Louis writes:
Sajeev,
I recently got involved with helping a female friend who is going through a divorce get a car (in Phoenix, AZ), and it seemed to me that the basic economics of used cars have shifted (“Cash for Clunkers”?) Old used cars with high miles and no warranties appeared to be so expensive that a new car would yield a lower cost per mile driven (as well as a much lower level of risk for a single woman with no mechanical skills). I ended up lending her the money to buy a new 2010 Hyundai Elantra SE.
Still, I’m wondering if it is still possible to achieve a significantly lower cost per mile with a used car than you can get by buying a new one and driving it into the ground. Or, is there now a “poverty penalty”, where people without the cash or credit to buy a new car end up paying more per mile driven?
Sajeev answers:
Just this week I found the “Toronado of my generation”, an original Oldsmobile Aurora in stunning condition at a local dealership. It sold in less than a day for the asking price of $4995. At the height of GMAC’s profitability, a ride this old would be lucky to avoid the “Buy Here, Pay Here” lots. Anyway, your query implies there’s a cut and dry answer for all automotive purchases. Incorrect. The devil is in the details. But buying a 1-year-old Civic or Corolla with poor credit and no outside (i.e. bank, credit union, etc) source of financing available is probably not a bright idea in today’s economy.
Let’s say you want a 3-4 year old Focus, Versa, or any other perfectly acceptable form of motoring from a private seller. You then negotiate a price that’s far better than any dealership, reconditioning in mind. With a check from a local credit union in hand, odds are you’ll do far better than buying a new car. But that takes a lot of work, too much for most. So forget it.
I ran the numbers in a more believable scenario: 2.99% APR for 60 months from a local credit union to buy a 2008 Ford Focus SE with SYNC and a CPO warranty. The asking price is a bit high, I’d make it the “drive out” price instead. This also assumes the tires and brakes are new, because some dealers do just that as part of the CPO process. The payment on said Ford comes to $224 a month for the next 60 months.
Car number two was supposed to be a new 2011 Corolla LE, but there are still 2010s around: with 0% for 60 months and $500 cash back! Buying one with similar trimmings as the SYNC-fettled Focus, our friends at Edmunds believe it will sell for $16,300. The monthly payment: $272 for 60 months.
So is it worth buying a new car for an extra $48 a month? In this case, maybe. CPO cars can be just as good as a new one, far outlasting their owner’s desire for one vehicle. And while it took me about 30 minutes to come up with the scenario presented here, do most people do this level of due diligence when they need to buy a car?
Send your queries to mehta@ttac.com. Spare no details and ask for a speedy resolution if you’re in a hurry.
And while it took me about 30 minutes to come up with the scenario presented here, do most people do this level of due diligence when they need to buy a car?
Sajeev, I think you’ve nailed it. I know people that spend more time picking out which TV to buy than they do deciding how to allocate their retirement accounts. It seems like the more important the financial decision is, the less time people are willing to spend deciding it.
No most people don’t do this level of due diligence when it comes to looking for a car. Should they? Heck yes.
My father is a confirmed used car buyer and he starts looking for his next used car (when the one he has for whatever reason has outlived it’s usefulness in his eyes) 6 months to one year before he actually ready to buy. The vehicle he selects has to be just right, for the right price.
a confirmed used car buyer
Why would anyone do that? If the facts change you need to change your mind. Just because used cars were once a deal doesn’t mean they will always and forever be a good deal.
What can I say the man has never gotten a “lemon.” A few of his family vehicles got a little break down prone post 100,000 miles but he always got 50,000 to 60,000 good miles out of them. And he always bought GM vehicles.
Dan,
What does that have to do with the price of used cars? Just because they don’t break down doesn’t mean you should overpay.
Back when the average transaction price of a new car was $12,000 he was paying $6,000. Now that the average transaction price is something like $29,000 he spends about $13,000. Being a high school graduate and a tractor salesman he wasn’t exactly looking at a $20,000 used Cadillac and thinking; “Should I get the used Caddy or just go buy a new Chevy?”
Back when the average transaction price of a new car was $12,000
In case you haven’t noticed, a lot has changed since new cars were typically $12k.
Your logic is as bad as those who bought $500k homes in Las Vegas in 2005 because “Dad”‘ had such good luck when he bough in LA in 1971.
Times change.
Look. My dad’s got just as much a right to a used car as you have to a new car. If there were no new car buyers like you, there would be no used cars on the used car market to start with. If there were no used car buyers, your resale value would be $0 even if you bought the Honda or Toyota that you though wasn’t going to depreciate that much. Besides some guys love the thrill of the used car hunt as much as other guys love haggling about the price of a new car or ordering just the right options.
My dad’s got just as much a right to a used car as you have to a new car.
What value is their in encouraging people to overpay? A blind faith in the value of used cars does everyone a disservice.
@jmo:
How is buying a used DTS, STS, Lucerne, Impala, Taurus, S80, Town Car, Jaguar XJ8, Saab, or Alfa Romeo 166 over-paying?
DTS, STS, Lucerne, Impala, Taurus, S80, Town Car, Jaguar XJ8, Saab, or Alfa Romeo 166 over-paying?
You haven’t told me what the price is yet.
Many used euro luxury cars may be a good deal – it all hinges on what they are asking.
The fact that Mini and Land Rover have both the highest resale value and the lowest reliablity doesn’t do much for my faith in the rationality of the used car market.
40% off the best price you can get new on a 3-year old 335I is a good deal. 20% off MSRP for the same car is not a good deal.
ajla:
Because THOSE specific cars you mentioned, weren’t worth the price of purchase to start with!
Because THOSE specific cars you mentioned, weren’t worth the price of purchase to start with!
Then give me some prices. The GM’s you mention only make sense when you compare used to MSRP rather than used to the typical massive discounts GM puts on the hood to move the metal.
Again, give me some years and prices for specific trim levels and we can talk.
You do know that Volvo is offering $6,000 cash back on a ’10 S80, right?
@jmo:
2011 S80 FWD: $34,108 (Overstock.com)
2010 S80 FWD average paid : $35,623 (TrueCar)
2010 S80 FWD new average asking price: $39,889 Low: $31,600 (AutoTrader).
2008 S80 FWD average asking price: $25,416 (ClearBook)
2008 S80 FWD average asking price: $23,508 Low: $16,950 with 34500 miles (AutoTrader)
__________________________________
2011 Town Car: $46,205-$51,299 (Overstock.com)
2010 Town Car average paid : $44,817-$49,965 (TrueCar)
2010 Town Car new average asking price: $46,487 Low: $36,995 (AutoTrader).
2008 Town Car average asking price: $23,894 (ClearBook)
2008 Town Car (mileage under 60000) average asking price: $23,176 Low: $16,995 with 52930 miles (AutoTrader)
________________________________________
2011 Lucerne V6: $28,952-$34,748 (Overstock.com)
2010 Lucerne V6 average paid : $28,583-$35,251 (TrueCar)
2010 Lucerne V6 new average asking price: $35,096 Low: $28,960 (AutoTrader).
2008 Lucerne V6 average asking price: $19,036 (ClearBook)
2008 Lucerne V6 average asking price: $18,948 Low: $10,400 with 22000 miles (AutoTrader)
__________________________________
2011 9-3 sedan I4 FWD: $29,132 (Overstock.com)
2010 9-3 sedan I4 FWD average paid : $28,928 (TrueCar)
2010 9-3 sedan I4 FWD new average asking price: $32,528 Low: $22,138 (AutoTrader).
2008 9-3 sedan I4 FWD average asking price: $19,397 (ClearBook)
2008 9-3 sedan I4 FWD average asking price: $18,081 Low: $11,999 with 64418 miles (AutoTrader)
So… ajia.. you’re trying to tell me that the average Towncar or 9-3 sold new with less than 10% MSRP on the hood?
Really? Someone bought a 9-3 in the last 5 years new for 29k? Hahahahah!
@Acc azda atch — In what country do you live in where Land Rovers have high resale value? You cant give those things away here, they are some of the cheapest used cars to be found.
@jmo:
Here’s the lowest TrueCar gives for the average prices paid during the last six months:
2010 S80 FWD: $34,782 (in Mar ’11)
2010 Town Car SWB: $39,989 (in Nov ’10)
2010 Lucerne V6: $25,223-$35,105 (in Jan ’11)
2010 Saab 9-3 I4 FWD: $23,951 (in Jan ’11)
These were the best sources I can find. You wanted numbers and I gave you numbers. If you find them so unbelievable, why don’t you go get some numbers of your own?
2010 S80 FWD: $34,782 (in Mar ’11)
Are you kidding me!!!???
An ’10 S80 invoices for 34,773 and Volvo is offering $6,000 cash back which brings us down to $28,773 for a brand new S80.
My earlier comment was supposed to be to jmo, sorry… I guess I read to fast!
But you guys are going in circles. Without a specific situation in mind, there is no right answer, your BOTH right. Some used cars are great deals, some are not. Ditto with new cars. So much hinges on your negotiating skills, research skills, general knowledge and information.
Most people in the market dont know anything about cars. They dont research anything. Dealers prey on those buyers. All the pricing, advertising, coupons, and marketing fluff is aimed at those people, not well informed buyers. Just because they are ASKING a certain price for the car means nothing to what you will pay for it. In some cases, even the book values dont matter, our MR2 had been sitting on the dealer lot for 7 months, they practically begged us to buy it since we were the first people to even want to look at it!
I got $5k knocked off the price of my used GTI, $4k off the price of my wife’s used MR2, both were purchased at dealers, which I normally wouldnt do. But I literally spent months researching prior to that and looked at a couple dozen cars. And I chose cars that were good deals as used cars. I would never bother to buy a used 1-3yo Honda, thats pointless.
When I bought my only new car, in 1993 (a Saturn SL2 with 5 speed), I bought new because my scanning of ads indicated that the premium over a used Saturn was negligible. In other words, depreciation appeared to be pretty much straight line. I kept the thing for more than 11 years, so the capital cost was little more than $1,200 annually, which, if I remember correctly, was considerably less than what I would have saved by buying a year old SL-2. And that was with optional ABS, air, and aluminum wheels.
That’s something of a rare scenario. For several years after Saturn first arrived on the scene, they held their value extremely well. Depreciation was almost nil. That’s not the case with most cars.
I think the bigger issue is the perception versus reality of used cars. Yes, every car maker has their dogs. I could never with a straight face tell someone to buy an Odyssey with a V6 and the Gen-II 4-speed automatic. I would happily recommend a 2003 Camry to someone but not a 2008. I couldn’t recommend a 2003 Grand Prix to someone but wouldn’t hesitate to recommend a 2006. Etc. etc. etc.
But there is this perception that Honda and Toyota = 100% trouble free and anything else equals total crap.
There is very little built, with a handful of exceptions, after 2004ish from any manufacturer that won’t go 100K to 150K miles with normal love and attention (stress NORMAL) of oil changes, tire rotations, fluid swaps at the prescribed intervals, and brakes pads changed before they are worn to crap, along with some basic car washing and at least some wax twice a year (depending on climate) where the car won’t be just about trouble free.
Lightly used Hondas and Toyotas carry quite a used car penalty tax on them, and if you do the math, buying a 2 to 3 year old version versus buying new (especially with some of the smoking lease deals that Toyota is pushing on the Corolla right now) the math just works out better to buy new. The used car will cost more.
But venture out a bit further and look at bullet proof if not maligned vehicles like the Panther platform, GM W-body cars, especially from 2004 forward (oh spare me about intermiediate steering shafts, its $100 to lube the damn thing every 30K odd miles – whine – I can do a search and find a more than average problem with ANY car), Ford Fusion, Ford Focus, Mazda3 (with a manual especially), Volvo, the much maligned Ford Five Hundred, the prior generation Hyundai Elantra or Sonata, etc. etc. These cars demand much lower prices in the used market – but with reasonable care there is no earthly reason someone won’t get 125K to 150K trouble free miles out of them.
I have had mixed success with used cars from Asia, Europe and North America. There are good deals to be had for reliable used cars.
Well said. If anybody I know is asking about buying a used car and they only have 8K to spend, Honda or Toyota is not the way to go. Depreciation machines are the choice here
As far as I can tell, used car prices are strongest at the low end of the market for Honda Civics, Toyota Corollas, and the like.
I just sold my 2000 Lexus GS 400 for $7,250. I think the buyer got a steal, but many people are wary of old luxury cars, even a Lexus, because there are so many things that could break that would not be cheap to fix. This car did only require two repairs during the three years I had it, tie-rod ends and one brake caliper. Odds are the new owner will continue to have no problems, but few people are willing to take this gamble. Those who are willing can get some very nice cars for far, far less than an equivalent new car.
There are also fuel economy concerns with such cars because gas prices are heading up. I sold the car for less than I otherwise would have fearing that a crisis in the Mid-East might send gas prices way up, in which case the car’s value would have plummeted. I hadn’t driven the car in two months, and it’s almost time to settle up with Uncle Sam, so the time had come to move the metal.
How many miles on your 2000 and what was the overall condition?
I am thinking about selling my 1998…
I saw that Consumer Reports owner survey concludes that a seven year old Lexus LS is as likely to have a problem as a brand new Jaguar. Unfortunately, the stigma of European luxury cars turning into liabilities when the warranty ends is dragging down Lexus values by association.
When I started thinking it might be time to buy a used car I did the following:
1. Made appointments at dealerships and test drove every car on my list:
2. Checked owners forums for common problems and also to get other insight into the cars.
3. Once I decided on the car I wanted, each day I scanned ebay, craigslist, auto trader and the CPO website (in my case Toyota) for the desired vehicle. When I could get information on how much a car actually sold for, I put that number into a spread sheet so I had a very good idea what a good price for the vehicle would be.
4. I spent 4 months scanning data bases for a car with the exact color, options, millage, at a price which was fair. I test drove 5 cars and finally was able to get the car I wanted at the price I wanted after haggling. I probably spent more than a 100 hours but in the end I was happy and very satisfied.
I tend to do this as well. In the process of buying my Taurus X I compiled a spreadsheet that ultimately included over 50 cars.
This amount of time can only be justified if:
1. You earn less than $20 an hour, in which case you cannot afford a decent car anyway.
2. Enjoy the process, so it provides entertainment value and the time spent isn’t entirely a cost.
With me, I rationalize that #2 applies. But the fact of the matter is that I often spend hundreds of dollars worth of my time in order to save one-tenth as much. As much as I hate to admit it, those who spend far less time on research (and thus on sites like mine) are probably behaving more rationally.
There is, of course, a happy medium.
My process was slightly different when I bought my Legacy GT. I shopped around for used for a bit, but the price difference between the used and new didn’t justify going used in this case. Once I was sure that was the car I wanted, I emailed dealers within a day or so’s drive from home to get their current inventory and best price. The range of responses were staggering. In the end, a local dealer and one in eastern MA had similar vehicles and were quoting well below invoice. I went with the local guy. My out the door price was about $8k below MSRP and a $2500 below invoice.
True to Michael Karesh’s comment, this had some entertainment value to me – especially beating up on the dealers who called and tried to give me MSRP + pricing for left over 07’s (this was in July of 07, after the 08s were on the lot for a good 3-4 months).
BTW Mr. Karesh, TrueDelta.com was very helpful in eliminating some of the choices on my original list. Thanks for that excellent resource.
I do really enjoy collecting the data and I am glad to hear someone else out their goes about the car buying process the same way I do.
Excellent system… I did the same thing when buying a used Volvo C30 last week. However because the car is so rare the pickings were slim. Still step #3 provided lots of information, as I watched three cars in the Orlando area sell during a period of 4 months. Cars.com allows you to save a search and quickly recall it. So I used that feature to build my database by doing a weekly check of inventory. When a particular car disappeared from my search I knew (approximately) for what it sold for. I watched two cars (including the one I bought) drop almost $2K from their original “internet special” price despite being told (in person and over the phone) that the price was already as low as it would go.
I agree most people don’t nearly enough homework on vehicle purchases, I made that mistake ONCE. Now with the internet the research can actually be kind of fun but your really have to put your time in. Visiting forums, reading up on what real owners report and comparing inventories from various sites you’ll quickly become an expert on a particular model. This way when it comes time for a test drive you immediately notice small problems. For example I’m looking to buy a 350Z by years end and have already learned that scratched consoles are a common issue.
Incidentally, is there any site that has all the specs and options of every vehicle, where you can put in your criteria (like “minimum legroom/headroom”, power seats, etc) and it comes up with a list of eligible cars? I see a bunch of side-by-side search sites, but you need to know which cars you want to compare ahead of time, and I just want a list of eligible vehicles based on my required criteria.
@Dr. Ken – I’d like a site that would include those things + if the engine has a timing chain or a timing belt and if it is an interference or non-interference design. (For obvious reasons to anyone who has ever had a timing belt break.)
I never buy a used car with a an interference engine.
Every time Ken and Dan post adjacent, I feel like a gunfight’s about to break out. I’d probably be more scared if I had a blank avatar that looks exactly like a shooting range target.
Hey there’s a big difference between Leslie Nielsen crazy and Walter Sobchak crazy! (They’re both good in their own way, BTW.) FWIW I did teach with a gentleman who looked exactly like “the Dude.” (He was a middle school Math teacher.)
My turn: Don’t mess with Mr. Nielsen, easily the funniest avatar on TTAC, to me at least.
“I never buy a used car with a an interference engine.”
Well, that’s certainly one way to pare down the list of possibilities. What was the last car with a non-interference engine sold in the US anyway?
People with little money and less-than-stellar credit have few options and are usually making decisions on a narrow timeline, because they are forced to (i.e., i need a car NOW cuz I just found out my old one has DIED on me and will cost too much to fix.) People with few options and in a hurry will always be taken advantage of.
Yep, not a single mother here, but last summer when I was shopping for a replacement for my soon-to-be-deceased ride, I settled on a make/model.
Hit the lots looking at used CPOs which were parked right next to new ’10 models. The sticker price on the ~$24k ’10 models were flirting with $20k on the ’09 and even some of the ’08 models. Sure, it added a couple extra dollars on the monthly payments, but being able to roll out with a fresh odometer and the fact that the dealers were offering very sympathetic rates on the new steel made this a no-brainer.
I should add that I did scores of hours of pouring over craigslist/online inventories etc. as I am a cheap bastard who swore up and down that I would never by new. Turned out to be a lot of fun, who knew changing one’s preconceptions could be so fun?
CPO vehicles often net the dealer $2000 or more profit per vehicle. New vehicles rarely break $500 profit. That there is one of the reasons why a new vehicle is often the better financial choice.
I heard an argument that the “cash for clunkers” program tightened the used car market, because the cars traded in had to be destroyed. Anyone hear this?
While that Line is BS, the used car market is tightening… for a different reason.
It can take one second to realize that the majority of the cars that were taken off the market were tired and worn out old SUVs and cars with the majority of them being v8’s. The market for these vehicles were sharply declining because they were so old and so in-efficent.
I’m sure Steven Lang and others here would agree that the used car market overall is becoming tight, mostly because people are keeping their cars longer. If I can recall correctly, I heard that the US fleet average is 10 years or more now. The combination of a crappy economy and reliable cars from every car maker out there means that people are holding on to what they have.
I know in my family we now have vehicles that are creeping up in age and mileage, including a Grand Cherokee and a Ram that now have over 100k miles on them. In the past they would have been long traded in, but nothings going wrong with them, and they are paid off. Why not keep them?
Well, yeah, a little, and in the short-term, but it depends on what you were in the market for. Cars needed to get pretty poor gas mileage to be eligible. (I know Crazy Ray’s was full of junked Ford Explorers after that started picking up). The price of gas is starting to go up pretty quick, so you’re probably not trying to buy one of these right now anyway.
(This was mostly necessary to get the enviro-types to go along with the plan by convincing them that this was about saving the environment when it was really about trying to give the American consumer economy a quick jump-start.)
Of course, in a few years there’ll be a big loosening in the used car market when all the new cars people bought as part of that program hit the market at once. Circle of life, etc., etc.
I think C4C was a strong factor in inflating used car prices, but only one. First among the others is that carmagedon ate about 2 years worth of sales. Some of those 2008s that were neither built nor sold are not late model low mileage used cars now. Second is the market for scrap steel that Murliee Martin has discussed. And third, I saw in some post at TTAC is the export market fueled in large part by Helicopter Ben Bernanke’s desire to trash the US$.
690,000 functioning cars were removed from our fleet by C4C. That has an influence on supply, if not an immense one. That’s more cars than BMW, Mercedes, Mazda, Chrysler, Cadillac, Buick, Acura, Audi, Infiniti, Mitsubishi, Volvo, Mini, Land Rover, Porsche, Suzuki, Jaguar, Saab, Smart, Maserati, Bentley, Ferrari, Aston Martin, Lotus, and Rolls Royce combined sell here in a year, for some perspective.
Over the past two years, the US market sold between six and eight MILLION fewer newer cars than would have been sold had pre-2008 market dynamics continued. Roughly speaking, that means that about the same number of good trade in vehicles didn’t go on the market.
Part of those new car sales losses are are result of rental car companies keeping their vehicles about twice as long as they did just a few years ago, and they changed over rather suddenly when tougher economic times hit. That means one of the primary supplies of 1-2 year old vehicles has been greatly reduced.
C4C mostly scrapped undesirable vehicles, many of which had been spending more time in the driveway than they had on the road.
C4C ate 690k clunkers while carmagedon ate 14m new cars or more than 20x as much so i seriously doubt the c4c effects on second hand car prices are “immense”.
Very true…we bought a new car in 2010 after looking at the same metrics. $22k brand new or $18k for 2 year old same model with 40k miles on it?? To me, that decision was easy. Full warranty, new tires/brakes, better/easier financing and no surprises for my wife’s new daily driver.
So far we’ve put 15k trouble free (as expected, of course) miles on the new car, which also happens to be very fuel-efficient. After calculating my overall cost per mile, including depreciation, gas, insurance, maintenance, etc.; I realized that my per-mile costs are already lower than the per-mile costs on my previous used car (which despite being bought at a very cheap price and thus depreciating very little, had lots of maintenance issues to deal with, and swilled premium gas).
Of course the lowest cost per mile would be buying a fully depreciated old Saturn SL or something basic, reliable with great gas mileage. But there is a happy medium–not everyone wants to live their life like that :)
I was in the market for a replacement after the factory warranty ended on my 2007 Cobalt with three years of payments to go. (BTW, HOLDEN SSVSE, the Cobalt or whatever it is in Oz, IS one of the post 2004 models you want to stay away from as I had clutch issues, broken steering shafts and intermittent electrical gremlins all before I hit 15,000 miles, not to mention the recalls on the steering motor and gas tank hose). I didn’t want to be stuck with paying a note AND paying for expensive repairs, which after perusing various blogs, would happen with 90% certainty. I traded for a new 2010 Accent GS with the premium package and my payment with that Hyundai warranty is $229 a month. I couldn’t find anything newer than 07 with less than 40,000 miles for that much on a 5 year note during my rounds of the used car lots. The peace of mind is worth it.
I’ve been hearing the ‘there are no more bad cars’ mantra ever since Automobile magazine launched in the late ’80s. It wasn’t true then, and it isn’t true now. Try telling it to people who bought cars with dual clutch gearboxes or direct injection in the past 3 years.
I agree. There are tons of new cars that still have problems with basic systems. My latest 2006 Mazda5 GT, for example, has never left me stranded. However, it has had a host of issues with the suspension, electronics, and paint/rusting. While the car will probably go at least 150,000km (its at 122,000km right now), they certainly were not “problem free”.
changsta,
As if on cue, my friend I helped find a 2005 Mazda 3 a couple years ago texted me last night that it was almost stalling at idle and the check engine light came on. A quick google search revealed that lots of people on Mazda 3 forums had the same symptoms. For most of them, it was a purge valve failure, a MAF problem, or a dirty throttle body. Dealer prices for the purge valve were all over the place, but I was comfortable that I could give her informed advice about what to expect. Today the head gasket blew on her way to work. I think the car has about 70K miles.
I skimmed the comments, but it appears that no one has yet mentioned the folly of Louis’ “helping a female friend who is going through a divorce” by giving her a loan. I’ll put this as nicely as I can, but I hope he is holding the title to the vehicle. These situations often end in tears.
I tried to mention it, but it didn’t take. From experience: FOLLY!
“female friend who is going through a divorce” by giving her a loan” I doubt this will end well.
That may depend on non-monetary factors.
@Robert, “exchange of services”? o_O
Yep. My eyebrow pulled a Spock when I got to that line.
Smart money with car definitely doesn’t involve loaning money to a female friend who’s going through a divorce. I feel bad for Louis because this kind of thing usually gets much worse before it gets better.
I am Louis, the guy who wrote the question that inspired this thread. No, I’m not holding the title, and no, I don’t think that there is much chance that she will ever be able to repay the “loan”. However, she is a good person with two small kids who had her car repossessed because her irresponsible soon-to-be-ex-husband drove them so far into a financial hole that she may never see daylight again. I am not particularly religious, but I like the excerpt from the Bible that says, “Whatever you did for any of these, the least of my brethren, this you also did for Me.”
Looks like not folly. Nice work Louis.
I give my used cars away, free and clear, but so far only to extended family.
Part of this is non-altruistic, since when I am done with a car its worth more to someone who knows it (me) than its worth to the market. I like to keep the gain on acquisition in the family.
I too recently ended up buying a new car after looking at possibly buying a used example. What finally swayed me was that my bank would offer me a far better loan rate for a new car than they would for a used one. In the end I payed $11500 for a brand new stripper Cobalt at 0.9% whilst used examples that were one or two years older with 20-30k’s on the clock were going for anywhere from $9-$10k and the best rates I could find were 6-7%.
Having previously bought cars which have only done 30k miles, during which time the previous owners have beaten the car to hell, I decided that a totally unabused car which had a full warranty was definitely worth the extra couple of grand.
I tend to buy used cars that are highly functional and desired, regardless of price or age, figuring that they can be sold for the best price later. I bought a 1991 Honda Civic, 13 years old at the time, for $2200. In two years of use, I spent $750 on maintenance and repair. I sold it for $2000. Total cost of maintenance/depreciation for 2 years, perhaps 15,000 miles, was $950. No new car, not even Honda or Toyota, can keep their value like that. Another example, purchased a 1995 BMW M3 Lightweight, six years old, can probably sell it for the same amount or more today. Family car – 2003 Passat Wagon, 30,000 miles, three years old, CPO from the dealer, purchased for $14,000. Can probably be sold today for $6000. About $1200 in repairs in 5 years. So $9200 for five years of use (assuming insurance, fuel, oil changes are a wash, which they aren’t because many older cars got better mpg). That’s a big hit. A new Passat wagon would have been perhaps $30,000, and today would be worth $15k perhaps, so the used car still comes out ahead.
Buy smart and used cars can save you a lot.
The time, hassle and unknowns of dealing with the higher and sometimes unpredictable maintenance and repair costs represent an unwelcome opportunity cost for many people.
Just about everything I really want to own is either:
1. Not sold in the United States.
2. Out of my price range.
3. 5+ years old.
4. A rare trim level/option combination.
I also dislike owning a vehicle under warranty. I’m always worried that any maintenance/modification I do on my own will end up voiding it and I hate having to spend time at a dealer’s service department.
Luckily, I am mechanically inclined and I have lots of free time.
@ajla: I’m in the same boat. I like the higher end packages or sport models that don’t seem to be commonly available. For example: I would love to buy a Malibu Maxx SS, but how many of those do you think are on the market at any given time? There are four in my local market right now, two of which are CPO. And dammit, it figures, I will owe Uncle Sam this year! No Maxx for me. At least now.
Also, I’m mechanically reclined and don’t have much free time…
Good point, but don’t worry. I once took an Olds in for warranty work, and they never noticed the after market Holley. Yes, they did fix the car.
+1.
Time is money. People pay more if they need a car RIGHT NOW.
Given the general reliability of cars built in the last decade, if one can drive the current car for 4 or 5 years after it’s paid for, then it’s possible to save money upfront (by continuing to make monthly “payments” into a savings account) and get out of the endless car loan trap. This has the advantage of building a cash cushion to tide over unexpected financial emergencies.
It isn’t really a poverty penalty, it’s an I’m-too-poor-to-think-straight penalty. Always remember, both parties in a transaction have a worst case scenario. The seller’s WCS is that the buyer will walk away. So that’s your strength, right there.
New or used, the buyer in this case would probably be happy. But happier longer with the newer car, because the seller is letting you use money for free. Almost everyone can squeeze $46 a month out of their budget. So do it. And don’t let the dealership “business guy” add a lot of glass etching and other fees to the total. Your strength is the ability to say no at any time for any reason.
Any down payment you can make will reduce the $46 a month.
If possible, I’d try to shorten the 60-month term of the loan, though monthly prices would be higher.
Warranty might be a consideration. The new car warranty comes with the car. The buyer would have to pay attention to cost and term of the cpo warranty.
Do your homework. Be confident. Don’t act luck a cluck.
There is a “penalty tax” levied on the potential purchasers of desireable, reliable used cars and that tax is levied by…Car dealers. Where I live , if you want an Accord,Civic ,Camry or Corolla , the ads that you will see on Craigslist are from dealers. Very few “By Owner” ads for these type cars,which means that you are paying the $2500 (minimum) markup to buy a dependable car. If the car is just a year or two old,and you qualify for financing it ,you’re really better off buying new. (Often from the same dealers that are keeping the used ones prices high) If you add in the potential for used car shenanigans (Frankencars/ Odometer funny business/ Undisclosed frame damage etc…) the odds are really better for the buyer of these makes when they buy new. They are also covered by lemon laws.
I have even seen ads from potential buyers of these types of cars offering to better the dealers low ball trade in order to save a thousand or two on late model Accords and Camry’s.But the bottom line is that if a car is in demand,dealers will do their best to make money on that demand.
To address the OP’s question, yes I believe there’s a poverty penalty. I used to see this when I was selling cars. Some poor sap would roll onto the lot with their busted rig, and we’d end up selling them the cheapest Tercel we had on the lot. Frequently because they were sub prime, they got the worst deals on loans, too. But they were in need of a car, because their old car was FUBAR, and they had to get to work or to the day care, etc. With many of these folks, no job = no housing. Generally these folks don’t have or can’t take the time to research 3 cars, much less 50. They know if they don’t get some wheels under them, their world will collapse. They will take just about whatever you present to them. It’s financial bondage…
There does not seem to be a poverty penalty in play for luxury cars. Let me give an example from a car I am researching, the Porsche Cayman. A new base Cayman with a reasonable number of options would list for around $60,000. That same car, 2 years later is available with less than 10,000 miles for around $45,000 from a dealer. Porsche presently offers 1.9% financing and the warranty that comes with a CPO Porsche is one of the best I’ve seen. The interesting thing about Porsche right now is that their new car financing (3.5%) is actually higher than their used car financing.
And a brand new 370Z with sport pack that can keep pace with that used Cayman on any track is available brand new for $33k, and I think you can get 0% financing for 60 months on it too. The slightly used 370Z sitting on that same lot can be had for around $26k.
Just because a massively overpriced Porsche comes with massive depreciation doesnt mean there isnt a penalty.
Also, I don’t know if I’d call it a poverty tax. Many upper-middle class people are out paying top dollar for used Pilots and Odyssies. It’s more of an idiot tax.
I last looked at this question when I bought my Acura TSX new in 2006. Back then at least, there was no financial advantage to buying a 1-3 year old used TSX.
Also, I maintain my cars a bit better than “by the book” and I don’t thrash them. I’m generally much happier buying a well chosen new car and then taking care of it over the period of 7-10 years I normally keep a car for. In theory I might have saved a few thousand dollars over that time period by buying lightly used, but I’m happy doing it the way I do it.
One thing you get with a new cars is, well, new everything. The tires, brakes, suspension bushings, light bulbs, all fluids, etc. are all brand spanking new. Every one of these items and more are wear items which eventually need replacement. I like starting out with an all new baseline from which to then simply maintain and enjoy the vehicle.
If you want to play the buy used game, then the trick is to find high depreciation rate vehicles which still meet your needs. Two years ago we had to replace our daughter’s college commuter car and a one year old ex-rental Hyundai Sonata worked out to be a decent choice. At that time used Sonatas depreciated heavily and sold for over $3,500 less than a similarly equipped Camry or Accord would. We also looked at Fusions as they had a higher than normal depreciation rate back then. Both of those vehicles are closing the gap used vehicle wise today.
Right now, used vehicle bargains probably have names like Pontiac or Mitsubishi attached.
For my latest purchase, new vs. used was made easy. I wanted a low-mileage BMW 3-series Wagon with RWD and a manual transmission. Without iDrive, without Xenon headlights. If BMW sells 10 of these a year in the US I would be shocked. Not a one on the used market in the country. Unicorns are probably easier to find.
So I ordered a new one. Yup, it cost more, I don’t care, I can easily afford it, and as others have pointed out you get some of it back in the lower interest rates. Since I was going to Europe this summer for a two-week vacation anyway, I’m picking it up at the factory and saving another $2500.
But for my not-nearly so well-off kid Brother, we were in the situation of needing a cheap car for him and his wife when thier old hand-me-down Volvo 744 just got too unreliable at 260K miles. The answer was a 110K mile Volvo 944 for $2K. It’s in nice shape, older couple owned, I know the cars inside and out and can help by Brother fix what little will go wrong with it in the next 100K miles. I’m actually looking for another one for myself as a winter beater.
krhodes — Hey, if you can afford it, go for it. I love new cars, I love being the ONLY one to have driven it or maintained it, I keep it perfect. I had to buy used this time, but I wont deny missing the options, the worst thing was finding the right color. With a new car, I get exactly what I want, with used, I had to settle for black even though I SWORE I would never buy another black car!
But, I really love my Xenon headlights, I think I would have gone with that option. Then again, I havent had to replace the bulbs yet!
How does that work with the Euro delivery though? You say you save $2500, but do you then have to pay for shipping it back? Or is it included? Someday I want to buy a car that way, seems so fun, and you get to drive your brand new car on those great Euro roads, maybe even the ‘Ring. Oh and dont forget you also save on rental car costs, so figure that into your TCO.
I went for it. :-)
The problem with BMW Xenons is not the bulbs, its that they are self-leveling and turn into corners. Which means they are chock full of cost-cut German electrical bits that you absolutely DO NOT want to have to pay to fix, ever. And they cost $1000…. I plan to keep this car a LONG time, considering BMW won’t sell me another one after this year.
Euro Delivery is simple really, BMW just pauses the normal build and ship process. They build your car, but instead of putting it on the ship they send it over to the delivery center. You pick it up, drive it around for a while, then drop it at any of 22 cities in Europe. They truck it to the port and it catches the next ship to the US just like the rest of them. Same $875 delivery charge as on any other new BMW. You pick it up at the dealer you ordered it through as usual. The savings is that BMW does not have to pay import duty on the car, it comes in as a used car. They used to give you a plane ticket, but now it is only a buy one get one free deal with Lufthansa. No big, I used FF miles and hotel points for the trip. And I am saving $1000+ on a rental car, which I definitely took into consideration, I would have had to pay for that!
The only issue is that you have to pay for the car 30 days before delivery – many banks do not like to play ball with this, but of course BMWs in-house financing has no problem with it. And thier rates are lower than my Credit Unions anyway. And if you are trading in a car that complicates things a bit too. I have five cars so no issue there, I mostly drive my convertibles in the summer anyway.
One thing no one seems to have mentioned that is different between buying a new and used car is that every used car is unique, while a new car is a commodity. If Dealer A won’t play ball on the price, you can buy the exact same car from Dealer B, C, D, E, F up to whatever your tolerance for travel is. I used this to good advantage in ordering my BMW. I flat out told my local dealer that I travel for a living, and would be more than happy to order the car anywhere. It took walking out a couple times, but they got close enough. Helps to have a 1/2 million FF miles to play this game. :-)
After looking at several CPO 3 series, I reached the same conclusion. How are you getting there? Air fares to Germany, so far, are very high compared to Great Britain for example.
The Xenons in our AMG are still going strong in their 12th. year.
Well obviously it only makes sense if you are already planning a Euro vacation, or as you said, have a million FF miles to redeem. But still, we have been wanting to go to Europe someday, just need to schedule that at the same time I am ready to buy a new car!
I know what you mean about the dealer vs dealer game though. Back in 2004 when Mazda was dumping thousands of leftover 2003 Protege5’s that seemingly no one wanted, I played that game between 4 dealers in DC and Florida, as I was travelling that route weekly for work at the time. One dealer got really annoyed with me, the sales manager basically told me to take my business elsewhere! But the other 3 played ball, even when I got kind of greedy. I ended up paying $14,500 OTD for a brand new one, in the exact color, exact options, etc. Sold it 3 yrs and 70k miles later for $11k, and I have regretted it ever since. Best new car I ever bought, and nearly impossible to find nowadays.
@william — Is it practical to fly to GB, then train to Germany?
You could get two people to Munich on Lufthansa for ~$1500 from pretty near anywhere in the US right now using BMWs deal. Flights are expensive this year, I assume due to fuel costs and reduced capacity by the airlines. Flights to Germany in particular are expensive because the Germans put a “Green Tax” on airline tickets. I used Frequent Flyer miles to buy my tickets, but I still have to pay the taxes and fees in cash. For two tickets Boston-Amsterdam-Munich, the taxes Boston-Amsterdam were $60 (and that is for First Class), Amsterdam-Munich was $180! Per ticket. For coach.
But still, even with expensive airfare, the $2500 discount on a 3-series will nearly pay for a nice vacation. And technically you don’t even have to drive the car to get the discount, you caan fly over, sign the papers and fly right back. You just have to take delivery.
Technically, it is a reduction in MSRP, not a discount per se. This is GREAT in a state like Maine with a steap excise tax, I will save money on the car every year for as long as I own it. 2.5% of $2500 the first year. And the more expensive BMWs have bigger discounts, it is something like $7K on a 7-series. I think it is roughly 7% of base MSRP.
@mnm4ever
You COULD fly to GB and take the train, but it would take forever. And I doubt you would save anything. European trains are delightful, but they cost just as much as/more than flying for long distances. I looked into the train for Amsterdam-Munich, it was over $400 per person and would take 8hrs. You can buy a plane ticket on KLM for $250 and be there in 1.5hrs.
Very interesting information on the Euro Delivery. Never considered that. Do you know if they have a similar program for motorcycles?
@mnm4ever
If you’re doing a quick in and out, I don’t recommend London. You could do it, but all the extra transportation costs will add up, plus you gotta deal with LHR, which is possibly my least favorite airport in the developed world.
Off hand, I’d recommend Schiphol. Fares to AMS are almost as cheap as LHR, access to cross country trains are much, much easier plus it’s right next to the port of Rotterdam for the return trip.
Dulles, or Orlando, (Virgin Atlantic) to London. The Eurostar to Paris, and then Munich. Practical and fun, as European trains are very good. We did 2/3 of it a few years ago, and it worked well.
Yes.
Something about the way that TTAC comments are updating is broken. I keep getting updates out of order.
@krhodes. AMS to Munich is definitely not 400 USD. I used to do AMS-Nurnberg by train on a fairly regular basis and it was always 100-150 USD. Scarf down a few brownies and settle in for a pleasant train ride.
A friend just traded in her old Honda Civic with over 400K on it for a new Hyundai. Why would anyone who had that many miles on an old Civic ever change brands? She said that she liked the Honda because it never left her stranded in 400K miles. There are some things I will never understand.
Why would a Honda Civic being the best bet 15 years ago mean than a Honda Civic is the best bet now? Things do change.
The Honda Civic still tops the list of cars most likely to see 200,000 miles. Hyundai products built three years ago are already revealing their frailty. Learning from experience is the least someone can do if they want to be seen as intelligent.
I drive an old E39 5 series BMW. The bottom has fallen out of this market and an old e39 5series is a bargain. Minimal electronics and no iDrive, bulletproof driveline and 30MPG. I’m driving this baby into the ground and won’t be a customer for a newer model.
The last five cars I’ve bought were all new. Several years ago I was looking for a particular used car, and after looking at nine of them, I found that most were not taken care of by their previous owners so I changed my plans and bought a different and new car. After that experience I don’t know if I’ll ever buy a used car again unless i knew the owner and how the take care of their stuff?
I dont know where all you guys live, but you need to come to Florida and buy your used cars. There are tons of them available, good prices, good cars, almost any range you need. Your first mistake is going to the dealerships… unless you are highly skilled negotiator AND looking at the right car (which is almost never the one you want), you will not do well. This rule triples in importance if you are looking for a really cheap car. There are no cheap cars at dealers. You can shop for CPOs and something 3 yrs old or less, but thats about it for dealers. Second thing, you are looking at the wrong cars. The highly desirable used cars like Camrys are ALWAYS going to cost too much to get a bargain. Dont bother, accept the fact that you will need to drive something that isnt as cool or popular and the options open up dramatically.
Buy from owners, shop around, look at the less popular cars/colors/options, and do your research on reliability, stop applying the “blanket” policy to used cars just because you hear something good or bad about some manufacturers.
I’m with Kincaid, except my 5s are E28 ’88 528es . I can maintain them in my driveway. I enjoy the work and the friends I’ve met doing it.
Running costs for a late model vehicle (05 and up) from greatest to smallest…
1) Depreciation
2) Gas
3) Insurance
4) Maintenance
5) Repairs
6) Opportunity Cost – Investing the price of purchase in a money market or mutual fund
7) Taxes, Tolls, & Licensing Fees
This ranking can vary based on where you live, your mechanic, the parts you put into the vehicle, etc. But ON AVERAGE these are the costs from greatest to smallest.
Now if you buy a 7 to 9 year old vehicle with about 100k, you are looking at around $5k on average vs. about $3500 five years ago. The price HAS gone up for older vehicles quite dramatically for a long list of reasons. The loss of credit sources for most consumers. The rise of buy-here pay-here lots. The economy. The real rate of inflation. I would also add that the costs to make a car have gone up considerably as well.
Your seven to nine year old car will likely have this ranking of running costs.
1) Gas (consume the same, or minimally less)
2) Repairs (a bit more)
3) Insurance (a bit less)
4) Depreciation (a LOT less)
5) Maintenance (a bit more)
6) Opportunity Cost – Investing the price of purchase in a money market or mutual fund (a bit less)
7) Taxes, Tolls, & Licensing Fees (a bit less)
I wrote an article at TTAC a few years ago that pretty much summed this up.
http://forums.motortrend.com/70/6285867/car-truck-shopping/car-buyingfeeling-used/index.html
What it all comes down to is supply and demand. As for the best deal, it’s almost always the older and unpopular vehicle. It should have low but reasonable mileage on it (5k a year) and is usually owned by an older person.
So if you want to get a great car at a very reasonable cost, buy a small car at a retirement community located far away from the beach. Garage kept. Dealer maintained. At an estate sale :)
https://www.thetruthaboutcars.com/2007/11/depreciation-kills/
Last CAR bought (not truck) 1997 Ford Escort LX station wagon, loaded model. Purchased in December 2000 with 21,000 miles on it. Previous owner (according to the Michigan title) a resident of a local retirement home. Sticker price new, roughly $15,000. I paid… $7,000 after I talked the salesman down from almost $8,000. I think it meets many of your criteria. (Definitely an unpopular vehicle in the middle of the SUV boom at the turn of the century.)
<i> Sticker price new, roughly $15,000. </i>
The other guy had paid sticker on an escort?
People under financial pressure are always going to be at a disadvantage.
I had an interesting discussion a couple of years ago whether we were going to be facing inflation or deflation — and how it was impossible to have both at once.
The reply which struck me as astute was that, “everything you need will get more expensive and everything you don’t need will get cheaper.”
Reliable, inexpensive transportation is at a premium, yet there seem to be a glut of luxury off lease vehicles (soon to dry up, I imagine) from the last orgy of spending prior to the meltdown.
If you can pay over $20k+ for a used vehicle and buy a used sports/luxury type of vehicle, there are deals to be had. Further, these cars tend to be garaged in the suburbs and reasonably well maintained.
Plus, something like this is ideal if you have either multiple vehicles or enough time and cash on hand to deal with having them maintained. Much less so if you are short of time and money.
Depending on the exact circumstances, I would tend to look for a lease on one of the usual suspects — a Camcord type of vehicle. Or maybe a bit smaller. Or something like the poster did with an aggressive deal on a dealer closeout on a new Hyundai.
A single mom under a lot of financial pressure is in close to the worst imaginable position to try get a reasonable deal on basic transportation — so the OP has done a good deed.
I guess this would be my contribution to this highly interesting discussion.
All things being equal, I’d prefer to buy new for reasons others have listed above. But things aren’t always equal. Here’s an example. I drive a ’95 LeBaron convertible in ’07 that had 61k on its clock. I paid $3,800 to a private owner. It now has about 115k and, other than a few twinges here and there (regular maintenance issues), has been relatively problem-free to this point (I know, tomorrow is another day). Let’s say that car dies tomorrow. To replace that car with what I want — another convertible with the same list of options — would cost considerably more — maybe $35k (?) if I bought new. I’m not going down that road.
Or you could use the exact same logic that you used when you bought your LeBaron, and buy a used creampuff mint condition Sebring convertible that did cost someone $30k when it was new, but thanks to truly horrific depreciation, can be found used for like $1.99… :)
Of course I kid, but here in FL, Sebring ragtops are always for sale, and always bargains… 03-04 models well under $5k. Probably a combination of rental fleet queens and elderly owned beach runners. I have occasionally considered them for my teen drivers, I am just afraid of the reliability issues.
Last car I bought I saved 2/3 of MSRP vs. new. The one before that wasn’t quite as good, I saved about 45% of MSRP. Finding them was a multiyear effort because they are extremely rare.
Talking about high end cars with very low miles, almost new.
A lot of the good points have already been made in this discussion. It really does bear repeating that when buying used, depreciation is your friend. Especially cars that are depreciating fast primarily because they have a Detroit rather than Japanese nameplate and/or they are thought of as old men’s cars.
One issue that has not been addressed much in the discussion is how is the buyer financing the purchase. This is another reason the 2 year old CPO car ends up costing the same as a new car — the best interest rates are on new cars. On the other end of the spectrum, it can be hard to get “conventional” financing on cars more than 7 years old or 75K miles (try credit unions, they can be more flexible). The cash buyers in the $8-15K range have a tremendous variety of good cars to choose from that many banks won’t finance. Low mileage well kept cars are the way to go in that range, regardless of model year. And cash buyers don’t have a monthly payment, so they can afford an occasional repair.
I also tell people who only have $3K to spend on a car to please, please find the best car they can buy for cash, rather than sign onto a BHPH deal at 24% interest. Yeah, that means they may end up with a ’94 Buick Century, but it’s not like they are getting way better cars from the BHPH dealers.
One thing I really dont get is the obsession with CPO cars. So many of the posts so far have specifically compared the prices of new cars with CPO used cars specifically. CPO cars are not a good deal.
Sure, I get it if you are one of those buyers who doesnt know anything about cars, and your deathly afraid of buying a used car thanks to the horror stories from your freinds, or the advertisements and articles you see. So you get comfort in buying a car that someone has “certified” for you.
But that someone is the dealership, they are not your friend. The way I see it, car shopping is a battle, and they are the enemy. And you pay about $2k in profit for that comfort, and its all BS anyway.
Any dealer that sells CPO cars inspects all thier cars the same, CPO or not. They wont sell wrecked cars, cars with huge potential problems, etc. The junk goes to auction and on to the less reputable dealers. So much for the comfort factor.
The other part of the CPO process is the warranty, and maybe special financing. If you are already planning to buy a warranty, and if your credit is good enough, and the financing offer is worthwhile, then I can see it. But you really need to crunch the numbers and make sure its worth it for the difference in price. I could have gotten a CPO label on my GTI, but it didnt make sense. No special rates, the price would have gone up, and I could buy my own extended warranty for less money anyway. My credit union had better rates than the dealer, and they even offers thier own warranties if I wanted it, financed into the loan.
IMO, CPO is just a way for the dealer to use scare tactics to get you to buy thier extended warranty, instead of fighting with you in finance for add-ons.
“If you are already planning to buy a warranty”
Can you get an extended factory warranty without going through CPO? I’ve heard good things about CPO factory warranty coverage but have rarely heard anything good about those non-factory plans.
@jmo: It depends upon the mileage restrictions set by the manufacturer. In GM’s case you can buy an extended warranty up to the end of the 36,000 mile bumper to bumper warranty. After that, it’s the aftermarket. With GM CPO, if the car has any of the original 3/36 warranty, the CPO 1/12 warranty gets added on to the end of the 3/36, IIRC. I would have to imagine that most other mfrs are similar. I’d go CPO on a 4 or 5 year old car, but not necessarily on a 2 or 3 year old car.
It just depends on your experience. I have had 3rd party warranties and had amazing luck with them. No dealer fighting, just go to any mechanic and paid my $50 deductible. I hear tons of horror stories about dealers not honoring warranty work, or the factory not approving it or whatever, although personally nothing like that has ever happened to me, luckily! Best bet? If you need a warranty, shop around, knowledge is power.
Basic fact is, no one, not the 3rd party, not the dealer, not the factory, is going to be looking to give you something for nothing. Its all about making money, and a warranty is just an insurance policy. Better coverage costs more, less risk costs you more money, and the riskier the car, the higher the price. The Ford factory extended warranty on our Explorer was $2200, on our Celica we got the dealers 100k warranty for $599 AND it was 100% refundable if we never used it. I got my money back after that car got wrecked at 70k. Why was the Ford so much higher? More likely to need it. BTW, we didnt buy the warranty, and never needed an expensive repair.
IMO, if you are that concerned about the car you are buying having such expensive problems that you feel you need a warranty for it, then you should probably not be buying that car. Better to lease a brand new car on a super lease special and get rid of before the factory warranty expires. That is the real reason people shop new and replace cars that are still very “servicable”, its simply easier than actually maintaining a car for 150k miles.
Thats why CPO programs started on luxury cars. No one wanted to buy a used BMW or Mercedes because the repair potential was too expensive. So they figured out a way to sell all those off-lease returns by including a warranty. The value proposition works OK there, adding a cpl grand to an already expensive used car is no big deal. Then someone figured the same deal could be used to pad the prices of standard used cars, and the public eats it up. Adding $2k to a $10-15k used car is a big hit. Its all a big work, the scare tactic ads, the inflated values, etc.
IMO, if you are that concerned about the car you are buying having such expensive problems that you feel you need a warranty for it, then you should probably not be buying that car.
To me it’s all about the numbers. If a 3 year old car was discounted 40% of the best price you could get new – I’d be all in favor of it. That doesn’t seem to be the case – it’s seems more like 15%. And, with the car having already consumed 15% of its useful life – it’s just not a deal.
@jmo, I always agree with you on these used vs new questions. You have to be able to save enough money on buying used to make it worthwhile, hence my opinion that I wouldnt shop for a 1-3yo used Honda, the new ones are better deals. But my GTI at 1yo and 11k miles had already lost about 25% of its value… a good car to buy used.
This makes my arguement against CPOs on many cars even stronger… by adding approx. $2k to the real price of a used car just to get a warranty only brings it that much closer to the price of a new one, and therefore reduces the value proposition even more.
You guys are right on target with the “% discount vs. % used up” value metric. If the former is substantially greater than the latter and the car proves to be reasonably reliable, you’re a winner. For instance I’m helping someone shop for a minivan and the one we settled on will be bought for 60% less than the the original MSRP while being about 30% used up (assuming a modern car can last 150K these days). The key is picking the right make/model minivan or whatever type of car to make this math work, and in this instance you’re NOT buying a Honda Odyssey.
150K? I’d consider that nicely broken in. Any decent car should be capable of 250K+ if maintained properly. My record is 415K on an ’87 Volvo 740, it still ran perfectly but the floors rotted out due to it being from VT. I bought it with 250K, and it was one of the most reliable cars I have ever owned. Note that this car had the notoriously delicate ZF4hp22 automatic too, but with fluid changes every 25K miles it lasted the life of the car.
Synthetic oil, change the other fluids regularly, keep it clean, and proper preventative maintenance and a car can live a very long time. And of course don’t buy cars that dissolve in salt. The trick to reliability is to treat a car like an airplane, you replace things on a schedule BEFORE they break. Too many people just drive the car and change the oil once in a while, then wonder why they are stranded on the side of the road…