By on December 2, 2013

barkflex

Everybody on the internet knows that buying new cars is just plain stupid. New cars, after all, are just “depreciating hunks of metal.” New cars depreciate an average of 20% immediately, and then go down another 15% each year after that, according to sources such as KBB and Edmunds. According to every message board I’ve ever read, buying a new car will probably cause you to lose your house, get divorced, and be sent to the Chateau d’If for thirteen years.

But how true is that? And if it is true, does it matter? Let’s find out.

Like the best scientists (and by the best scientists, I mean Norman Osborn), I made the decision to test this theory myself several years ago, albeit not necessary intentionally. Since 2000, I have bought five cars for myself, all of them new. In order:

2000 Hyundai Tiburon (bought new in March 2000)

2001 Hyundai Santa Fe (bought new in June 2001)

2004 Mazda RX-8 (bought new in May 2005)

2009 Pontiac G8 GT (bought new in October of 2008)

2013 Ford Boss 302 (bought new in June 2012)

Each car was financed over a sixty month term, and only the Tiburon had any sort of cash down payment (you can read about how that happened in my epic tale of short-lived 944 ownership). Each car was traded in on its successor at a franchise dealership. In other words, I did exactly what you’re NOT supposed to do. How did it work out?

The longest I kept any car was nearly four years. The shortest was a little over a year. In each case, I either got out even up (Tiburon, Santa Fe) or I had positive equity on my trade(RX-8, G8). So, essentially, I leased the cars for varying terms from sixteen to forty-six months. How did I manage to do this without taking massive financial losses?

1) Negotiate the hell out of the price on the front end. With the exception of the Boss (which, at that point, was seeing an average of $5K-10K ADM), I paid significantly less than invoice for the car. My best purchase was on the RX-8. For a car that stickered at just over $30k, I paid $22,500, which included a $4K factory rebate and $4K of dealer markdown. I was able to accomplish this due to my patience and willing to buy a car from the previous model year six months into the current model year. It took over two weeks of negotiating to make this happen, including walking away from the deal entirely twice only to have the dealer call me back. Use everything that’s available to you. Maybe your employer is a GM supplier-find out. Get invoice numbers, not only on the base car but on options. Dealers HATE how much information is available to consumers now-more than one dealer has said it’s impossible to make money on the front end of a sale of a new car. Use it all. You’re not there to make friends. Which leads me to…

2) Finance, finance, finance-but only at a good rate. It’s amazing to me how many people will battle like crazy on the price of a car only to give it all back in the Finance and Insurance office. If you have a beacon score of at least 700 (and that’s auto-adjusted, meaning that even if you’ve missed a credit card payment or two over the years but you’ve paid your car on time, you should be fine), there is NO REASON to ever, ever pay more than whatever the best promotional rate available is. If you’re at least a 660, you can still negotiate down to a very good rate-nothing more than 3.9% over sixty months. Anything that’s less than the rate of inflation is essentially free money. I was able to get zero percent for 60 months on the G8, so the payments I was making three years into my schedule were actually worth about six or seven percent less in actual dollars than the payments I was making in my first year. If the dealership is trying to hit you with a rate over five percent, it’s because the F and I guy is getting spiffed on every point above and beyond standard rates he can get you to agree to. Back-end profits are about all a dealer has left nowadays-don’t give it away. Know your score before you go in and, even better, pre-arrange financing with your own financial institution so you have an offer in your pocket.

3) Try to buy interesting, desirable cars. Most modern dealers will have some sort of desirability index that they reference when deciding what value they give your trade. It grades the supply of similar vehicles in the market compared to the market demand for that vehicle. If you have a 2011 Ford Fusion, you are screwed. The supply of these vehicles far outweighs the demand. Get ready to battle. If you have a 2009 Jeep Wrangler with low miles, feel free to sit on your hands and wait for the offers to come in. I was able to leverage this in two cases-my RX-8 and my Tiburon (and if I’d been willing to wait a little bit longer, my G8, too). I got crushed on my Santa Fe. Nobody wanted a Hyundai with nearly 100,000 miles on it. Part of my two-week negotiation with the Mazda dealer on my RX-8 was getting them to just get me out of the Santa Fe even up; they initially offered a value that was four thousand dollars less than my remaining payoff. The cooler and more interesting your car is when you buy it, the cooler and more interesting it will be when you go to trade it in. But even if you have a lame car…

4) Dealers need to take in trades for their business model to work. Auction prices are out of control. Dealers both want and need trades-in fact, they are keeping stuff now that they never, ever would have before. It’s no longer crazy to go in asking for retail price for your car. You might not necessarily get it, but you might not be that far off, especially if the used car manager has a prospective customer for your car. I had a used car manager stalk me on my G8 for weeks, even after I traded it in elsewhere-he asked if I had any other friends with G8s.

5) Buy cars when the OEM/Dealer needs to sell it to you. Dealers have OEM new car targets that they have to hit. In fact, it’s one of the few ways that they can make money on new car sales anymore. And for some marques, the very existence of the franchise can be at stake if they don’t make targets. The whole thing about buying cars at the end of the year/quarter? It’s totally true. I have always bought cars on the last weekend of the month, and always when there is additional cash on the hood (again, with the exception of the Boss 302). Buy from struggling dealers. That guy that advertises that he’s the number one franchise dealer in town? Avoid his store like the plague. Buy from the desperate dealer. It matters.
But let’s say you take all of my advice-you’re still going to lose SOME money. After all, unless you bought a 993, you DID buy a depreciating asset. And even if you buy used, you’re STILL going to lose money.

Here’s my advice. Accept that buying a car, virtually any car, is a money loser. Don’t lose sleep over it. Enjoy it. Remember that if you’re reading TTAC, you’re probably an enthusiast. You’re buying a car because, on some level, you enjoy driving. You enjoy car ownership. Every day that I’ve owned my Boss 302 is a day that I’ve been able to enjoy it. The guy who’s waiting two years for it to depreciate forty percent? I’m enjoying my car for two years longer than he will. Maybe that’s worth forty percent to me. If this sort of thing matters to you, I got it when it was new and hot. He’ll get it when there’s a newer, hotter model of Mustang being sold at Ford stores. Maybe that means I’ll enjoy it more.
When you buy your dream car brand new, and then when you have the incredible nerve to finance it, rest assured; the Internet will call you an idiot. Who cares. You’ve got your dream car. In my experience, there have been few better days than the days I drove my new cars into my driveway for the first time. I sincerely hope you have the chance to share that same experience.

And tell the Internet to go to Hell. After all, it’s your money.

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181 Comments on “Bark’s Bites: A Moment of Appreciation for Depreciation...”


  • avatar
    doctor olds

    “Everybody on the internet knows that buying new cars is just plain stupid.”

    Someone’s got to do it. Otherwise there would be no used cars!

    • 0 avatar
      BMWnut

      Ask the Saab lovers about that one. The fanbois only bought them used because there were such great deals to be had. Until the day came when so few new ones were being sold that the shutters came down forever.

    • 0 avatar
      jimmyy

      Buying new cars is not stupid. I purchase between 1 to 3 new cars a year. The method to the madness is simple:

      1) Purchase base model Toyota and Honda vehicles … Camry, Accord, Civic, Highlander, Pilot, CR-V, Rav4 are excellent picks … Pay invoice – rebates – holdback … at that price, most dealers say no, but sometimes a large dealer will give that price at the end of the month.
      2) Get a great color;
      3) Do not damage it in any way … no dings or scratches;
      4) Before the vehicle hits the 2 year mark, trade it in … demand KBB excellent price … you will get it;

      Using this formula, on average, you will lose about 10% per year. My worst was 14% per year over 2 years. My best was 1% loss for 1 year.

      However, don’t try this on cars with lots of options, or on unpopular vehicles … if you screw up and pick the wrong vehicle, you can easily lose 20% in the first year. I got smoked on a Ford purchase a few years back. A 40% hit in 18 months. No more Fords for me.

    • 0 avatar
      ect

      To some extent, it depends on your timeframe. My last 2 cars were both bought new, held for 8 & 10 years respectively.

      Cars don’t depreciate at the rate they once did. When I was a kid, conventional wisdom was that you lost 50% in 3 years. Today, it seems to be more like 50% in 4 years.

      If I buy new for $40 and hold it 8 years, or buy 4 years old for $20 and hold it 4 years, my cost of ownership is aobut the same. Given that choice, I prefer to buy new and get what I want.

  • avatar
    PonchoIndian

    I might add that you shouldn’t be afraid to play dealers off of one another, as long as it isn’t just time wasting for both parties.

    Played this game on a loaded Regal T. It was the only one left in the exact color combo/options (T07, blue/cashmere) anywhere. Had 3 dealers that were willing to trade to get it, and was also working with the dealer who had it.

    The short of the long, ended up getting it for under invoice and getting $3K extra on the trade from a dealer who traded for the car vs. the dealer who had the car and the other dealers bidding for the business.

    Some of the dealers were just downright rude when valuing the trade in, and that made all the difference in the world.

    • 0 avatar
      Bark M.

      Very good point. I neglected to mention that I have called one dealership from the showroom floor of another, in front of my salesperson, several times.

      Remember, YOU have the power in this interaction.

      • 0 avatar
        highdesertcat

        “Remember, YOU have the power in this interaction.”

        Sage advice!

      • 0 avatar
        PeteyCrack

        that is brilliant! I’m looking at a 2011 4runner right now. 43 are available withing 40 miles of me, but I’m about to make an offer on the one that is the color/options/mileage that I want. I will have a friend pose as ‘the other dealership’ and call right in front of the guy “what’s that you say? you’ll take 30K out the door bottom line? I’ll be right over…”

  • avatar
    Kendahl

    Two advantages to buying new are (1) you get exactly the car you want and (2) no chance that it was trashed by a previous owner.

    Depreciation slows down after the first few years of ownership. That makes it cost effective to buy the car you really want, maintain it well and keep it for many years.

  • avatar
    RetroGrouch

    Thank you for personally keeping the US auto industry afloat.

    – 1 of 14 personal vehicles purchased new

  • avatar
    kosmo

    I could not agree more. You hit the nail on the head. I tell friends that if it costs me $X a year to own the new car I want, equipped the way I want it, it’s worth it to me. Some of them spend that much on wine. To each his own.

    Jack, I pity the poor guy who is waiting to buy YOUR Boss 302 after two years of depreciation!

  • avatar
    redav

    Economics points to a fallacy of the used-cars-are-a-better-deal thinking: If they are such a good deal, then more people would want to buy them, and if more people want to buy them, then supply/demand happens and their price goes up until they have similar cost/value relationship as new cars.

    That, folks, is the reality: the auto market is reasonably efficient. You get what you pay for. Yes, you can find a sweet deal that makes buying a specific used car a steal and better than new, but that’s a specific used car, not a generic used car. You may not always be able to find a deal like that.

    • 0 avatar
      Volt 230

      Because most people want to own a brand new car, even though that “new car feeling” doesn’t last much at all and before you know it you end up with a used car, I recall the last new car I bought, second day, some inconsiderate SOB dinged my shiny new door at a parking lot, there was this brand new car already damaged, marked for good unless I spend a couple of hundred bucks to mend it, only to happen again and again, so it’s still there after 15 yrs and so is the car with all its dents, dings, rust and noises galore.

    • 0 avatar
      Pch101

      “If they are such a good deal, then more people would want to buy them”

      The car sales market is already dominated by used cars.

      • 0 avatar
        NoGoYo

        And if where I live is any indication, used car prices are absolutely absurd.

        I’ve seen a dealership trying to get $5500 for a 20 year old Chevy truck. You will never get that price.

        Or the other dealership who thought a 1978 Buick Regal with a V6 was worth NINE GRAND…

        • 0 avatar
          28-Cars-Later

          Gearheads might not pay 9, but pay more than you’d think for a mint G-body and drop a real motor in it. You would not even believe how much a pristine [real] Monte Carlo will go for in these parts.

          • 0 avatar
            NoGoYo

            Usually 80s G-bodies go for around 5 grand in good shape ’round here, though some Monte SSes go for 7 grand if they’re in extremely good shape and/or have a 350 swap.

            Cutlasses are usually around 4-5 grand if you can even FIND one, and Grand Prixes and Regals are pretty much nonexistent. Can’t recall the last time I saw one of either, not counting the collectible and thus ubiquitous Grand National.

    • 0 avatar
      Luke42

      Yes but maintaining a used car costs people different amounts of stress and cash.

      Take me and my neighbor. He has a PHD in the social sciences and is neither handy nor interested in thr empowerment that comes with being handy. He and his wife were ready to scrap a perfectly good Honda Pilot because the starter failed once, and their confidence in the vehicle was shaken, even though their dealer put in a perfectly good OEM starter. This car stresses them out, and it costs them a lot to get things fixed on it. Buying a new car with a warranty is a good idea for them.

      I on the other hand enjoy tinkering when j can, I don’t mind supporting a local pro mechanic when I can’t, and I’m not stressed out about the potential for car problems – I’ve been there, done that, got the merit badge both with and without a cellphone. If I needed a Pilot, I’d have happpily taken it off of my neighbor’s hands for a song, and we would have both laughed all the way to the bank. A used car is a much better deal for me than it is for him — because the issues that come with used car ownership don’t inconvenience me as much as they inconvenience him.

      P.s. My reaction to his starter story was something like “schweet, now you don’t got to worry about the starter no more!” He looked at me like I was a Vulcan who just didn’t get it, which is probably how most of his conversations with people from the STEM disciplines go sooner or later… :-)

    • 0 avatar
      carrya1911

      The prices used cars command are insane these days and are really throwing a monkey wrench into the whole concept of buying used. I originally looked at buying a used car to replace my previous daily driver but the prices of the cars I was interested in were only a little bit lower than the price of a brand new car with a warranty purchase thrown in on top of it. Then add in financing. I was able to negotiate a price for my trade-in that was only a couple of grand less than what I originally paid for the car 4 years prior, (again…used car prices are nuts, so why not use that to my advantage?) threw down a sizeable hunk of cash, and financed the remainder for 36 months at 0.9%. I couldn’t put together a deal that good on a used car, plus I wouldn’t have a warranty that will last well into the next decade.

      Conventional wisdom is frequently wrong because it doesn’t consider the facts on the ground. Governing one’s financial decisions on axioms rather than crunching numbers isn’t going to deliver good results.

      People seem to regard finance as some sort of voodoo witchcraft…and if you’re trying to wade through the books at Goldman Sachs that might have some merit. But buying a car is thankfully much more straightforward and people shouldn’t be afraid to whip out the calculator and do the math.

      Oh, and as for dealing with dealers…well…be prepared to be a dick. The first offer they made on my used car was *half* what they ended up giving. The price shot up very quickly when I picked up to leave and asked the low-rung sales guy if he and his manager thought I was a f**king idiot. Suddenly 3 grand more showed up immediately, and more after that. Expect it to be hostile and don’t hesitate to give harder than you get.

  • avatar
    Bark M.

    Just wanted to point out that, despite the byline, I did write this :) We’re having tech glitches this morning.

  • avatar
    thegamper

    I buy new as well. There are incredible deals to be had on a lot of new cars wether you are leasing or buying. There is also something to be said for having a factory warranty for a number of years. No maintenance ownership is pretty nice. For an enthusiast, it is also very nice to be driving off in a new car every few years. I typically keep my cars no longer than 5 years or around 100k miles.

    I know it is not a sound investment. But I enjoy it. We all have our vices, we all waste money on something….or perhaps many things. All in all, a car is not a bad way to waste money in my opinion. It is only a problem I see if you live in a shack, arent saving for retirement, college funds, your kids are wearing tattered/worn clothes and you are behind on paying for necessities (Heat, electricity, water, food, credit cards, etc). If you have a little disposable income…Why Not!

    • 0 avatar
      hubcap

      +1.

      To each his own. No need to denigrate followers of either method.

    • 0 avatar
      thelaine

      +1 gamper. Buying my first new vehicle was a fantastic experience. When I am ready to replace it, I will go in and get exactly what I want (well, within reason – I would like a Ferrari but I am going to end up with a Wrangler or another pickup.) It is a true luxury. The process of researching and buying the exact car you want, as recently described by Tom K, is an experience I greatly appreciate after many leaner years. Knowing that you can now arm yourself with information that allows you to avoid getting ripped off makes it even better.

  • avatar
    OneAlpha

    Depreciation.

    The only way to get that $8,0000 flagship.

    • 0 avatar
      mkirk

      I used to think this until I purchased some 8000 dollar flagship. Now I am of the “If you can’t afford it new, you can’t afford it used” school of thought.

      • 0 avatar
        Dr. Kenneth Noisewater

        Indeed, there are no cheap German cars.

        • 0 avatar
          NoGoYo

          I certainly haven’t seen a BMW with a young owner (I’m 21, so someone my age) that wasn’t in either rough shape or suffering from some kind of mechanical trouble…hell, a friend of mine managed to cook his 540i a while ago, which is a damned shame because that was a nice car.

        • 0 avatar
          George B

          My girlfriend’s $5000 off CraigsList 1998 Mercedes E320 “taxi cab” has been a good value for her for the last 5 years. The trick was waiting patiently for months for a very well maintained high-mileage example to appear at a good price. She bought it with over 100k miles and drove it to 210k miles so far. Required a new air conditioner compressor, but no other repairs so far. I’ve done some maintenance on it and can appreciate some German Panther qualities. Chrysler used the W210 parts bin for the 1st generation 300, Charger, and Challenger so I’d be a little less concerned about part cost than for most German cars.

        • 0 avatar
          Morgan

          Yes, but you can get a cream puff Lexus LS400 for under $3000…

  • avatar

    Unless you’re putting crazy miles on a car then you’d still save even more by leasing. A great negotiated price is made even better when you lease because sticker or below invoice, the guaranteed future value is the same.

    As a salesman I don’t hate the info that’s out there, I hate when customers read one article on buying a new (or used) car and think they know more than I do. I’ll accept all reasonable offers and several stupid ones, but you’ won’t get much out of me if you spend hours and then go shop with other people. Sit down and you’ll get the deal you want without driving all over this good green earth.

    The part about financing is very true. A customer will never get as good of a deal when they finance because I assume I’ll at least make something off the back side of the deal. Don’t come in and expect a better deal if you’re paying cash, we much prefer you financing. Even if you just pay it off right away (with Ford you often get a rebate for financing with Ford at an uglier rate, make three payments and then pay it off (min finance is only $7500)). Look smart and be smart buying a new car, but if you like new often, leasing will save you more money.

    • 0 avatar
      cdnsfan27

      Frantz, I completely agree with you. I work in an Audi dealership and I love having well-informed customers with realistic expectations of what they should pay for mine and what I can give them for theirs. It makes the process simple and painless. The ones that are the toughest to deal with are the ones who follow the Edmunds buying process and parachute the trade at the end. They do not seem to realize that the transaction is one basket and that OTD price is what they should concentrate on. The ones who think a cash offer should give them an additional discount also make me laugh, so I get no money up-front or on the back end…right and we want to make that deal…only on the last day of the month will we consider it!

      • 0 avatar
        DeadWeight

        Frantz, I don’t know you, and you’re probably a nice, decent person, but you’re delusional in your comments since the internet and fast, accurate consumer information is empowering your potential customers, and more importantly, your financial interests as an Audi salesperson are not only NOT aligned with your potential customers’ interests, but they are AT ODDS WITH THEIR INTERESTS.

        To put it bluntly, your entire comment is a steaming pile of horseshit,whether you consciously recognize it, or are simply deluding yourself out of guilt.

        • 0 avatar
          cdnsfan27

          Dude, why the hostility and insults over what is a simple business transaction. I get paid on commission, most of the cars I sell are leased. A difference of $1,000 will put $250 in my pocket and will increase your payment by $20-$30 a month. Can’t afford that then how about a VW, I sell those too.

    • 0 avatar

      *I of course meant you will ALWAYS get more in negotiations when financing.

    • 0 avatar
      pragmatist

      Leasing is a mixed bag. If the vehicle is for business, it’s the only way to go because all your expenses are straightforward and easily documented, and it does not count as debt.

      For a private user though, I don’t think it’s that great. It leads to perpetual payments. When you’re done with the lease, you own zilch. You’ve got to start the process all over again. Buy the car and it’s yours, you can spend a few years without payments.

      [In the Jeep Wrangler world where I dwell, a large portion of the buyers want used ones (these guys want to start modifying the hell out of them anyhow), so that does actually push up the price to some degree (no matter how old a Wrangler is, if it\'s fairly solid mechanically you can get 4-5K for it.) But that\'s a special case]

      • 0 avatar
        doctor olds

        On the other hand, it may not be financially prudent to own a depreciating asset. Most vehicles eventually hit the scrap yards.

        Owning is not without ongoing costs: maintenance, repairs, inconvenience when failures occur. It’s inevitable if you drive them long enough.

        Leasing lets you lock in a monthly cost, eliminates the variability of costs with aging vehicles. If you have to spend a few grand on a major repair, it offsets months of lease payments.

        With a lease car, you always have a relatively new, up to date vehicle, with no risk of loss on resale. It is easy and provides roadside assistance, free repair and alternate transportation in the even of problems. You also must be brutally honest about how many miles you need, or you may be forced to buy the thing. My sister would have had a $4,000 bill for mileage overage by failing this and had no other choice.

        Leasing is not for fast mileage accumulators for this reason. The rates seem good for 15,000/year and less, if that suits your needs.

        Maybe someone in the retail business can comment on the highest mileage leases they have seen and the associated pricing?

        • 0 avatar
          dtremit

          I think you’re making too broad a comparison here, though. The appropriate comparison for a leased car is a purchased car that’s financed and traded in at the same interval. If you trade in before the warranty expires, the repair risk between the lease and the purchase are the same.

          If you compare the total cash outlay between a car leased for three years, and one purchased, financed, and traded in, the purchase is *probably* going to come out ahead, at least by a little bit. Why? Because with a lease, you’re essentially paying the dealer to assume risk. They calculate the cost of the lease based on their best guess on the residual value — and they have no incentive to lean in your favor.

          Just picking an example at random — a local Ford dealer is offering a 24 month lease on a $38k Explorer for “$239 a month.” Of course, there’s a $3k down payment and a $645 “acquisition fee,” bringing the total outlay over 24 months to $9,380, or $390 a month.

          If I buy that same car, TrueCar says I’ll pay $34k. Let’s assume I finance at 0%, since you can right now, and I drive the 21k miles allowed under the lease. Edmunds estimates a trade-in on a 2012 with a similar config at $25,512. That leaves a cost of $8640 over 24 months, or $360. Negotiate a private party sale, and you’re looking at about $2k less — $276 a month.

          So with the lease, you’re basically paying somewhere between $30 and $115 a month for the dealer to assume the risk of depreciation for you. Obviously the numbers may work out differently on other cars — but the basic idea is the same.

          As an aside, the one thing I’ve never understood about leases is the recent trend towards down payments. Does anyone actually pay these up front, or is it just an advertising trick? A $2-3k up front cost kind of throws a wrench in the “consistent monthly payment” argument.

  • avatar
    morbo

    Yes and no on the finance game. I totally agree that when you’re ready for that dream car, buy it new. Did it with my loaded 300C 2 years ago. Bought the 2011 last week of November 2011 with all kinds of dealer cash on the hood. Came with a blank check from the local credit union at 1.9%. Dealer couldn’t touch the rate; or rather didn’t want to because he’s the type of dealer that sells a car payment more so than a car, but was staring at a couple dozen V8s in inventory that don’t sell well in metro DC. Lost $4,000 the second I drove it off the dealer’s lot. Haven’t regretted it yet.

    At the same time, I can’t to afford to buy my dream car every 24 months. I put way too many miles on my car for that to be viable. I’ll prolly buy some horribly cheap, foul, and boring beater once I crest 100k miles, just for around town nonsense driving and save the 300C for cruising. And on that beater, it will be every cheapskate trick in the book.

  • avatar
    ash78

    I’m a number cruncher by trade, and also a car guy. It all depends on your assumptions and model inputs, but a good rule of thumb is that the longer you keep the car, the less it matters whether you bought new vs used. Most people already know this.

    When I tried to quantify it using a variety of assumptions over a 15-year ownership horizon (ie, people who make long-term decisions and take care of their cars), it was right around $1,000/year extra to buy something new vs 3 years old. To be fair, that’s still an extra $15,000, but there is a peace of mind in being the sole owner from day 1.

    The fun part is that if you keep it half that time (about 8 years), it can still be north of $10,000 difference. The longer you go, the better off you are.

    • 0 avatar
      Tinker

      I bought an ex-rental car, a year old with 30,00 miles on it. A Mazda from the dealership service department rental fleet. We don’t drive all that much anymore, so we figured it was a fairly nice deal, CPO warranty, in addition to the maker’s warranty.

      We just put gas in it, and drive it.

      • 0 avatar
        chevron

        The above is the proper use of anymore.

        The below is not.

        “In fact, it’s one of the few ways that they can make money on new car sales anymore”

        pls stop raping my eyes

  • avatar
    Sam P

    I haven’t decided whether to go new or CPO/used for my next primary vehicle. If I’m getting something like a Mustang or WRX, I may buy new to ensure that I’m not getting a car that’s been thrashed by the previous owner.

    • 0 avatar
      SCE to AUX

      I’ve become a fan of CPO. You get the benefit of depreciation with the peace of mind that comes with a warranty, and it may be worth the extra $1000 in asking price.

    • 0 avatar
      fredtal

      Check out the for sale in the car’s forum. I found my A3 that way. Well cared for by someone who was forced to sell the car. I paid blue book for it, but still less than the dealer CPO price.

      • 0 avatar
        bball40dtw

        I sold my GTI that way. I got way more than I would have in a trade. I sold it to someone who appreciated the light modifications and extra winter tires/wheels. They also were willing to pay a fair price for an unmolested GTI that was well taken care of. They then purchased a VW extended warranty, and were still under the CPO price. I have no doubts my GTI was in better shape than anything a VW dealer certifies.

    • 0 avatar
      hf_auto

      I’m a big fan of CPO. I bought my 328i on CPO. It was 1 year old, so it had depreciated (especially with the manual transmission), but CPO actually gave me a longer warranty term than if I had bought new. Win-win!

      • 0 avatar
        krhodes1

        You get a longer warranty on “some” things. BMW CPO barely covers a fraction of what the original warranty covers, and even those with diagnostic fees and a deductible. Personally, I would not pay a cent extra for a CPO car, just like I will never buy an extended warranty. At best, you are pre-paying for repairs.

  • avatar
    AMC_CJ

    I’ve bought cars at both ends of the spectrum.

    At the end of 11′ used car prices were crazy. Base model used Mustangs were going for higher than new ones. Most were buy-here-pay-here for people with shit credit, but some were even “real” dealership themselves.

    Cash and/or good credit is your key to getting a good deal. When I bought our Mustang, I had no credit. So they pretty much said no. I went back and forth, telling them I didn’t have credit because I have cash, and could put down a good payment upfront. Well, then I guess they figured they had me over, so they expected me to put down like $4k at a 12% interest rate.

    Luckily, we had 5 other cars, one still being fairly new itself, so I pointed this out to them, said I didn’t need this car and I sure as hell wasn’t paying any kind of crazy rate for it and gave them 1 more chance, no BS. As I put it;

    “Look, we got 5 cars, one pretty new itself. I don’t need this car, and I’m working on building my credit. So if I have to wait, fine, I’ll get what I want eventually, it just won’t be now, and it won’t be from you guys.”

    The FI guy disappeared a bit, came back with a 3.9% rate. I thought that to be fair.

    At the other end, I’ve bought something really old, but decent, for a few grand and fixed it up and drive that everyday. More so then the new cars. I’m not sure what route I’m going to take on the next purchases. Probably this one.

    • 0 avatar
      highdesertcat

      “I’ve bought cars at both ends of the spectrum.”

      Me too! And MY experiences with buying used, when I was forced to because I was young and poor as a two-striper in the Air Force, were that you always buy other people’s problems.

      These days I buy new and trade every 3-5 years. That way if anything breaks or needs repaired someone else can pay for it.

  • avatar
    SCE to AUX

    One rule I stick to: Never negotiate the trade-in price separately.

    I don’t care if the dealer loses money on the new car or the old one, but I’m mostly interested in the out-the-door price. This requires you to have a very good understanding of your trade’s value, but it puts the dealer in the position of calculating their profit on the deal, not two separate transactions, which is how it appears when you sign the sales agreement, anyway.

    A perfect example of this was those old ‘push, pull, or tow’ specials where they’d give you $4000 for a hunk of metal – this is obviously funny money. Anyone thinking they got a good value on their trade was a fool, and should know the dealer made up for it on the new car.

    • 0 avatar
      PonchoIndian

      That doesn’t make a whole lot of sense. Why would you not want to know what they are giving you in a trade?

      You can go practically anywhere and get invoice pricing on a new car, the trade is usually where the deal is good or bad.

      • 0 avatar
        SCE to AUX

        What I mean is that I already have a fair number in mind for the trade-in, as well as for the new car. But I don’t care how they present the numbers for them individually, all I care about is the bottom line on the sales sheet. It does me no good to do well on one and not the other, and it saves me half the fighting to only go for one number.

  • avatar
    Volt 230

    Question for the group: If you put on a lot of miles for work, do you buy new or used? keep in mind that with all the driving I do, the warranty expires about a year earlier than if I drove the normal amount of miles.

    • 0 avatar
      SCE to AUX

      My office mate drives 33k annually just commuting to work. He’s a car guy, and he buys new. He traded an ’09 HHR at 102k miles, and took a beating because of the mileage, so he just traded a ’12 Cruze at 67k miles, and still lost $14k on a pristine 2-year-old car.

      I think he’s willing to pay the price just so he can trust the vehicle he’s in. He figures he’s tired of driving everybody else’s junk. But the price he pays for peace of mind is appalling to me.

      • 0 avatar
        PonchoIndian

        holy mommy! what the heck did they give him for the trade? Sounds like he got raped a little bit.

        • 0 avatar
          SCE to AUX

          I thought the same thing, but KBB pretty much supported the dealer’s number. Too bad, though, his Cruze was showroom-ready and well-maintained. I was shocked at the Cruze’s depreciation.

          • 0 avatar
            28-Cars-Later

            KBB is generally fiction. MY12 Cruze LS with 68K should do in the 8s and goes up +/- a grand on each trim. If he lost 14K on the deal from what he originally paid I’d say he was taken for a ride.

      • 0 avatar
        bball40dtw

        That HHR was probably good for another 100k too. As it is basically a Cobalt, it will refuse to die.

        • 0 avatar
          SCE to AUX

          It was pretty good, but he traded it soon after it needed a cam timing solenoid (for the VVT). Guess he didn’t trust it any longer.

          • 0 avatar
            bball40dtw

            Fair enough. The depreciation on compact cars not named Honda Civic is crazy. A Focus or Cruze will be worth 40% of MSRP on trade 2-3 years out.

      • 0 avatar
        mikey

        @SCE to AUX…..I worked with a number of people, just like your office mate. Long distance commuters Flipping cars, and trucks, as soon as warranty run out.

        They all had the same argument..”peace of mind” They would argue, that they never bought tires, never bought brakes. The high cost,was just the price they paid to live where they wanted.

      • 0 avatar
        krhodes1

        This seems like one of those all-to-frequent occasions where trading in the old car is kind of stupid. The dealer is not really interested in a 2yo car with high miles on it as something to sell at retail, so it is going to go straight to auction. Where it will also likely do poorly against all the low mileage examples. So the screwing gets passed back.

        But if you were to sell it privately, then the show-room condition will really count for something even with the high miles. You would probably get thousands more than the trade-in value.

        Of course, I realize that most people simply are not in a position to do anything but trade the car in. They don’t own it, so would have to pay it off so they could sell it. And they probably can’t handle either having two car payments for a while or having no car for a while, depending on how quickly it sells. Pity. This is a big reason I will never finance a car unless I could also afford to pay it off the same day, and also why I have had more than one daily driver for the past 25 years. Makes for a lot more flexibility.

        Don’t even get me started on people who spend money on a car then immediately trade it in. Best example, a good friend had an ’02 Passat in immaculate condition with 60K on it. Dealer raped him for $1500 for brakes, and another insane amount for the 60K service. he then immediately went and traded it for an ’11 Honda Accord. Dealer even talked him into buying an expensive extended warranty! On an ACCORD! And the longest he has ever kept a car in his life was that Passat… And the Honda dealer raped him on the trade-in as well – had I known, I would have bought the Passat – they gave him something like $4K for it! Got him coming and going.

    • 0 avatar
      Bark M.

      Why not a high-mileage lease?

      • 0 avatar
        mikey

        @Bark M….I worked with a girl that went with the high-mileage lease. She always drove fully loaded Jimmys and Blazers. She lived 60 miles away in the heart of the snow belt..

        She claimed it worked for her.

      • 0 avatar
        SCE to AUX

        I’ve never heard of a high-mileage lease. How does that work?

        • 0 avatar
          bball40dtw

          You buy extra miles. The extra miles will lower the residual and raise the monthy price. It will be cheaper than going 15000 miles one a lease though.

          My family concrete business was leasing work trucks for awhile. We had 20,000 mile leases. Last time our leases were up, GM priced the Silverado W/T edition so low, we just bought 5 instead of leasing them.

    • 0 avatar
      AMC_CJ

      I hate paying all that money for a new car, and just running it into the ground.

      My commute is 50miles round trip. I’ve been using a 78′ Chevy sedan I fixed up a little bit over the past few years, but when my wife got a company vehicle, I started to drive her high-mileage 01′ Jetta more for the gas savings.

      New, or used, I’d never buy a nice car for commuting like that. Why pay that much money just to destroy and wear out something so quickly? Get a everyday beater to run in the ground, and something decent for trips, nights out, weekends, etc.

      • 0 avatar
        PonchoIndian

        I’ve had that exact same outlook until recently. My 110 mile roundtrip seemed like it begged for a high mpg type car that offers some comfort.

        I’ve learned that I spend enough time in the car everyday (anywhere from 2.5 to 4 hours) that my next car will not be a boring appliance. It is going to be fun, and something that I would normally buy as a toy because why the hell not? If it adds some enjoyment to what is otherwise a boring commute than I’m the better for it.

  • avatar
    jaydez

    I’ve always sucked at negotiating. I get screwed on new cars every time I buy one. My wife and I have our eye on a C-Max for her. We found one hat has most of the options we want and went to take a look at it. Its been sitting for a LONG time. The battery was dead. It wouldn’t even unlock the doors or turn on the interior lights.

    How can you negotiate a car that has been sitting for a long time? I know dealers want to get rid of them because they cost them a ton of money to keep on the lot.

    • 0 avatar
      bball40dtw

      Make an offer and be prepared to walk. Arm yourself with information on what the car should sell for. Invoice on my C-Max (SE with 203A pkg) was somewhere around $26,500. There is also at least a $1000 rebate on the C-Max as well. With A-plan, I don’t have to haggle anymore, but there was a time when I did.

    • 0 avatar
      Bark M.

      Ask the dealer to show you the original invoice-it should have the order date on it. If it’s older than 60 days, you have considerable negotating power. If it’s over 120 days, you have ALL the power. Some dealers are still holding onto that fantasy of making money on a car. If you get that sense from a dealer, run away and go find that car elsewhere. C-Maxes can be lot poison for dealers in truck buying states. Call a Ford dealer in rural Indiana and make your deal.

    • 0 avatar
      bball40dtw

      If you were in ther Detroit area, I could give you the number of a few dealers that would move a C-Max at invoice, as long as its one on their lot. They are only getting a few hundred over invoice anyway. Some may go below invoice.

    • 0 avatar
      imag

      Simple. Use the phone. Talk to the fleet salesperson. It works like a charm.

      If they deviate from the deal when you walk in to sign the paperwork, start to leave and be ready to drive off the lot if they don’t give in.

      Easiest car sales ever.

      • 0 avatar
        JMII

        Yep I did the fleet sales thing once too. When I bought my Dodge truck – peace of cake, super easy deal. The fleet guy is just adding your truck to his weekly order sheet, thus could care less about “meeting his numbers” because he doesn’t have any. Totally different from a “sales” guy. I also had F&I in place so it was a cash sale to them, they didn’t even have to inventory / floor plan the truck because I ordered it with options they didn’t stock (loaded minus leather… a non-seller).

        Still not a fan of buying new, with all the websites you can cast a wider net over the used market if your willing to drive out of your way for a purchase. Especially if you can wait. Most search sites will save your choices and email if/when a deal pops up. For example my 350Z – 100 miles west, big savings via a smaller dealership with less customers looking for sporty cars. Took nearly 8 months of “searching” but zero effort other then checking my email.

    • 0 avatar
      cdnsfan27

      I have a 2013 C-Max for $25K

    • 0 avatar
      z9

      With tax credits, state rebates, Ford incentives, and dealer discounts, the C-Max Energi is now effectively cheaper than the equivalent hybrid model. Unless you’re the type that wouldn’t be satisfied by anything less than a $3000 Lexus LS, the level of standard equipment on the C-Max is fairly impressive for the money. The depreciation could be cruel but would it be worse than it would be for a Focus that gets a fraction of the mileage? Hard to imagine.

  • avatar
    LeeK

    The classic conundrum: how to be an automotive enthusiast and not lose your shirt financially? The answer: you probably can’t. For us, there are non-monetary benefits of having a new car, fitted out exactly the way we want it, and not ragged on or poorly maintained by a previous owner. But we get bored easily, so the super-hot Scion FR-S we bought last year might last about three years until we get the Jones for the diesel-electric Evo XI that comes out in 2016 (not really).

    You can spend you money on lots of things — for us, cars are not only just transportation but also a life-style, a hobby, and a source of pleasure. You gotta pay to play.

    • 0 avatar
      PonchoIndian

      +100
      Something people either “get” or they “don’t get”. The ones who don’t get it most likely like cars, it isn’t actually part of their life.

    • 0 avatar
      George B

      If you have patience, space, and ability to do some of your own repairs, it’s possible own some combination of interesting used cars and reliable transportation. Buy already depreciated hobby cars when you find a good deal and sell them when you get bored.

      • 0 avatar
        PonchoIndian

        I’ve got the time (sort of) space and hobby cars. I just can’t justify spending money on “transportation” when I could have something more enjoyable to sit in everyday.

  • avatar
    mikey

    As Robert F would say “whatever floats your boat”….no matter how you cut it, vehicle ownership costs money. Depreciation is the number cost of vehicle ownership.

    I’ve depended on the new car industry to put bread on my table,and a roof over my head for 41 years, and counting.

    Yup..I’d have to say “screw the depreciation” buy what you want to buy!

  • avatar
    28-Cars-Later

    Great article.

    “I’ve ever read, buying a new car will probably cause you to lose your house, get divorced, and be sent to the Chateau d’If for thirteen years.”

    Oh, Zatara, the stories you tell.

  • avatar
    mkirk

    Sometimes you just want a certain car. If it is a New Mustang, then I buy new. If it is a Citation X-11 then I guess I’m buying used. Sometimes I like the previous generations of a model better than the current. I wanted a Miata for example but after driving several I got used because I liked the NA better than the NC. Just depends on what I want.

  • avatar
    Dr. Kenneth Noisewater

    Cheap money really helps as well, hard to beat 1.55% 60mo financing with 0 down plus cash back along with some dealer incentives.

    • 0 avatar
      bball40dtw

      There are some cars that are cheaper to buy new. Some VWs, like TDi models and GTIs have been better new buys that used buys when VW offers 0% financing + rebates on them.

      Didn’t you lease a Volt? Those seem to be a great deal on a lease.

  • avatar
    mikey

    In Ontario there offering zero% on GM everything now to Dec 8th.

  • avatar
    Luke

    How does one get information on invoice pricing?

    I totally agree with the “everything is negotiable” attitude, because it is, but invoice pricing on cars and options is one piece of information that I don’t know how to get my hands on.

    • 0 avatar
      bball40dtw

      It depends on the company. Ford has an A/Z/X plan sheet that shows employee discounts plus invoice. Edmunds shows invoice on their website, and most dealers will show you what it is if you ask. At least I’ve had that experience.

    • 0 avatar
      Pch101

      Edmunds and Kelley Blue Book both provide invoice pricing.

      • 0 avatar
        VoGo

        Keep in mind, dealers do not pay invoice. They pay invoice minus holdback, which tends to be ~2-3%. You should know exactly what your dealer pays. I tend to offer $150 above what they pay (typically below invoice), and I always pay cash.

        • 0 avatar
          Bark M.

          Holdback is probably the least understood concept amongst consumers and is deserving of its own article.

          However, dealers don’t necessarily pay holdback. It’s dependent on several factors and is most often offered in the form of a rebate to the dealer.

          • 0 avatar
            JMII

            This is why you can buy at invoice price – they still make the holdback money. I like to think of it as the discount the dealer gets from buying cars in bulk. In my truck deal mentioned above I walked in with all the numbers, offered them $150 over and so the fleet manager placed the order. I did my homework and knew all the order codes (for example EA12 = towing package) so I was speaking their language. Another example: order by paint code and not the silly marketing name – Frost White? No, its really “Color W2B” on the invoice. Way easier to win when you have the cheat sheet.

          • 0 avatar
            Pch101

            “I like to think of it as the discount the dealer gets from buying cars in bulk.”

            Theoretically, holdback should cover the cost of the floorplan.

            If the car is turned quickly enough, the holdback should provide a profit to the dealer. That should motivate the dealer to turn inventory quickly.

          • 0 avatar
            Bark M.

            Pch, as usual, understands how holdback works. It’s not just additional profit. The amount of holdback is reduced by the amount of time the car sits there.

          • 0 avatar
            28-Cars-Later

            “The amount of holdback is reduced by the amount of time the car sits there.”

            Learn something new everyday, thanks guys.

          • 0 avatar
            Pch101

            The holdback doesn’t change over time. But the profit that can be earned from the holdback does.

            Dealers borrow money to buy cars, with interest charges accrued daily. The faster that they can sell cars, the less interest that will be paid.

          • 0 avatar
            Bark M.

            I worded that badly. You’re correct.

        • 0 avatar
          cdnsfan27

          You are the man I never want to sell too:)

  • avatar
    Zackman

    Lessee now, Wifey and I are married over 36 years, several new cars including my 2012 Impala bought July 2012 and we’re not splitting up anytime soon, so the internet whiners who write that garbage are just a bunch of liars and merely jealous because they can’t afford a pot to (urinate in) in the first place!

    As to whether it’s the best financial decision? Depends on one’s resources, but like it or not, building one’s life around money is a losing proposition anyway, for such a person may not be happy in the first place.

    However, myself being closer to retirement, Wifey’s aging CR-V will most likely be replaced with something gently used.

  • avatar
    TorontoSkeptic

    This article is craziness to me. I can’t believe people are saying that the best case is not only buying new but also financing and putting nothing down. Sure interest rates are low but even at “only” 3% or whatever you still are adding ~$3500 to the cost of a $50k car. Then you’re paying for a depreciating asset with zero equity. With real estate it’s one thing – between leverage and rising prices you might do well in the long term. But cars…?

    Do we even have to elaborate all the other additional costs (more sales tax, licensing costs, higher insurance) that add thousands more to the cost of buying new?

    Steve Lang once said on this site that used is all about “hitting em where they ain’t.” There are models/years/body styles that are just unloved for some reason, and you can get serious deals on them especially if you pay cash from a private seller.

    No I don’t think I’ll be getting a 302 mustang for $10k on craigslist. But I could pretty easily get a 2011-12 well-equipped dodge charger, top-trim maxima or Genesis sedan for 40+% off because they’re not Toronto type of cars.

    Congrats on your success but damn, that seems wasteful.

    Re: Invoice pricing, it can be found online with a bit of looking, I don’t know what the options are in the US but in Canada there are sites like CarCostCanada, UnHaggle etc that publish them.

    • 0 avatar
      Bark M.

      Thanks for reading and sharing your thoughts.

      I’m not sure that anybody is saying that buying new is “best,” myself included. What I AM saying that is if you’re going to do it, this is the right way to do it.

      Inflation, at least lately, has been outpacing low interest car loans. A dollar today is worth significantly more than a dollar with be in 60 months. The stock market is up over 20% this year-you’re much better off investing your money there (at least for now!)and spreading out the cost of your loan payments, especially at zero percent.

      Also, there’s a lot less gray area in the pricing of new cars. It’s hard NOT to feel like you got screwed on a used car from a dealer, even if you paid a “good” price, because you have no idea what the dealer paid for it. Maybe that’s all psychological, but I’ve NEVER felt like I got screwed on a new car, because I KNOW that I didn’t.

      • 0 avatar
        TorontoSkeptic

        I appreciate the response and I don’t mean to be too negative, some of your points make a lot of sense to me like “interesting” cars having a much greater negotiation value in the future. Truth be told I have zero idea how dealerships work in terms of incentives, so it’s interesting to see this.

        I wouldn’t buy used from a dealer as that’s the worst of both worlds for me – the dealer experience and higher prices with few of the benefits. Private party sales I have a lot more leverage, especially if I’m willing to pay cash. And I have some ability to assess how the previous owner has treated the car.

        I’m curious what you think you’ve spent NET over those 13 years… I’d estimate the retail value of those cars at about $200k. What do you think it cost you when you subtract out all the discounts and trade-in value? 100k? Less? I’m honestly asking here, I don’t really know how to estimate it.

        • 0 avatar
          Bark M.

          Much less, but it’s tricky once you factor in inflation. Probably $60k of payments over thirteen years.

          • 0 avatar
            TorontoSkeptic

            ok I’ll admit that’s impressive… <400/month! But would it be fair to say you've also paid $10k+ in sales tax and transaction costs?

        • 0 avatar
          cdnsfan27

          Remember that one day you will want to sell that unloved car…then what? Owning a car is typically a 5 year investment and includes purchase price, maintenance, depreciation and fuel economy. The Audi Q5 is ranked #1 best buy by Forbes and we don’t discount them much. Over focus on purchase price at your own peril.

          • 0 avatar
            28-Cars-Later

            Best buy in its category or best buy overall?

          • 0 avatar
            TorontoSkeptic

            We used car cheapskates aren’t typical and keep them longer than 5 years. :)

            Checking craiglist it looks like the average private-party resale price is about 10% more than I paid for it two years ago. So there basically won’t be any depreciation at all.

        • 0 avatar
          cdnsfan27

          Best buy in luxury vehicles, 3 Audi’s in top ten…Q5 TDI, Q7 TDI, A5.

      • 0 avatar
        3Deuce27

        Reduced payback due to inflating dollars, only works if your income matches or exceeds inflation. Most Americans are seeing reduced buying power due to stagnant or diminishing income values.

        • 0 avatar
          Bark M.

          I have been fortunate over the timeframe discussed in this article to have my income increase significantly more than the rate of inflation. I realize that this is not the norm. However, we are also talking about a time of my life when people should be pretty upwardly mobile (from early twenties to mid thirties).

      • 0 avatar
        vvk

        The only reason you are able to make the arguments you are making in your article is because used car prices have been rising steadily (sellers market) and that new car market has been a buyers market since 9/11. It’s like everyone writing about real estate when prices are going up.

        You try it in a few years when new car prices go through the roof and used car bubble bursts. Will see how smart you are then.

        • 0 avatar
          3Deuce27

          Reg; “You try it in a few years when new car prices go through the roof and used car bubble bursts.”

          I’m sorry, but I can’t make any sense of that comment. Do you want to rephrase it?

          If, new car prices escalate, the demand for new will diminish, and the demand for used will increase or continue at current levels of demand with steady or increasing valuations. I don’t see a “used car bubble bursts.” in that scenario.

  • avatar
    mikey

    @Zackman…..”building one’s life around money is a losing proposition anyway”

    So very true!

  • avatar
    Kyree S. Williams

    This is very good, not to mention the fact that you’ll pay less interest over the life of a shorter loan, and that the shorter loan itself may even constitute a lower interest rate. Indeed, if you play your cards right, you can buy a new car every time. One thing though: I think you’re mistakingly placing hyphens (-) where you should be placing em dashes (—). On the TTAC WordPress front-end, an em dash is achieved by using three successive hyphens without spaces, but I’m not sure how it’s done on the administrative end.

    • 0 avatar
      Bark M.

      I’ve been told about the dash thing before…I can’t figure it out. Maybe I just need to use semicolons more often :)

      And yes, shorter loan terms are definitely better. Sometimes they result in astronomical payments for some not so interesting cars, though. I mean, who wants for write an $800 check every month for a $25K car? Not me. I’d rather take advantage of promotional financing when it exists.

  • avatar
    PrincipalDan

    Depreciation is your friend. I have an done searches on Auto Trader for things like V6 sedan CPO and it’s pretty amazing what you can get for even $15,000 dollars. Some depreciation queens are 1/2 price within a year to a year and a half of having left the showroom floor and with less than 40,000 miles on them.

    I you can whine about whether you really want a 2012 Chrysler 200 for $13,000 or a 2013 W-body Impala for 1/2 price but honestly as we’ve acknowledged here before the gap between best and worst cars in any segment is closing.

    Naturally the key to any CPO experience is not only the warranty itself but the experience with the dealer if you experience any problems.

  • avatar
    abhi

    I don’t know maybe I am on the other end of the spectrum with this but for a normal car I have always bought new. I am talking about mostly appliances here .. my wife’s MDX was bought new with a 3 year maintenance pkg, and 0.9% financing. I think it’s really what you want to buy .. and what the used market for that vehicle is.

  • avatar

    My approach for my last couple cars has been to buy new, but at the end of the year when manufacturers are offering giant rebates. It helps that I like body-on-frame trucks, which few other people seem to.

    My previous vehicle was an ’06 Ranger, bought July ’06 with 3 grand in rebates and another 1k off in negotiations. Financed it for 60 months, had it paid off in 18.

    Current vehicle is a ’12 Pathfinder, 5500 in rebates, another 4k in dealer discounts. Paid cash for it.

    I plan on doing this if i can keep finding vehicles i like, although the idea of buying a pre-owned Range Rover is kind of tempting. The thought of the repair costs isn’t.

  • avatar
    ajla

    People are free to do as they wish but if you make $60K a year, and you buy a new LR4 HSE, and you can’t afford to replace tires or a burned out bulb on it because so much of your monthly income is going to fixed payments, and you are way underwater on it, and you make fun of people driving a Ford Focus; I’m going to call you a dicksmack.

  • avatar
    ash78

    Even more than the financial pressures (which are many; we haven’t had a car payment on either vehicle in over 5 years…10 years on mine), there is an unspoken element of the enthusiast community that you should buy used and do most of your own work. I subscribed to this for more than a decade, but I’m changing my tune with two small kids at home, and plenty of other pressures on my time and labor.

    “Dood, you actually paid $200 to have a bad CV joint replaced?!”

    “Yeah, the parts were $75 and I didn’t want to spend a couple hours covered in grease just to screw something up.”

    “Yeah, yeah, Moneybags…”

  • avatar
    1998redwagon

    lucky enough to get the car i wanted vw tdi at 0% finance for 60 months, 0 down and 2K off sticker (close to invoice). that deal was tough to pass on. i could have done slightly better at a local dealer that was smaller (we’re #2 – we try harder!) but it wasn’t the color combo i wanted and the first dealer was willing to arrange shipment over 2,000 miles for the car w/ color combo i wanted (for which i paid $800 roughly the shipping cost carmax would charge for the same distance).

    yes it pays to know a good sale price, finance rate and trade-in price at the time you are buying.

  • avatar
    Mandalorian

    Ah, swapping cars, the great American way to stay poor. In all honesty, you are going to lose money on a car, period.

    All one can really do is seek to minimize the loss as much as possible, it is really a game of damage control. I buy my cars new with all of the options I want and keep them 10+ years. Best way to do it.

    • 0 avatar
      healthy skeptic

      If that works for you, that’s cool, but you’re viewing cars as transportation appliances. This article is geared toward people who buy them for reasons beyond that.

      • 0 avatar
        Mandalorian

        Hey man, I like my cars just as much as the next guy on the website. Just because I take a pragmatic approach to the financial details associated with them does not make me a non-enthusiast. I just like to get my money’s worth.

        • 0 avatar
          Dave M.

          Exactly! My mindset as well. I like to purchase new with my chosen options (got 5k off this summer and 0.9%/60m loan), and I keep my cars 12-15 years and or 200k miles. Then I repurpose the old one for vacation duty at our summer location with family up north.

          I also have a play car that I bought CPO for 50% off and only had 18k miles. 6 years later it was paid off long ago and has 45k miles, but brings smiles every weekend.

          I understand the “buy used” financial model, and I respect those that prefer it. That’s not for me however….

    • 0 avatar
      Acd

      I can’t imagine keeping a car for 10 years, even one I like. Two and a half years into my current car and I’m bored sick of it. I don’t take vacations or have any other expensive hobbies like golf so pouring some of my hard earned $$$ into a car is ok. Paying several thousand dollars or more for 1 week of “fun” seems crazy to me; that could go onto another car and I’m much happier.

    • 0 avatar
      Russycle

      +1 for buy and hold, if it’s a car you really like. I’m currently looking for a people-hauling appliance, in this case I’m thinking I’ll go with a used depreciation queen and save some cash, because there’s nothing I really like in this category.

  • avatar
    healthy skeptic

    Great article, all good advice, and while I’m a practical guy, I agree on the “spend money on something that makes you happy” philosophy, Internet kill-joys be damned.

    However, I’m still a believer in the CPO/used route. There’s a bit of a gamble that you might end up with a lemon, but cars in general are so much more reliable and better built these days that the risk isn’t is as bad anymore. Better yet though, I can get a car that I couldn’t (or at least shouldn’t) afford new. In fact, for me the used option isn’t so much about saving money as being able to reach higher without spending more.

    Unless I end up rolling in dough later in life, I doubt I’ll buy new ever again. But I will still buy cool cars that I enjoy driving. I won’t penny-pinch on that point.

  • avatar
    SCE to AUX

    I’ve owned many cars, but only bought 4 new. Of the new ones:

    02 Passat: lemon-like. 12 dealer visits in 3 years.
    05 xB: nearly perfect. 1 dealer visit in 7 years.
    05 Odyssey: lemon. Countless dealer visits in 1.8 years.
    12 Leaf: lease, doesn’t really count. Jury’s out.

    So even though I can praise the new-car warranty and benefits like anyone else, my reality says that new isn’t always better. The CPO Sonata I recently got with my son was a sweet deal for both warranty and price.

    • 0 avatar
      highdesertcat

      “I’ve owned many cars, but only bought 4 new”

      Yeah, me too. At one time I had over 20 vehicles parked on my property, 11 of which were in running order.

      My first new vehicle ever: a 1988 Silverado, then a 1992 Towncar for the wife, followed by a 2006 F150, a 2008 Highlander for the wife, a 2011 Tundra 5.7 and now a 2012 Grand Cherokee for the wife.

      At age 67 I am seriously thinking about what my last new car will be, and what it will be for my wife.

      At some point the DMV is going to take away our drivers licenses once our senior moments overtake our lucid moments.

  • avatar
    3Deuce27

    Nothing like the Smell and Feel of New… Bought right, worth every penny, especially if your a long term owner like me. And you know its history. That said, a well cared for, low mileage, three to six year old can give you most of that for a lot less.

    The recession killed off the bargains in used cars and reduced the stock of used luxury and sporty cars driving the prices up from before the recession. Hopefully, that will recover in another year. And since the rich are getting richer, and the middle class is getting poorer , the price of used luxury and sporty cars, should fall.

  • avatar
    dtremit

    The new-but-previous-year trick works particularly well if you qualify for an employee discount — since often the discounts on those are factory incentives that stack right on top.

    Ford’s A/Z plan is invoice MINUS holdback and advertising allowance — and incentives on a previous MY car can reduce that by several thousand more. I have checked sites like TrueCar and have never come close to that kind of deal.

    As an example — take a 2013 Edge Sport. MSRP is $42.8k; invoice is ~40k, and A-plan is 37.9k. Stack a $4250 incentive on it, and you’re out the door for about $34k — lower than the lowest price reported on TrueCar — with _no negotiating_. And you can still make dealers compete on the trade-in.

  • avatar
    krhodes1

    I think there are basically two ways to go – either buy new, or buy REALLY depreciated. If buying new, I think Bark is pretty much spot on. I bought two cars this year – 2013 FIAT Abarth, and an ’01 Range Rover HSE. Got the FIAT for invoice price and .9% for 60 months. Thought about leasing but the deal was nowhere near as good. I have never traded in a car – I am VERY good at selling cars. I’ll probably pay it off and sell it in a year or two when I get bored with it – it was bought as a toy and as something to autocross. Cheap fun. I expect I will get a good price for it when the time comes.

    For used – too new just costs too much, unless it is something that is just completely undesirable, and even then, it was sold deeply discounted in the first place. Might as well just buy new in that case. But older cars in good shape can be GREAT deals, assuming you are equipped to deal with the inevitable issues. My Range Rover stickered at $76K in 2001, I paid $5500 for it. Cash, of course, and private sale from a multiple Rover enthusiast. Great history, good condition other than sunburned paint on the roof. All the right things already fixed. I’ve spent a couple grand on it on this and that, but overall I am very pleased with it. But I am equipped to do most of my own work on the truck – paying someone to maintain one of these, especially if it was your only transportation would be ruinous!

    Ultimately, I am in that stage of life where I have more money than I have time. I have project cars that I want to have time and energy to work on. I do NOT want to HAVE to work on my daily drivers. So I have two cars that are new enough to be under warranty. My quandary is my BMW (’11 328! wagon, six speed manual RWD). While I am certainly not afraid of owning it out of warranty, on the other hand I would sure love to do Euro Delivery on a new one again. But on the gripping hand, BMW doesn’t want to sell me what I want, and I am not really into compromise when signing on the dotted line for $50K+. So I will probably just keep it. Haven’t driven it much lately, but drove it down to NJ from ME today which made me fall in love all over again. :-) Also part of the secret, I think, own enough cars that you don’t get bored. Maybe the compromise is to replace the FIAT with a 2-series and keep the wagon!

  • avatar
    Sanman111

    I think it really depends on the deal and the which is better. I negotiated the purchase of a 2012 corolla S for my gf (now fiancée) and at the time it was a great deal new. 15.6k for a car that stickers over $21k with 1k down and the rest financed over 36 mths with 0% interest (decided to save the cash even though it could have been paid for straight up). For myself, I usually do CPO on cars that are second or third favorites in their category and get forgotten. The 2011-12 ford fusion is a pretty good bargain right now is to the glut (as mentioned) and pick up the mercury Milan version for added savings. Another trick is to do your research. The car get a bad relabiloty rep due to auto/cvt trans failures and you are buying the manual version? Gold. The nav/idrive/sync system is failing and you run across a car without one? Gold. Buying old man cars can be a bargain as well. Then use the money saved on a fun project car.

  • avatar
    omer333

    The lease is up on my Crosstour next year, and I’m definitely taking notes on how to get into something else (I’m leaning towards a new Dart or Mazda3, although my wife said a new Mustang would be ok too).

    Any way I can get you to negotiate a deal for me?

  • avatar
    jim brewer

    Almost all of you are overlooking something: Transaction costs. When you trade in a used car and buy new, you are selling wholesale and buying retail. Always. Usually its more advantageous to buy used as so many point out, but as many others point out, now is not such a time. Fine, but the transaction cost drag is inexorable with an occasional outlier here and there.

    It doesn’t matter how adroit you were in negotiating or how well you supposedly anticipated the used car market three years out. An essential strategy is to find a car you can live with a long time. That may or may not be a ‘practical’ car. After all, your toy car can be with you a long time, not just your commuting car. Go out of your way to keep the cosmetics of the car up so you don’t mind keeping it. Driving a mechanically well-maintained dung heap is a mixed pleasure at best.

    • 0 avatar
      turf3

      Yep, the finance companies love you. You are giving them money for essentially no value added.

      I too believe there is value in buying new cars – buy new, pay cash, maintain them with Calvinistic care so you don’t have unexplained failures (“I don’t know what happened, the transmission just blew up” – BS!) keep them till they are completely clapped out, put the money you would have urinated away on interest into something that will pay you back when you really need it. Like investments. Or a college fund. Or a house. It’s easy when you’re in your twenties to get caught up in the marketing of debt; the marketeers of debt in this country hire the smartest people they can to convince you that you NEED to owe them a whole lot of money. If you can’t pay cash, buy something less expensive. If you can’t afford to pay cash to buy a new car, buy something used. If you can’t afford the used car you want, buy something cheaper.

      My wife and I kept two cars for seventeen and fourteen years respectively, in our twenties and thirties. Nobody but me ever put a wrench on them. The car payments (and later, when the value of the cars declined and I canceled all insurance except liability – the insurance payments) I didn’t make formed the foundation of what is now a fairly comfortable lifestyle. We don’t owe anyone in the world a dime, and we have some money put away for emergencies and retirement. I still have to work every day, but we have a cushion.

      Don’t underestimate the value of living debt free till you try it for a while.

  • avatar
    jmo

    Two things I’ve noticed about used car fans.

    They tend to compare to MSRP and they don’t adjust for the reduced useful life of the vehicle.

    So, let’s say the average Civic lasts 20 years and goes 300k miles (the average is most likely somewhat less). That means every year it uses up 5% of its usefull life.

    So, Civic EX-L is 20k MSRP and 3 year 36k used is 15k.

    Well, we’d first need to adjust for the fact that with cash back, invoice, financing etc. it’s down to 17k. Then we adjust for the fact that it’s used up 15% of it’s usefull life and we’re down to 14,450. Now, the car would have to be significantly lower than that to make up for all the unknowns and the fact that years 3-20 are going to be less trouble free and require more maintainance than years 0-3. In most cases the amount you’re saving isn’t really worth the trouble.

    • 0 avatar
      Power6

      Sure if you are keeping 20 years buy new! The Hondas don’t work out that well. The best deals are cars that are more resale challenged.
      Not sure why everyone has to pick a superlative and defend it with honor, it is the Internet I guess but I thought the crowd here is above that. Sometimes it makes sense to buy new, sometimes it doesn’t. Sometimes you say screw early retirement I want a new car!

      Pretty sure my 01 Lexus ES is cheaper to run than a new car payment but I can fix it myself if it needs any work. Our Subaru has been a bit more costly. We take the risk though, and we like owning our cars. When you pay cash for your cars you just have a different attitude.
      I wish I could make a case for signing a new car note SAVING us money but the wife ain’t buying it and I can’t make the math work, not up against an old Toyota!

    • 0 avatar
      ajla

      Some vehicles will depreciate at a much higher rate than Hondas, so buying them used tends to lead to more savings than a comparing Civic.

      Do the same math with a Cadillac DTS. An ’07 with 50K today is about $15K. New they were $43K. So even if you say the DTS had $10K in incentives originally (and I don’t think it was quite that high), that means my DTS only has to reach 91000 miles for me to “win”. The Northstar is a diva engine, but I like those odds.

      The potential tax savings on used over “new with big incentives” shouldn’t be ignored either. I happen to live in a state where tax is applied before factory incentives, so my savings from buying a used DTS over new are almost $2k just in sales tax. That will make up for some maintenance right there.

  • avatar
    That guy

    My simple rules

    1. Plan on keeping it until it dies: buy new
    2. Plan on replacing it after just a few years: lease
    3. Plan on racking up tons of miles: buy CPO and replace every couple of years
    4. Plan on modifications: buy used

  • avatar
    nrd515

    The three years of not having to pay for anything that breaks is worth a lot to me. I have owned, let’s see, about a half dozen used vehicles over the 41 years I’ve been driving (That number amazes me!), and their reliability ranged from great to awful. Everything of any importance went bad, with one exception, out of warranty. The big stuff ranged from blown transmissions in two of them, to a head gasket in one. I fixed the head gasket myself, but all the other big stuff was done by someone at a fairly high cost. The one thing, an exploded A/C compressor, was only covered when I drove customers out of the showroom and the owner of the place couldn’t take it anymore, and agreed to fix it. Used car warranties are a joke, in my experience.


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