years, comfortably and inexpensively. Keep it until another example falls across your path (seems to happen to me about every 4 years), then repeat.
Sound points all…. but the heart has its reasons that the mind knows nothing of……
I apologize if I don’t respond to everyone here. But I want to dispell a few myths that have been brought up.
“I use my leased Audi in my business and get to deduct it and all expenses incurred in its upkeep. The government, in effect, ends up subsidizing me rather substantially.”
My late father did this once at the advice of his accountant. It was the wrong decision in every respect. He ended up paying far more than he would have if he had just simply kept the car for the long run (2000 Lexus ES300), and the depreciation and mileage deductions for owning the vehicle were far greater than what the accountant took credit for.
Unless you’re leasing a Ferrari at insanely good terms, leasing does not work… regardless of the tax bracket. Tom & Ray Magliozzi have a chapter on this subject in their ‘Car Talk’ book that highlights the math for this.
Adam: I think the problems we will experience are more of an economic nature. The technology for extracting and refining oil, harnessing alternative energies and transporting people are set to improve dramatically over the next decade.
The greater issue we need to tackle is debt and leverage. I am not a ‘Gold bug’ or one of those economic conspiracy thinkers that sees disaster at every single turn. However if we are to remain a first world country we will need to say no to a lot of special interests and design goods that are far more durable, energy efficient and easier to maintain than is the case right now.
Everyone else who thinks cars discombobulate before 100k need to seriously educate themselves on cars. Most cars these days can last north of 250k if they’re properly maintained, and regular maintenance can be done at an independent mechanic’s shop for a fraction of the price of the dealership.
I’ll be the contrarian here and suggest the best value is to buy a new Civic/Corolla/Mazda3 and drive it for 10-15 years. Used Civics, along with most other small, popular and fuel efficient cars keep their value too well to be worth buying on the used market. Their value seems to be a proportion of how close they are to their 250k lifespan.
A Civic’s 38 real-world MPG rating saves you thousands over a low 30’s Cavalier/Cobalt/Neon/Elantra, not to mention the likelyhood that a well maintained Honda or Toyota will actually make it to that 250k milestone.
Ralph, buy one on Ebay from a seller with a 98+% feedback rating.
I suppose that I should state for the record that I haven’t bought anything but CPO cars for the last 10 years…..
With BMW, you can save 25% by accepting a year-old car with 12K miles on it….. AND get the balance of the complete (including wiper blades) maintenance agreement AND a warranty out to 100K miles – better than the new car warranty.
It makes it pretty hard to justify a brand new one, especially when the leather still smells new at 12 months old.
To quote Lao Tzu, “When in doubt, do nothing.”
I waited and made my homework for 12 months before buying my used Toyota Avensis. Mi friends joked about my “future car” that never came.
I even created a google document with all the models I considered (about 30) and its characteristics: Size, Weight, NCAP rating, mpg, handling, ESC or no ESC, reliability and comments from different sources.
The time and the effort was worth it.
Your footwear is going to have a bigger impact on your life than the car you drive
Absolutely NO!.
For starters the car you drive makes a notable difference in your chances of becoming a mortality/morbidity traffic statistic.
That is why my 191,000 mile WRX is still on the road. Yeah, it has seen better days and could use a host of repairs…. namely shocks and bushings… but as long as it remains reliable I can overlook the age and lack of refinement. I have no interest in stroking a check each month to a finance company or parting with a chunk of my savings for new. Plus i love not caring what it looks like anymore. Dings, scratches, etc.. blah.
Well, it is possible to own the car you really want, and to buy new, without being taken to the cleaners. One can even be a bit impulsive about it. I have purchased only new Hondas, Acuras and Subarus for the past 20 years and I think it has worked out fine. Here is my new car buying history:
1. Purchased new Acura Integra in 1990 for ~$14k out the door.
2. Traded the Integra (with 54k miles) in on a 1999 Honda Civic Si. Paid $19k for the loaded Civic -$5k for my trade. This was my most impulsive transaction. Trades are not so smart, but I just had to have the bright red zoom zoomy Si! 8000rpm is such fun!
3. 2003. My beloved zoom zoomy Si is rear ended by a soccer mom in a Ford Expedition. Her insurance cuts me a check for $16k. I rush to my Subaru dealer and write him a check for $24k and drive home in a 2004 WRX sport wagon. Yeah, now I’m a rally racer!
4. 2008. I go along with my wife to look at Honda Fits. Savvy sales lady let’s me test drive a 2008 Civic Si sedan. Once again, love at first drive. Sell the 04 WRX (now with 75k miles) to a private buyer for $13.5k. Write check to Honda dealer for $21K and zoom zoom home in brand new bright red Si.
So, lets see. Over the past 19 years my check book has payed out ~$43,500 to keep me in new Hondas and Subarus. Minus the $18,675 KBB private party value of my current Civic that comes out to $24,825 for 19 years of driving pleasure ($0 repairs over 185,000 miles), or $1306 per year. I suspect I would have spent at least as much money buying and repairing crapped out Pontiacs and Fords, while having far more headaches and far less fun!
He ended up paying far more than he would have if he had just simply kept the car for the long run (2000 Lexus ES300), and the depreciation and mileage deductions for owning the vehicle were far greater than what the accountant took credit for.
Some leases can make sense. BMW heavily subsidizes theirs, so if you have some compelling reason to drive a new BMW every other year, leasing is often a better alternative to buying, because of the built-in incentive.
Keep in mind that a person who swaps cars every couple of years has to deal with the trade-in, which probably means getting spanked in the real world at some amount below the residual value built into the lease.
But most people who lease probably shouldn’t. If you don’t need it for business, then you have to ask yourself why you’d feel the need to drive a new car every 2-3 years. For most people, that’s a matter of the wrong priorities, not good financial sense.
Another mistake that people make with leasing is that they fail to haggle the purchase price. A lease based upon MSRP is unnecessary, but people do it, anyway. Negotiate everything.
@Steven Lang
“and regular maintenance can be done at an independent mechanic’s shop for a fraction of the price of the dealership.”
My father is a service manager at a BPG store and he does everything he can to take care of his customers. He will make sure, even if the car is no longer under warranty, that the customer is getting the best price and best repair avaialable. Many times he goes out of his way to find parts that are cheap to lower the cost to the customer as compared to if the customer had to buy a brand new part from a supplier/GM.
Many times people come in complaining of taking their car to an “independent mechanic’s shop” and that now the same thing is wrong that the independent shop was suppose to fix. 9 times out of 10 it turns out that the independent shop incorrectly repaired or never repaired the issue at all and that they actually created even more issues. My dad feels for these people, but when he checks their customer records, they bought the car there but they never had brought it in for regular maintenance or oil changes, so he feels less so for them. Now their car is out of warranty because they never brought it into the dealership and because the indepedent shop screwed more things up, they have a large repair order to pay.
So I would argue that you find a good dealership and continue to do business with them, not an independent shop. A good dealership will continue to want to help you and give you good service, where as in all the experiences I have had and heard of with indepedent shops people always get screwed big time, and end up fixing more than originally needed.
Case in point: friends of mine are about to turn in a Fusion that they leased three years ago. In three years of lease payments they spent twice what I spent eleven years ago to buy a Thunderbird that I still own. OK, my maintenance costs have been a lot higher, but I’m still way ahead of them in both annual and total costs – and I still have my car.
Put another way, what I paid to buy the Thunderbird and Miata combined equals what they paid to lease the Fusion for three years. For some reason they did not appreciate me pointing this out to them… ;-)
Steven:
Thanks for the tip. I just did as you suggested. Went on eBay. Note that I am far from an eBay master. Searched for Fusions. 138 vehicles. Refined search for manual transmisions. Down to 10. Refined search for within 75 miles of my zip code. Down to one, a stripper “S”, and they wanted $15k.
I know a big part of my problem is where I live and there may be no easy answer. So the search goes on.
very good article!!!
though, there’s also a lot to be said about buying new ‘regular’ cars VS new(or used) luxury / semi-luxury cars…
for example:
better to buy a new accord for 23k than a used acura for 23k
better to buy a new jetta for 18k than a used a4 for 18k
though – buying the 1 year old sonata for 12k is still a better deal…
Generally, I agree with the jist of the article. However, most people have a self-image they wish to fulfill, and unless they fill their consumption constellation, say their dream car, they’ll never feel fulfilled.
Shopping and buying things is just another way of building identity, which is at the top of Maslow’s needs pyramid (self-actualization). Having a high cash burn rate isn’t the problem, it’s the objective. It’s just most people don’t have the cashflow to afford their ideal lifestyle.
And when you buy exactly what you want, there is no downside. There’s zero envy when you see someone else pull up in a desireable car next to yours. The problem I see is that people impulsively buy because of boredom or necessity, not what they want.
I say enjoy your old appliance. I will enjoy my 350 plus HP V8 RWD new sports car. You can say it doesn’t matter and polish your pennies. Have fun with that.
There is one gigantic central logical flaw in this article.
If we all follow this advice, and we all (or even a large fraction of us) avoid buying new cars ever…..who is going to buy the new cars that will eventually become the used cars we want?
And, if we’re all out looking for 3-year-old Civics because those are the financially optimum choice, doesn’t the Law of Supply and Demand dictate that the price of those Civics will go up because so many people will be competing to purchase them.
We can’t all save money buying used cars any more than we can all get rich buying foreclosed homes.
Steve, I have to disagree somewhat with your response to my point about the tax write-off, etc. I want (and can afford) a new car every three years. I like, too, that it stays in warranty. Most important, the tax advantage reduces the annual cost of my 2009 Audi from about $5,500/year to under $4,000/ year. Maybe it sounds like a lot, but AudiCare is also included, so no maintenance cost either. I used to buy, but when it was time again for a new one, I either had to get creamed by the dealer on a trade, or sell it myself, something I don’t like doing. I think there are others like myself who will pay for the real luxury of not being bothered. Much more pleasing, to me at least, than even five Armani suits!
most cars these days are about 25 to 40 percent cheaper after their first year.
Please tell me you’re not comparing sticker price to the price used?
I bought a new 08 GTI for 23,500 ($1000 under invoice) the sticker was 27,500. I looked for what a one year old one with 10k miles it would be 22,500.
The only way you can get that 25/40% number is if you compare the sticker price to the used price. If you compare the best price you can get new I honestly don’t think used cars are being discounted enough to make it worth it to take the risk.
“the 12-13 yr old car with 100-120k miles in the $3-4k price range. At this age, good maintenance is apparent and bad maintenance is clear as a billboard.”
True. And I’d say this applies to potential enthusiast vehicles as well. To wit: BMW E30s or earlier E36s, E34s, etc. Anything terribly wrong has probably been fixed, and if you know your way around the cars, you can find a good example with a solid power train. With two or three thousand more dollars in hand, you can refresh suspension (shocks, bushings, tie rods), pads, rotors, brake lines, etc., and have one hell of a fun little car to drive for a fraction of the cost of something new, with simply fewer things (read: electronics) to break.
Also, trucks: if you need an actual work truck or off road truck, and especially if you know it’s going to get dinged up, buy an older one used for under $5k, and put some of that spare money you would have paid for a new truck into upgrading worn parts, and even, if you wish, upgrading some systems with good aftermarket parts (same applies to the BMWs: aluminum radiators for plastic, for example).
The extra added value of buying used like this is that you really aren’t fazed if your vehicle suffers additional scuffs, rock chips, etc. It’s very liberating to not care. As much as I took good care of my former S2000 and R32, I don’t at all miss that sense of low-grade panic every time a dump truck up the freeway was dropping sand on the pavement at 70mph.
Given the state of the “new car market” I think most of America has already taken your advice, a priori.
I keep my cars until their wheels fall off. I also know how to put the wheels back on, so I keep them for a long time.
As for buying new, I’ll never step into a dealership again, as long as I live. The only time I’ll buy a new car is if I can order it online from the manufacturer and have it delivered. Car buying, as it currently stands is about as pleasant as a root canal. In fact, I’d rather have the root canal. I can’t wait for the death of the car dealership concept. I will dance gleefully upon their graves.
–chuck
I’ll give you another example. A friend just bought a 5 yo Honda minivan with 75k miles on it for $10k. He said it was 30k new.
I looked it up – it was 28k new, the invoice was 25 and Honda is offering $2500 cash back. So, in reality the price new was only 22,500.
I don’t think $10k is a fair price for a 5 year old 22,500 car with 75,000 miles on it.
If cars really dropped 40% when you drove them off the lot that would make sense – but they don’t.
Also, can you please give me an example of a car that depreciates that fast? And again, I’m not talking sticker I’m talking from the best price you can get the car for new.
“That is why my 191,000 mile WRX is still on the road. Yeah, it has seen better days and could use a host of repairs…. namely shocks and bushings… but as long as it remains reliable I can overlook the age and lack of refinement.”
I hear you brother. I have two cars. . An ’87 VW 16V Scirocco with 180,000 miles that runs great, and burns NO oil at all, and only the AC is weak. And a ’06 BMW M3 coupe for nice commuting days. My job is only 15 miles away, so I usually take the beater.
If you are rolling in dough, go for it.
Otherwise, Mr. Lang is spewing badly needed wisdom. And, given what I hear RF pays, it’s advice worth much more than what it costs. :)
I actually think this is yet another weight on the back of the car industry. We have a lot more people around today that also find less value in a new car, and more in time spent with friends and family.
I have said it before, and taken much heat here, “If you can’t pay cash, don’t buy it.” I gave a few exceptions, but for most everyone, that’s what they should do.
“Unless you’re leasing a Ferrari at insanely good terms, leasing does not work… ”
I take extreme exception to statements like this. Everyone from that financial “guru” on tv, Susy Orman to my coworkers tells me how stupid it is to lease a car. This is true IF and only IF you plan on driving your vehicle until it dies. There are also certain models and makes with horrible depreciation (aka almost anything american) where leasing is a less attractive alternative as well. (when calculated correctly by the manufacturer) Leasing was actually a steal on many american suvs that came off lease last year because depreciation was so underestimated, lessees actually paid far less to drive the vehicle for 3 years than it would have cost a buyer in depreciation over that same time period.
The general public does not purchase a vehicle with the intent of keeping it for 15 years. This is the main reason why this argument about leasing being so bad must end. If you do, then god bless – this post isnt about you.
You can lease a brand neew Toyota Camry, basic trim level for about $275 dollars a month. Maintenance = 0. Worry = 0. Time wasted = 0. $3330 a year (not including insurance or gas of course) is not a lot of money for most people’s #2 most valuable asset. Many people go out drinking on the weekend and drop a hundred bucks and get zero return and then get all high and mighty on value when it comes to something as important as their daily transportation needs for work, school, etc.
Again, if you are struggling to get by, or running your car into the ground then yes, leasing a new car isnt for you. But for almost everyone else, there is no better financial option. No, “woops, your tansmission is done, that’ll be $2500, thanks” Worry free, hassle free, and a constantly updated vehicle to keep you in something SAFE and respectable wether you are at the 20, 40, or 80k price point.
All excellent points. Trying to out do the neighbors has gotten alot of people into BIG financial trouble.
Another thing to add to mix is buying used affords you a nicer car for the same coin. For $23K you could have a new Honda or a used Infiniti. Thus my wife’s next car will be a G35 coupe, the difference between a brand new whip and a lighted used/previously leased version represents almost $10K in savings, thus all of sudden its affordable luxury for us. The wife really wants a new Volvo C30 but for the money the used G35 is a much, much better deal and even she knows it. We are DONE buying new!
A great deal in used cars is an Acura NSX, since the model hasn’t changed in YEARS nobody can tell the difference, for under $30K (a 1/3 the cost of new) you could own a legit mid-engine sports car for the same payments as some chrome covered, leather stuffed new SUV. Now tell me… which one would rather drive?
However like others I’ve had atleast one used deal go bad – a Ford Ranger that was costing me more in repairs then the payments on a new truck. So I bought a new Dodge Dakota (don’t laugh) but planned from the get-go on keeping it forever. Its currently 8 years old and in perfect condition aside from the headline falling down (easy fix) and dinged bumper (who cares, its a pickup truck).
Our other car is a 10 year old Passat Turbo, once again we bought new but have taken excellent care of it (after all it is a VW). 70K miles at 30 mpg is nothing to sneeze at. Take the original selling price and divide by years and this respectable car has only costs us $2,400 a year… heck I know people with larger cell phone bills then that!
mark06902,
So totally right, the other point is it all depends on the deal.
If a 3yo Camry with 36k miles is selling for 19,995 and you can drive a new one off the lot for $20,500 then buying used is a bad idea.
If you are getting a hoon driven 5 yo WRX STi with 75k miles for 10k that’s not a good deal.
If you’re leasing a Range Rover Sport for $459 a month that’s a fantastic deal.
Again, it all depends on the deal.
Sometimes buying new makes sense, sometimes leasing makes sense, and sometimes buying used makes sense. But, don’t automatically assume that one option is better than the other.
jmo,
yes that’s exactly what I am getting at. Car buying/leasing is very deal specific. It is not wise to simply take leasing off the table entirely because often times, and for many people it makes a ton of sense.
Here’s a better one for you. – I lease my car for $700 dollars a month. (Now this argument has alot more to do with “want” value vs. “need” value) Find the best possible car out there that you could purchase and have a monthly payment of $700 a month (standard 5 year loan – with the assumption of ditching it after about 3 years for a new model) and i’ll tell you what leasing allows me to drive for the same price.
I learned from my folks, who always bought new or near-new and drove their cars more or less into the ground.
In 2002, I bought a ’98 Accord EX 4-door with about 60k miles on it. I paid about $1k less than the KBB value at the time. 7 years later the Accord is pushing 200k miles and, aside from replacing the stick shift (seems the previous owner was a bit of a hoon) and an expensive-but-not-critical known issue with the vapor recovery system, this bulletproof little wonder has been rock-solid reliable. It starts every time, even in cold New England winters. It has never left me stranded. It’s couch change to insure compared to newer and flashier models. Perhaps best of all, it’s completely paid off and still doing its job well. Maintenance costs have been far lower than they have any right to be given the car’s mileage and age. I take care of my investment but I don’t baby it, and it still puts out a level of performance and reliability that literally blows away any other complex machine or expensive appliance I have ever owned. So I’m more than convinced that there’s plenty of value and utility available in the used-vehicle segment of the market.
My wife insists that our next car purchase ought to be a new one – I’m not yet sure about it.
I am addicted to buying new cars. The thought of driving a car that someone else has ‘lived in’ for a year or two grosses me out, kind of like the jacuzzi and sheets in the honeymoon suite of a seedy motel. Life is short and some things just just worth it. Maybe I need help?
I don’t understand how leasing can pay off for the average individual. When you lease a car, you are paying someone else to own it, plus a profit margin. How can that be cheaper than owning the car yourself?
I can only think of two possible scenarios where leasing would make economic sense.
1) You can tie your money up in an investment which offers a far higher return than the effective interest rate on your lease, and you have virtually no savings and a bad credit history.
2) You know you’re going to die within the next few years.
This covers maybe two percent of the population.
Otherwise the other 98% of the population is better off getting a used vehicle that is…
1) Conservatively driven
2) Well maintained
3) Offers minimal depreciation
4) Well engineered
5) Can be paid off immediately in cash
The used car can be a demo vehicle with only a couple thousand miles that’s covered under the CPO program. Or an old 1990’s Volvo with an exceptional maintenance history. Your choice really depends on your willingness to deal with #3… and whether you’re willing to do basic maintenance yourself.
I think a large proportion of car nuts think this way, which is why our favorite cars keep getting canceled or softened – maybe we DO need to buy new more often.
I don’t understand how leasing can pay off for the average individual. When you lease a car, you are paying someone else to own it, plus a profit margin. How can that be cheaper than owning the car yourself?
—————————–
People that say buying a car always makes the most sense are the same people who insist a house that you live in is also a good investment. (real estate returns 1-2% per year over the last 150 years) None of these are investments, they are expenses, that we all have to deal with in some capacity in our lives. The amount of expense you choose to incur depends on an individuals needs and wants.
sardaukar,
A 09 Accord EX-L stickers at 25,605 new. The invoice is 23,213 and Honda is offering an additional $1000 off. So the price out the door could be 22,213.
An 05 Accord EX-L CPO is #16,217.
Now assuming an accord is going to last 18 years and go 250k miles a 4yo Accord with 60k has used up about 23% of its expected lifespan.
22,213 x .77 = $17,104. That’s not even accounting for all the additional maintaince.
So, if you can only get it for $16,271 you are only saving $900. To me $900 is not worth it.
Now, if you could find a mint condition 04 Accord with 50k for $12,500 that might make sense.
But, as the price used rises to the price new adjusted for the future expected lifespan buying used makes less and less sence.
a lease is the riskiest form of loan for a lender, if you have poor creidt history, a lease is generally not an option to begin with.
When you lease a car, you are paying someone else to own it, plus a profit margin.
Profit margin? Again it all depends on the deal you are getting. Volvo, for example, is offering ridiculously subsidised leases rather then huge rebates as they are worried that rebates will errode the brand. In cases like this Volvo may lose thousands on each lease. But, that loss will come in 3 years and they need to move metal now.
The same thing happened to Nissan back in the 90’s. They needed to move metal so they offered really low lease rates, the billions in losses came 3 years later.
Leasing is a good option for many people. You can get a new car that no one has abused, with all the latest safety equipment for not much of money. I pay $185 after sales tax for my ’07 Impreza. I could not have found a used car, that I could find financing that cheap on. Everything decently new is would make the monthly payment way more, or for a a very long period of time, and something older wouldn’t have the ability to be financed. The only reason I am considering buying the car from them next year when my lease is up, is because I don’t like the new one, and I would have to take one with drum brakes, which I despise the premise of. Sure it may not be worth exactly 12K next year, but the value should be in that ballpark, and I know the whole history of the car, not just what someone told me.
My parents leased a Accord EX last year for $305 after tax last year, zero down, 24 months. Next year they can get another car without any hassle.
On strictly financial grounds, I totally agree with Mr. Lang. And there are all kinds of great used performance car bargains out there, for example, if one is willing to look hard enough (and it’s not that hard) and be patient — late model Bimmers, Porsches, Mercs, Vettes…you name it, can all be had for a fraction of what they sold for new.
But life is short and is more than just numbers (and money), at least for some people. It all comes down to one’s means and priorities in life.
Some willingly suffer being car poor (or house poor) because for them, for whatever reason, it’s important to have that new BMW M3 (or Camry), or 6K sq ft McMansion (or 3K sq ft mini-McMansion). Hey, your life, your money. Knock yourself out. Plus has some have stated here, buying used means buying someone else’s “issues”.
For me, right now, a new new car isn’t an option. Actually, any car new or used is not an option. Such is life. But I damn sure look forward to the day when I can afford to drive off the lot in that shiny new look-at-me-mobile, horrendous depreciation cost and all.
I can only think of two possible scenarios where leasing would make economic sense.
1) You can tie your money up in an investment which offers a far higher return than the effective interest rate on your lease, and you have virtually no savings and a bad credit history.
2) You know you’re going to die within the next few years.
For those who insist on trading the cars often and who demand having a new one, leasing can make sense if the “money factor” (interest rate) and/or residual value are subsidized in comparison to what is available in the purchase market.
That being said, most people should not be leasing cars, and those who are good candidates for leasing should be selective about their choice of leasing programs. Most people have no real need to trade cars so often, and they are eroding their financial positions by devoting so much of their wealth to car rentals, which is what leases are.
I think that one thing that you miss is that it take more effort for the average person to both find quality used cars and to get top dollar when selling a late model used car than it is for you.
You’re in the business, so you have access to a lot of inventory. You pay wholesale and sell retail, so you’re getting better pricing on both sides of the deal. If you buy a lemon, you can dump it easily and quickly. Most of us are not in the same situation, so we have different issues to deal with.
For us, selling a two-year old used car means going to a dealer and watching him try to buy it from us for under wholesale book. In the alternative, you can spend weeks or months trying to find a private party buyer, who is probably going to need time to complete the purchase because he’ll need to get a loan. A big PITA.
If the residual on the lease is better than that and the lease otherwise has better terms, then leasing may be the way to go, IF you insist on being on the new-car-every-two-years treadmill. Getting off the treadmill would be a better choice, but those who insist on staying on it should consider leasing, even though it has a lot of drawbacks.
Steve, I understand your logical and emotional point, but I, and others here also have mentioned, have found buying used cars is buying “someone elses problems”. My experience has been I have no problems when I buy a new car and have more annoyances with used cars. My 1988 Camaro new had no problems until 60K, (muffle, front brakes). A 1996 Corolla (2 1/2 years old bought) was fine for 6 months then starter, brakes, tires, struts within a year. Since you can’t get a 6.9% rate on repairs (19.99% and higher card rates) I’d rather pay monthly for a new car than get a whopping $800+ bill every 6 months.
I buy a new car that’s within my means. I bought a Ford Fusion fwd not a Lexus IS250 AWD.
Great article.
Arguing the finer points makes no sense to me because it depends. Circumstances are different for every individual and what makes a great deal for one person may not be such a great deal for another.
Leasing? Usually a bad deal, but it depends.
Buying used? Usually a good deal, but it depends.
Buying new? It depends.
I’ve never been tempted to buy a new car until now. Seeing all the deals with $2,000 to $10,000 knocked off the invoice, plus 0% financing, is pretty enticing.
But then my buddy just bought an 06 750i for $46K (CAN) with the CPO from BMW. New it retailed in Canada for nearly $100k. I can’t imagine having bought that thing new and lost $55k over three years. That’s like…almost as bad as my retirement savings portfolio!
I’d never lease, not my thing personally (I’m an “owner” type person — I don’t own an mp3 player or buy mp3s).
I always thought leasing might be interesting for sports cars — rip the crap out of it & give it back.
For this same reason, I can’t really imagine buying a sports car used.
If we all follow this advice, and we all (or even a large fraction of us) avoid buying new cars ever…..who is going to buy the new cars that will eventually become the used cars we want?
I can identify several different kinds of new cars buyers:
* People who can afford to burn money.
* Well to do individuals with 10-20 years left on this earth (60-70 yo individuals). You do not need to be with a foot on the grave to think about your mortality.
* People who really “has” to own that new flashy model. Early adopters.
* People who does not know/does not like the process of buying a used car. Some of them had been burned by previous bad used car buys. You need to know some tricks to buy a good used car. And you need patience.
* People who does not know/care about good financial health. They only see the monthly payment and the flashy new car. They can not see the financial whole (grim) picture.
* People with more money than sense.
* People who is worried about keeping up with the joneses.
The rest of us (i.e., young/middle aged, thrifty, average income, rational car buyers with some measure of knowledge about used cars) shall buy used.
mark06902 [on leasing]: “$3330 a year (not including insurance or gas of course) is not a lot of money for most people’s #2 most valuable asset.”
A leased vehicle is not an asset in any sense I’m familiar with.
mark06902: “Here’s a better one for you. – I lease my car for $700 dollars a month. (Now this argument has alot more to do with “want” value vs. “need” value) Find the best possible car out there that you could purchase and have a monthly payment of $700 a month (standard 5 year loan – with the assumption of ditching it after about 3 years for a new model) and i’ll tell you what leasing allows me to drive for the same price.”
I bought what is perhaps my last new car ever, eight years ago, for $600/month and I’ve now driven it for several years for free. Let me tell you about the cruise we just took with a small part of the $600/month we’ve been setting aside for a while…
A is A,
Can you honestly look at the cost of a 3-5 year old Honda or Toyota vs. the discounted/rebated price new and still think it’s a good deal?
Can you honestly look at the cost of a 3-5 year old Honda or Toyota vs. the discounted/rebated price new and still think it’s a good deal?
Some of this depends upon where you are.
In the US, residuals on used Hondas and Toyotas are extremely high. They’re the default choice, sell easily and command high prices.
I doubt that’s the case in Europe, where Japanese cars are not as popular and where competition is fierce in the size classes similar to the Corolla.
Also, Europe has a high VAT (sales tax) as well as other costs on new car purchases, so that makes buying new that much more costly. High sales taxes tend to discourage consumption and to encourage people to look for lower cost alternatives.
In addition, I don’t know whether Europeans have to pay VAT on used cars bought from private parties, but if they don’t, that would encourage more people to buy used. In the US, sales taxes are not high enough to keep many new car buyers entirely out of the market.
Though I’ve bought a new car, I will probably not do so again for a very long time.
I read in a consumer reports that an S550, costs something on the order of $101,000 to keep for the first few years, largely due to depreciation. That doesn’t stop people from buying or leasing one…
Exceptional service is why some people buy new. A friend of mine, recently bought a new M3 (an unsold 08, actually) and the dealership presented the car to him, under cover with a gift ribbon on top. Those salesmen probably just sold my friend his next car. Some Lexus dealers will even come to your house with your car and the paperwork.
Regarding leasing–It depends on your situation and what you’re looking to get. One person satisfies is Impulse by leasing on short terms and rotating through different cars for a fairly low monthly payment. I know someone else who buys new (and writes down the depreciation) because they put on too many miles a year for leases to be worthwhile.
“Unless you’re leasing a Ferrari at insanely good terms, leasing does not work… ”
I take extreme exception to statements like this. Everyone from that financial “guru” on tv, Susy Orman to my coworkers tells me how stupid it is to lease a car. This is true IF and only IF you plan on driving your vehicle until it dies. There are also certain models and makes with horrible depreciation (aka almost anything american) where leasing is a less attractive alternative as well. (when calculated correctly by the manufacturer) Leasing was actually a steal on many american suvs that came off lease last year because depreciation was so underestimated, lessees actually paid far less to drive the vehicle for 3 years than it would have cost a buyer in depreciation over that same time period.
The general public does not purchase a vehicle with the intent of keeping it for 15 years. This is the main reason why this argument about leasing being so bad must end. If you do, then god bless – this post isnt about you.
You can lease a brand neew Toyota Camry, basic trim level for about $275 dollars a month. Maintenance = 0. Worry = 0. Time wasted = 0. $3330 a year (not including insurance or gas of course) is not a lot of money for most people’s #2 most valuable asset. Many people go out drinking on the weekend and drop a hundred bucks and get zero return and then get all high and mighty on value when it comes to something as important as their daily transportation needs for work, school, etc.
Again, if you are struggling to get by, or running your car into the ground then yes, leasing a new car isnt for you. But for almost everyone else, there is no better financial option. No, “woops, your tansmission is done, that’ll be $2500, thanks” Worry free, hassle free, and a constantly updated vehicle to keep you in something SAFE and respectable wether you are at the 20, 40, or 80k price point.
So then why aren’t you willing to drive a car for 15 years? That’s the most financially sensible thing to do here. Most who lease are simply doing so to drive cars they wouldn’t be able to afford otherwise. I notice your main criteria seem to be “keeping yourself in something safe and respectable”, and I’m sure you put a lot of emphasis on the “respectable” part. This is nothing more than the sort of stupid consumerism that got our economy to this disastrous point. And older cars can also be largely “trouble and hassle free” if they’re maintained properly, etc.
Leasing is really, really stupid. End of story.
Yep, spot-on article.
Lotsa energy here on leasing in the comments. I find no good reason to do it and have found that those I’ve know who lease and find all their justifications to do it are also the same people who have money problems/debt problems or living the TX term of “big hat, no cattle”. Leasing? No Thanks.
The appeal of owning a car in America continues to diminish each year. Why? Crowded roads, time stuck in traffic jams, more traffic signals, pounded in paying taxes, fuel prices that jump all around, cops, traffic tickets becoming city revenue sources, insurance costs, people getting fat from sitting on their ass in the drivers seat too much, yadda, yadda, yadda. Unfortunately, I don’t see this trend getting better for auto industry. Look at what has happened in Japan. Citizens are walking away from cars as they are not viewed as cool anymore. Japanese dealers and manufacturers are scrambling to try to fight this battle and they are losing. This trend is happening here too. Over the past few years I’ve watched numerous friends in several states change their views and desires on cars and its not pretty for the OEMs.
Can you honestly look at the cost of a 3-5 year old Honda or Toyota vs. the discounted/rebated price new and still think it’s a good deal?
Absolutely.
I paid 45% (11750€) of the cost of my Avensis as new. 70000 real (checked) Kilometers. 12 months of guarantee. Car in mint condition. No crashes (I checked underneath with a high power flashlight in an elevator previously). Complete service history.
Paying 26000€ for a new car was totally, absolutely out of question from a financial point of view (I paid in cash). Ditto for a (hypothetical) rebated 24000€.
As I see it: I bought an excellent car with 70% of its trouble-free service (lets say 210000km) left for 45% of its price. It seems a bargain to me.
I doubt that’s the case in Europe, where Japanese cars are not as popular
True. I bought the car at a Marcedes-Benz dealer in Spain. After the purchase I asked the seller why the car was so (relatively) inexpensive. He confessed me that selling used Toyotas was not as easy as selling other brands (he cited VolksWagen as a easy sell). I told him that Toyotas are quality vehicles. He replied: “Yes, I know that. You also know. But the average buyer does not know”.
My personal take on leasing: I used to be vehemently against it, and I still am for the most part. However, when I was looking to trade in my ’06 TSX and buy a new convertible to replace it I found that the best option for me was to keep the TSX until it falls apart and lease a Miata for $250 a month for two years. Ultimately I get a practical car and a car just for funsies. Plus I wasn’t too keen on owning a convertible outside of the warranty period.
Most of you know my cash is king theory, but here is a little more.
If you can pay cash, then you obviously can afford the luxury of buying new, or at least have proved you are capable of making the decision wisely. There is nothing wrong with paying extra for luxuries that you desire. That is what money is for. IT’S NOT WHAT CREDIT IS FOR! Credit is for necessity. Credit is for business opportunity.
So yes, all you “it sometimes make sense to lease or buy new” guys, you are correct. Except you are almost always not. Think about it like this, way more – than half of us think we are above average. Only way to prove you are above average at important, personal financial decision making is to pay cash. Period. Otherwise, you are a wannabe who is just fooling himself. If you don’t have the cash, or have some EXCUSE not to use the cash, then you have not graduated and do not deserve a new car.
When you have graduated, you will know it, and you will enjoy it immensely. The self assuredness of having 50k in the bank, and deciding that you don’t need a new sports car is much more enjoyable than said sports car. Trust me. And, you can enjoy passing up the sports car hundreds of times before finally deciding its time to buy one, and by then you likely will have 100k, and the sports car will be a used one that cost 25k. And it gets better and better. :) :) :)
When to lease? If it is REALLY for business purposes – which means the lease is in the name of the LLC or corporation. If your company can’t get credit without you putting your own name on the line, you might want to reconsider whether your business should not buy cash. Write offs are a fools bargain.
So, you are a young professional starting on a new career, and you must have a presentable car that never breaks, and you are tightly managing cash flow because you have no savings. Well, shame on your parents, but, fine. Get the cheapest lease or payment on a new or CPO compact that you can find. Don’t pay $5 a month extra for anything, otherwise, you are kidding yourself about why you “need” a new car. BTW, they put that Jetta in the paper like that so they could get your young, inexperienced self into their lair to sell you something more expensive. Teach them a lesson. Say no, and threaten to walk if they try to upsell you again, and then do it.
Now, think about the coolest people you ever knew. Were they that cool because they had a new car? How about the smartest? Most successful? Happiest? Car payments don’t help anyone reach their goals. Avoid them like the plague.
A is A,
That would explain it. In the US that Toyota might be worth 70% with 43,000miles on it.
carguy,
Did you think of paying the lease upfront to avoid the interest? If you did that, then I would say you made a great decision. Most people don’t know you can do that though.
In the US that Toyota might be worth 70% with 43,000miles on it.
70%?. Oh my G*d. No bargains then in the US. The average car buyer is wiser then in the USA.
People in Spain keeps buying unreliable Peugeots/Citröens/Renaults one after another after another. A relative of me who sells cars says that French car buyers have “masochistic” (his word) tendencies.
Toyota only has a 4.5% market share in Spain. They were not free to import Toyotas to Spain until 2000 (!!!!).
http://www.toyota.es/about/espana.aspx
In fact I bought a Toyota spurred by this website. I read here that Toyotas are bland (not for me) and souless (???, do you want “Christine” in your garage?), but well built reliable and durable.
Without the Internet and TTAC I would be driving a Renault or a Citröen, as everybody else.
If you can pay cash, then you obviously can afford the luxury of buying new
Yes. Of buying new an inferior car.
The same money buys a used Toyota Avensis or a new Chevrolet Nubira…
http://www.chevrolet.es/nubira-4d/nubira-4d-index.html
…I choosed to buy the used Avensis. Thank you very much.
Landcrusher Unfortunately no… My biggest asset going into the new car purchase was the value of the TSX. Ultimately I really couldn’t afford the lease either… but I convinced my self otherwise (had to take up some extra hours at my part time job, cut back the cable to 13 channels). I’ve wizened up since then financially and would be able to do such today, and plan to do such when, and if, I decide to lease again.
By the way, $250 a month for a car that puts a smile on my face every time I drive it is worth it for me.
I paid $2000 for my 20 year old 525i with 117k, if it lasts me a year without crapping itself I call it fair. I expect this car will do another 6-7 years with not too much maintenance, although I’ll probably change it in 2, and get most of the purchase price back. I might get a worse deal next time ie. take a bigger risk but let myself enjoy it.
@Gary Numan: “big hat, no cattle” -LOL! Love it.
There’s this middle-aged guy around who drives both an upscale European car and a used supercar.
He doesn’t live in a $1.5M house; -more like $200k.
++
I see Tons of people driving cars Wildly above their station to classes at a Community College.
…ymmv…
I paid $2000 for my 20 year old 525i with 117k
I call that an excellent bang for the buck. And what a gorgeous car. Almost a classic.
If safety is not a priority and saving pennies is, used is obviously the way to go.
Willman,
Or people driving 15yo S-Class Mercedes who have been much better off in a nice new Corolla.
Just becaue you are buying used doesn’t mean you’re being responsible.
Or people driving 15yo S-Class Mercedes who have been much better off in a nice new Corolla.
…and much safer.
Please check what happens when you crash the safest car in the world in the 1980s (the Volvo 700, reincarnated into a Volvo 945) and a 21st century NCAP 5 stars penalty box, a Renault Modus
http://www.youtube.com/results?search_type=&search_query=bbc+modus+volvo
Yes, you are right: Buy used can also be bad business if you buy overpriced used metal.
jmo, you can not compare the purchase price of a new car (instead of MSRP) to the asking price of a used car (which is equivalent to MSRP), which is exactly what you are doing.
Most credit unions will give you the MMR (Manheim Market Report) valuation that will show how much the prices are for certain vehicles. It’s based on the largest database of valuations that I’m aware of and I use it almost every day.
For an easier to access pricing guide you can also go to Ebay and perform an advanced search for vehicles sold between 2005 and 2008. Include the word ‘No Reserve’ or ‘NR’ in your searching criteria and you should get over 1,000 responses.
A brief synopsis of what you will find…
1) Luxury vehicle values are crashing. Most can be had for less than half the price of a couple years ago…. and will sill have about 80% of their life left.
NOTE: You’ll likely find these vehicles to be far better values than most midsized cars if you heavily prioritize a luxurious ride and are willing to spend a few thousand more in repairs.
2) SUV’s have even worse valuations.
Finally….
3) For those who REALLY are looking at cost uber alles, a SALVAGE vehicle will probably be cheapest from an initial cost perspective.
Most of these are NOT good deals… some are. For the average person I would simply buy what is unpopular, but personally enjoyable, and do the necessary pre-purchase diligence.
As I’ve already said… your footwear will likely have a greater impact on your life. Spend your time accordingly and enjoy life.
“Exceptional service is why some people buy new. A friend of mine, recently bought a new M3 (an unsold 08, actually) and the dealership presented the car to him, under cover with a gift ribbon on top.”
That’s not service. That’s stroking one’s ego.
The rules outlines in this post are good, but life is a bit more complex:
-Certain cars do not depreciate much (i.e. Civic) so you might as well buy new.
-Some cars have really good fully transferable factory warranties, making CPO a complete waste (i.e. Infiniti).
-Used cars are not as safe.
-People who, in the last couple years, leased expensive cars had their asses saved from horrible depreciation by the wildly overestimated residual values built into the leases.
-Buying used cars takes a lot of expertise that many people don’t have.
-Adjusted for inflation and features, basic “entry level” new cars are incredibly great values.
For example, one can get a 2009 Hyundai Sonata for $18,595 without even haggling (cheaper with it), and it will come with the following notable things, among others:
– 5-speed automatic transmission
– Electronic Stability Control (ESC) with Traction Control System (TCS)
– Anti-lock Braking System (ABS)
– Front, front seat side and curtain airbags
– AM/FM/XM/CD player/MP3 audio system with iPod®/USB and auxiliary inputs
– Remote keyless entry and alarm
– Power windows, locks, heated mirrors
– Cruise control
– Air conditioning
With no down payment, a 60 month loan and 6% interest (the kind of things one can get with a new car), that is $380 a month, or $12 a day. Insurance will be very good with all the safety features, and it will use less gas than a used car.
It will save one’s life in a crash, and one will rarely have to think about it. Just like any good appliance.
A non-enthusiast would do quite well to buy the above new car AND keep it for 10 or so years.
jmo, you can not compare the purchase price of a new car (instead of MSRP) to the asking price of a used car (which is equivalent to MSRP), which is exactly what you are doing.
How much under are you going to get a dealer to go on a CPO Accord?
“Exceptional service is why some people buy new. A friend of mine, recently bought a new M3 (an unsold 08, actually) and the dealership presented the car to him, under cover with a gift ribbon on top.”
If I took a 2008 M3, a car that is a year old and in many ways redundant to the 335i, off the hands of a BMW dealer I would expect an attractive female sales associate to come with it, wrapped up with a ribbon on top.
“For example, one can get a 2009 Hyundai Sonata for $18,595 without even haggling (cheaper with it), and it will come with the following notable things, among others:
– 5-speed automatic transmission
– Electronic Stability Control (ESC) with Traction Control System (TCS)
– Anti-lock Braking System (ABS)
– Front, front seat side and curtain airbags
– AM/FM/XM/CD player/MP3 audio system with iPod®/USB and auxiliary inputs
– Remote keyless entry and alarm
– Power windows, locks, heated mirrors
– Cruise control
– Air conditioning”
Why not get a used 2008 Sonata, still under warranty, no less safe and with nearly all the same features (only exceptions being the 5-speed AT and the USB/AUX inputs), for about $10-12K like I did?
Granted, I DO miss the USB/Aux input since I use my iPod shuffle when driving. But I just plug in a $30 FM transmitter.
Oh and I should mention that the car it replaced was a 2003 Hyundai Elantra, which I bought used last summer and saved my life in a crash in December. Not only that, I collected more from the insurance settlement than what I paid for it.
rajagainstthemachine:
Yeah, for that price on a current generation Sonata with all the safety features used would be the way to go. How much of the warranty transfers?
By the way, $250 a month for a car that puts a smile on my face every time I drive it is worth it for me.
Well said carguy, and for me that really cuts to the heart of the argument at this level of discussion.
We all have different criteria for determining worth. When it’s our money changing hands, the figures in the equation for Worth, Value and Cost become somewhat less fixed, and it seems to me that settling on one be-all/end-all method of satisfying that equation becomes less and less likely.
As a hypothetical, I have no idea right now what I would do if my beloved Accord went TU and I had to get new wheels tomorrow. I might look into leasing a 370Z or an MX-5, but only because I know my wife and I will be on the market for a family hauler in the next couple of years, and leasing a car I know I’ll be selling for garage space before I’m done making payments makes sense to me. I might find a steal on an M3 that’s been around a few bends from my import guy. I might see an unbeatable rebate/warranty deal on something brand new from a local dealership looking to meet a monthly quota.
Until I get into the nitty-gritty of what I want and what’s available, I just can’t say right now. I’m more comfortable defining up front exactly what I want and exactly how much I can spend to get it and then investigating my options, than laying down one commandment in advance and sticking to it like epoxy.
Why not get a used 2008 Sonata, still under warranty, no less safe and with nearly all the same features (only exceptions being the 5-speed AT and the USB/AUX inputs), for about $10-12K like I did?
This is a good point, and it goes back to one of the issues raised earlier here.
Some cars depreciate like rocks with weights attached to them. Late model used versions of these cars make far better buys than new ones.
Other cars command premiums on the used market. In this case, you’re allowing some unknown quantity to do the break in, with little or no savings in exchange for the risk. There isn’t much of a point of buying these used, particularly in a market like this one where incentives are available on just about everything.
If I wanted a late model Sonata, Lacrosse or monster SUV, I would absolutely buy it used. If I wanted a late model Accord, Civic or Camry, I would almost certainly buy a new one. Resale values can make a big difference.
I think that if it’s within your means to buy new, and it’s what you want, why not? I know where it’s been and what has been done to it since the day it left the lot with <50 miles on it, and I’m comfortable with that. I know it’s never been wrecked, has been washed weekly, and isn’t driven like it was stolen. And the part that most people love about the new ride is that intoxicating aroma (which probably really is intoxicating… or at least toxic!). I don’t trade in every 2 years, accumulating several cars’ worth of negative equity, but I like the new car every 5 or so.
Like buzzliteyear said, there has to be a market for new cars, and those people that trade in 2 or 3 year cars are especially important to the used car market. The more a specific model appears on a lot somewhere used, the lower the market price goes, so those of you that buy them used should cheer the people that trade in newer cars with low mileage.
It’s not stupid to buy a car new. Sure, buying a used car can be a great deal, but not everyone wants someone else’s trade in. Or even worse, some fleet car that’s had the shit beaten out of it and was mildly reconditioned to make it to some dealer’s front line. If you’re aware of the depreciation and are okay with it, buying a new car is exciting.
no_slushbox:
The 60k bumper-to-bumper warranty transfers, which means I get a couple more years of coverage.
However the powertrain warranty (100k?) does not transfer (except as covered by the bumper-to-bumper). I knew this going in and decided it was worth it anyway. One, if the powertrain really had an issue it should show up well before 60k. Two, I have read that Hyundai dealers are notorious for their evasiveness on warranty claims anyway – which would be the same problem whether purchased new or used.
PCH101: Funny you should mention the Lacrosse; my dad bought a used one (2007-08, not sure) to replace his 2000 Buick Lesabre – a car which had NO issues, was perfectly enjoyable for him to drive, and which he had planned to keep until either it, or he, dropped dead (whichever came first, and neither showed any signs of doing so any time soon). He readily admits the Lacrosse was an impulse purchase which my mother pushed him into, and I think then only because I was spending so much time researching vehicles for myself. (In fact, he bought his Lacrosse on the same day I bought my Sonata. Creepy.) He sort of likes the Lacrosse, but still wishes he’d kept the LeSabre; it was more quiet and had better ride quality. Having driven both, I’m forced to agree.
Which brings us back to Lao Tzu: “When in doubt, do nothing.”
Ralph SS:
For manual transmission, only certain makes on Ebay have significant percentage of manual transmission: Subaru, Volkswagen, Honda, BMW. The other thing is to open-up your purchasing range and do a fly n’ buy. If you have a car-savvy relative or acquaintance that will check out the potential vehicle for you, you can multiply the zones you are willing to purchase from. p.s. Subaru’s seem to cheapen the further south you go, and Foresters are likely to have been adult driven.
“Then I spent an average of $300.00 / month just to keep the car running. It was simply due to crap breaking (HVAC headunit) , not even due to prior owner abuse.”
Wow, most used car buyers have little to no issues.
What kind of car? I’ll add that this sounds like one issue that was never fixed properly so the broken parts were more a symptom.
I fully plan on impulse buying my next car when I can afford another car.
Can’t you impulse buy used cars as well?
I hope to impulse buy a Mustang or HUMMER H3 or F150 or Avalanche someday.
Maybe I’d like to impulse buy a Fiesta when it comes out.
My current car is new because 1) Manual transmission cars at the right price were too difficult to find used. 2) Having bad credit, bank was more willing to give me $15K for a new car then $10-13K for a used one.
All this advice to buy used cars and against “impulse buying” is what is really “ruining” the auto industry.
Lots of the comparisons (new to used) people are making here aren’t taking financing into account.
The fact of the matter is, most of us don’t have $10K, $20K, or $30K cash to go and drop on a car.
Therefore, we end up financing. Smart? No. What really happens? YES.
SO, compare the rates that I’d get when financing a new car with the rates I’d get financing a used car. (A person with great credit, for instance will see a 3% difference.)
For me, that drove me toward NEW over used. Actually, I *wanted* a used car, but the interest rates for 1-year-old used cars were making them more expensive than the new ones!
I’ve really appreciated reading this post. I would disagree with the Mr. Lang’s premise that buying used is always better. However, I agree with the broader message that we all should be more aware of our relative values and preferences. Leasing/credit makes it easy to bury the real cost of a new car. How much we value our time, environment, and alternatives should be as explicit as possible so we can make informed tradeoffs.
For me, I realize that I like a little luxury. I also get bored, so I probably won’t keep a car anywhere near its useful life. I’ve done used, I’ve done new — there are benefits to both. Maintenance is a pain — and not just because of the expense. Having a car break when you need to be somewhere has enormous costs — and with cars increasingly complex, when they break it is not always straightforward to get them fixed. (And this is why I won’t go down the Audi route again…) This tends to argue for new cars for me. Similarly for safety features. But a nearly new luxury car with a good warranty that I can sell in a couple of years with less relative depreciation is attractive as well. When the time comes, I’ll probably shop around for new and used and make the best deal based on price and what I like.
This is sort of “impulse” related
Whenever I go to the local Honda dealer I sit in all the cars in their big showroom. I’m always most impressed by the Ridgeline and Pilot and not the “more practical” CRVs, Accords and Civics.
Maintaining my fleet of 1988 cars is my hobby. I prolly spend ~ 500$ in parts a year maintaining 3 of them. The challenge and the enjoyment is priceless. The 528es are a joy to work on.
leasing a new car and writing off the lease payment (+ the sales tax which you roll into the lease payment – yes, you write off sales tax from your income tax. Fuck you government!) is the only reason to purchase a new car.