Stop Overpaying for Lightly Used Cars

[Slee_stack]

We used to be able to skip tax buying from private party, but that changed years back.  You pay at registration based on the state's assessed value of the vehicle...not what you paid for it.

I've bought from both private parties and dealers.  To me, its one big market, and I try to buy what seems to be the best value for me.  Sometimes that's the former, sometimes the latter.

Some dealers are almost universally a used car ripoff (CarMax). 

I almost always email internet managers from dealerships.  They are almost always willing to negotiate on vehicles that sit around.

If you want a CRV or RAV4 or Subaru or pickup or any other popular vehicle, you'll have far less of a chance to negotiate it down.  Those don't sit very long.  If you don't need extra ground clearance, just buy a sedan or hatchback.

[Kashmani]

This forum proves I am not crazy. I thought it was just me.

I needed a new car two years ago. I looked for used cars, and realized that 99.5% of them are sold through dealers, at least here in Canada. I later figured out that the reason is that dealers can offer financing, and that most people who sell slightly used cars trade them in. Private sales for lightly used cars are very hard to find. And of the "private sellers", half are curbsiders and a quarter have very unrealistic pricing expectations. That narrows the field further.

I also did the math on a whole bunch of used cars, and almost universally they would be 4 years old, 30% off the new price, with around 70,000 km on the odometer. For me, that represents six years of driving. Mentally, I fully depreciate a car over 10 years. So paying 70% of the new price for a four-year old car makes no sense.

In the end, I ended up buying new.

Maybe in the U.S., there are more private sales and the math is different.

[obstinate]

Mentally, I fully depreciate a car over 10 years.

Obviously you can make any decision you want, but your mental model does not comport with reality on this front. Most good cars still have significant residual value after ten years. Like 33% or more of initial sale price, especially if you don't drive much (10k km/y is not much). Again, considering the example of the CRV that has been brought up in this thread, after ten years and 120k-150k miles, they often have $6-8k in residual value.

[MustacheAnxiety]

I think this has already been pointed out, but just because buying a two year old car is a mistake doesn't mean buying a new car is not also a mistake.  One of MMM's early posts dealt (briefly) with the idea of buying new over a couple years old and had the exact same car mostly being discussed: http://www.mrmoneymustache.com/2011/04/19/how-to-come-out-way-ahead-when-buying-a-used-car/

The only thing I found a bit silly in his post was the idea that you should pick out a make and model and search exclusively for that.  I get the need to have some parameters to meet your needs and to consider gas mileage and reliability as part of the analysis, but starting from a requirement for a prius or a CRV seems like leaving money on the table.

As a side not this thread reminded me of one of my car buying pet peeves, if anyone is contemplating an SUV because of rocky/snowy terrain please, please educate yourself on the many meanings of 4WD, AWD, and the capabilities of the specific car you are searching for.  Here is a starting point: http://www.rubicon-trail.com/4WD101/4WD-AWD-autoAWD.html 

One more point against buying barely used cars, the reason dealers are selling most of the 2 year old cars is because they are former leased vehicles.  In my limited utility, anecdotal experience, people who lease vehicles are much harder on their cars than the rest of the world (why take care of something that you are turning in after 2 years) but the car is too new to see the impact.  Leases with maintenance included have helped some in avoiding things like the lovely coworker who figured out oil changes were just a scam since she had driven 27K miles without one, but as a rule I would avoid formerly leased vehicles.

[StarBright]

We are having this conundrum with this exact car right now.

My neighbor just offered me 2.5k for my 15 year old CRV with 170k miles on it. That seems about right, honestly. The car is starting to need work, new tires, new converter,etc. I'm not handy with cars, my neighbor is.

We started looking at used CRVs in our area as a replacement - A 2014 EX with 45k miles on it is just under 18k without taxes or fees, a 2015 is 20k - both of these are past their warranties. I called to get the cash price on a 2018 LX version - 23.5k w/ the three year warranty and two years of free oil changes.

I may be missing something - but three years of little to no hassle is really attractive to me right now.

I have read the MMM post about CRVs and whether you really need everything in a CRV - but between kids, dog, bike, hauling stuff around, and snow - the CRV is a legitimate great fit for us.

[obstinate]

We started looking at used CRVs in our area as a replacement - A 2014 EX with 45k miles on it is just under 18k without taxes or fees, a 2015 is 20k - both of these are past their warranties.

These are the best negotiated prices, or the asking prices? If you're comparing a negotiated price (i.e. the non-sticker offer from the dealer you emailed) and an asking price, this is obviously going to tilt the scale unfairly in favor of buying new.

The only way to make a reasonable comparison here is to go apples to apples. Either compare the asking prices of both, or (ideally) compare the best negotiated prices of both. Don't compare the asking price of one with the negotiated price of another.

Also, worth noting that the EX is a higher trim than the LX, so other things being equal you'd expect an LX with the same number of miles to be ~$2k less (assuming options hold their prices perfectly, which of course they don't, but we're approximating here). So the LX equivalent of the 2014 EX w/ 45k miles should be asking about $16k.

FWIW, your neighbor's offer does seem fair. That's a little less than what CRVs near me are going for, but not much, and none of the ones I glanced at had the mileage on them yours does.

[Kashmani]

Mentally, I fully depreciate a car over 10 years.

Obviously you can make any decision you want, but your mental model does not comport with reality on this front. Most good cars still have significant residual value after ten years. Like 33% or more of initial sale price, especially if you don't drive much (10k km/y is not much). Again, considering the example of the CRV that has been brought up in this thread, after ten years and 120k-150k miles, they often have $6-8k in residual value.

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

[obstinate]

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

Best not to base a general rule on a single anecdote. There are of course a range of possible outcomes (your engine could explode one mile after the warranty coverage lapses!), but your assumption of full depreciation after ten years is overly pessimistic on average and will lead to inconsistent choices.

[StarBright]

@obstinate - indeed those are all negotiated cash prices! To be fair, they are all from a dealer and are certified. I could probably find something on CL cheaper but I am less comfortable buying a used car from an individual. (That may be dumb, but I know my personal limits :))

True about the EX vs the LX - but we can't find any used LXs near us with the mileage we want, and considering we are currently driving a car with a tape deck, we certainly don't need any of the bells and whistles of a new EX!

[foobaz]

Last time I was shopping for a car I felt like the asking price for used vehicles were way too high compared to buying new, I guess this article just reinforces my observations. Perhaps car advancements are on a bit of a plateau right now so newer cars aren't that much better than the previous years.

[radram]

Last time I was shopping for a car I felt like the asking price for used vehicles were way too high compared to buying new, I guess this article just reinforces my observations. Perhaps car advancements are on a bit of a plateau right now so newer cars aren't that much better than the previous years.

I would argue the opposite. So many newer cars have added safety options like lane assist and automated breaking. I believe we are entering an era where this new generation of cars might make those without these safety features almost worthless without retrofitting for those safety devices. I believe insurance costs for cars without these added features will be the driving force.

[FrugalFisherman10]

Y'all are trippin'. If you want a fancy car, just say you want a fancy car. Don't spread disinformation about the relative merits of buying used and new into the deal.

Preach

I don't have the discipline or confidence in my decisions to buy a car and stick with it for 15 years.  I get a wandering eye after a few years.

Good on you for displaying the most self-awareness in this thread. I'm being serious. I think more of us hoomans get a wandering eye than we realize.
Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real.


I'm still relatively young (in my 20s) and yet i've observed so many people telling me things like "oh but I'm gonna run this car into the ground, so it was worth it", only to not do so.

It's a similar line of thinking as those that say like "Oh, I buy name brand clothes because they last longer and are higher quality (think Ralph Lauren Polo, etc.). Sure, they do, I would agree with that. The colors look better longer, the collar stays the right shape for longer, etc. But like, you really going to be wearing that same shirt long enough for it to matter bruh?
(yes, you should buy higher quality items that last, particularly because of the footprint of such non-disposable hard goods. I am an advocate of that.)

[shawndoggy]

Good on you for displaying the most self-awareness in this thread. I'm being serious. I think more of us hoomans get a wandering eye than we realize.
Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real.

Haha for me its more of a jones.  I like internal combustion engines and the wheels they push.  I enjoy driving.  I like sports cars, I like sedans, I like trucks, I like automatics (tho I prefer manuals), I just like cars.  I've had subscriptions to the car mags since before I could drive and Reagan was president.  I want to drive them ALL!

Recently I've found that with a little bit of careful shopping that I can get "cool" (i.e. desirable to me) cars that are a few years old, drive 'em for a few years, and not really do too badly on the flip. I've only owned one new car, and it pained me to no end to see it's first paint chip, it's first door ding, it's first parking lot dent, etc.  I'd rather buy a car with a few little blemishes like that but with some years to go.  Give it a few years... I know I'll get bored.  But if I've done a decent job of deal hunting (and the hunt is really half the fun) I won't really get killed on the backend.  I tend to buy at about $15K and sell around $10K.  If I do a good job, that depreciation takes about 5 years.

Downsides?  More maintenance, no warranty.  For people who aren't handy and see a car as an appliance, I totally understand buying a new econobox and at least keeping it through the warranty period. 

[Dicey]

Mentally, I fully depreciate a car over 10 years.

Obviously you can make any decision you want, but your mental model does not comport with reality on this front. Most good cars still have significant residual value after ten years. Like 33% or more of initial sale price, especially if you don't drive much (10k km/y is not much). Again, considering the example of the CRV that has been brought up in this thread, after ten years and 120k-150k miles, they often have $6-8k in residual value.

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

Wait! That's a huge gap. You didn't try lowering your price on kijiji?

[Dicey]

I don't have the discipline or confidence in my decisions to buy a car and stick with it for 15 years.  I get a wandering eye after a few years.

Good on you for displaying the most self-awareness in this thread. I'm being serious. I think more of us hoomans get a wandering eye than we realize.

Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real.

I'm still relatively young (in my 20s) and yet i've observed so many people telling me things like "oh but I'm gonna run this car into the ground, so it was worth it", only to not do so.

Hope I got those quotes right...
I blame the new car jonesing on advertising. Fucking car ads are everywhere. Another good reason to kill the TV, IMO.

Anecdotally, DH bought his Ford F150 new in 2002. It still has under 100k miles on it. We want to keep it forever - we love that truck! It still looks and runs great. DH does all the maintenance. Our biggest fear is that something will happen to it that's out of our control and we'll have to replace it. That would be a sad day, indeed.

And no hate, please. He is a painting contractor. Bet you can guess what color the truck is ;-). When I drive it to the paint store, I feel like I'm part of the club, lol.

[shawndoggy]

Haha visiting jalopnik on the reg doesn’t help the Jones either.

I kinda agree re advertising, but my Jones relates to cars that are usually 4-8 years old (once they have dropped into the $15k range). So those ad guys are definitely playing the LOOOOOOONG game with me.

[FrugalFisherman10]

And no hate, please. He is a painting contractor. Bet you can guess what color the truck is ;-). When I drive it to the paint store, I feel like I'm part of the club, lol.

Now I'm interested...
I guess I don't know what the 'go-to' truck color for painting contractors is. But I'd like to

I'll take a gander at White?

[jeninco]

Y'all are trippin'. If you want a fancy car, just say you want a fancy car. Don't spread disinformation about the relative merits of buying used and new into the deal.

Preach

I don't have the discipline or confidence in my decisions to buy a car and stick with it for 15 years.  I get a wandering eye after a few years.

Good on you for displaying the most self-awareness in this thread. I'm being serious. I think more of us hoomans get a wandering eye than we realize.
Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real.


I'm still relatively young (in my 20s) and yet i've observed so many people telling me things like "oh but I'm gonna run this car into the ground, so it was worth it", only to not do so.

It's a similar line of thinking as those that say like "Oh, I buy name brand clothes because they last longer and are higher quality (think Ralph Lauren Polo, etc.). Sure, they do, I would agree with that. The colors look better longer, the collar stays the right shape for longer, etc. But like, you really going to be wearing that same shirt long enough for it to matter bruh?
(yes, you should buy higher quality items that last, particularly because of the footprint of such non-disposable hard goods. I am an advocate of that.)

Ha -- I am twice your age, and I freakin' HATE having to shop for stuff.  We wear our clothes until they dissolve (or develop holes, or start looking like crap), and our 17-year old is driving a model year 1995 car (which we bought used). So, yeah, at some point time starts speeding up and it seems like stuff breaks all the time, and it's irritating to have to replace it seemingly all the time. My husband is still wearing a Patagonia jacket that he bought new in the 80's. (True story -- Pategonia fixes their stuff, so we took that jacket in to have the zipper replaced. When I went to pick it up the sales guy asked me what it looked like. I said "Navy shell, grey fleece lining, several years older then you." He found it right away, although he told me the word for that is "classic.")

However, although I don't drive much, I enjoy driving nice cars. We buy them used and then keep them for a very long time, as mentioned above.

[radram]

And no hate, please. He is a painting contractor. Bet you can guess what color the truck is ;-).

I am completely missing this reference. Why should we know the color of his truck because he is a painting contractor?

[Dicey]

And no hate, please. He is a painting contractor. Bet you can guess what color the truck is ;-).

I am completely missing this reference. Why should we know the color of his truck because he is a painting contractor?

Lol, because painting contractors seem to have a strong preference for white trucks, as @FrugalFisherman10 correctly guessed. Kind of the inverse of Henry Ford's famous line, "You can have any color you want, as long as it's black".

[Kashmani]

Mentally, I fully depreciate a car over 10 years.

Obviously you can make any decision you want, but your mental model does not comport with reality on this front. Most good cars still have significant residual value after ten years. Like 33% or more of initial sale price, especially if you don't drive much (10k km/y is not much). Again, considering the example of the CRV that has been brought up in this thread, after ten years and 120k-150k miles, they often have $6-8k in residual value.

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

Wait! That's a huge gap. You didn't try lowering your price on kijiji?

I did initially lower to $1,000, but still no takers. And I had no place to keep it. We needed a driveable car and our condo only has one parking stall. Street parking permits cost money. Registration costs money. Insurance costs money. And one cannot park an unregistered or uninsured car on the street where I live.

There are lots of people selling cars "for parts", but they usually have a place to store it.

[Just Joe]

You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.

THIS! I've experienced that benefit several times. Buy a car that isn't popular. Its failed popularity isn't b/c it is a bad car but it is overshadowed by something else such as a Honda or Toyota. I remember mentioning Volkswagens to someone about 15 years ago who didn't even think Volkswagen was still in business. They were really shocked to find out that Volkswagen is among the largest car companies in the world. The brand just wasn't on their radar.

[Maenad]

Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real.

I'm still relatively young (in my 20s) and yet i've observed so many people telling me things like "oh but I'm gonna run this car into the ground, so it was worth it", only to not do so.

Well, now you "know" 2 - myself and DH. My first new car bought in 1991, finally gave away to charity in 2007. Replaced it with a new 2007 Prius that is still going strong and I have no desire to replace it.

DH got a new car in 1997, finally donated to a school in 2012 when it developed severe engine trouble. Replaced it with a new 2012 that we have no desire to replace. I was disappointed to only get 16 years out of these cars, I was hoping for 20.

My parents and brother are the same as me. Maybe normal spendypants people don't actually drive them into the ground, but plenty of frugal people do.

[Just Joe]

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

Rock Auto sells a gas tank for my car for less than $200. Some are even easy to do in the driveway. I know because I have done the task on my car.

[Kashmani]

I based this on experience. I sold my last car at 13 years of age for the princely sum of $186 - to a scrap metal dealer. At that point, it had a cracked gas tank and was not insurable without a replacement. This was after several weeks of listing it on Kijiji for $1,500 without a single inquiry.

Rock Auto sells a gas tank for my car for less than $200. Some are even easy to do in the driveway. I know because I have done the task on my car.

Yes. "Some" are straighforward. A VW Passat 4motion wagon is not among them. Apparently the rear axle assembly has to come out for the tank to be removed.

I miss that car. Tracked like a tank, had a shifter like a swiss clock, and had a passenger seat capable of absorbing a surprisingly large amount of amniotic fluid...

The constant gremlins are another story. Nobody drives a VW for reliability.

[I-Ranger]

You'll likely only overpay on lightly used, high-demand vehicles.

Anything in-demand you'll overpay for new as well.

Buy something no one wants and you'll do just fine.

We own a Lincoln (sedan) and a Saab (wagon).  We bought each when they were 3 years old.  They were seriously depreciated because almost no-one in the United states (or possibly anywhere) wants either one.

Both are actually quite nice vehicles too!

When you don't care about impressing even a single other person on the planet with a motorized vehicle, you can do very well on lightly used.  Just choose appropriately.

THIS! I've experienced that benefit several times. Buy a car that isn't popular. Its failed popularity isn't b/c it is a bad car but it is overshadowed by something else such as a Honda or Toyota. I remember mentioning Volkswagens to someone about 15 years ago who didn't even think Volkswagen was still in business. They were really shocked to find out that Volkswagen is among the largest car companies in the world. The brand just wasn't on their radar.

Agreed. I just bought a used 2012 Lexus CT200h hybrid with 80k miles for 12k cash, because they were comparable in price to similar year/mileage Fits, Priuses, and Matrixes (Matrices?). Turns out Lexus people don't want used Lexuses, who knew? Better gas mileage that Fit/Matrix, and with more bells and whistles. The CT200h was about 38k brand new-serious depreciation.

[Lady Stash]

We started looking at used CRVs in our area as a replacement - A 2014 EX with 45k miles on it is just under 18k without taxes or fees, a 2015 is 20k - both of these are past their warranties. I called to get the cash price on a 2018 LX version - 23.5k w/ the three year warranty and two years of free oil changes. 

I may be missing something - but three years of little to no hassle is really attractive to me right now.
 

Starbright - that's exactly what I saw and the reason I bought a new one.   


Obstinate - My point was that after putting 9K miles on a new Honda CRV, KBB told me I could sell it used for exactly what I had paid for it new.  So there is an inversion of prices going on where slightly used vehicles are overpriced compared to new ones.  You are right that a car with 80-100K miles is cheaper to operate if you don't count your time to repair it and don't count occasional breakdowns.  But I DO count time spent on maintenance and a breakdown is not only inconvenient but it can be dangerous when you are woman traveling alone.  So I weigh the *cost* of those higher than you do.   I am still working full time so my time has a premium on it for me.  I would rather pay a 3K per year depreciation cost to avoid the higher likelihood of breakdowns and time spent in maintenance.  Doing Vicki Robins calculation on what an hour of your life/time is worth, this is worth it to me. 

 

Alls I'm sayin' is, I find it hard to believe that the same 'type' of person who would convince themselves it's a better deal to buy a new car is the same person who really sticks with that purchase for 15+ years. Let's be real. 

Dude, I feel a bit judged here.  I've driven 3 cars into the ground.  And mathematically a new car WAS a better deal than a very lightly used one, which is the only argument I made.
 
 

[FrugalFisherman10]

Yeah my post was judgy but not meant for the actual frugal people that frequent this forum. More aimed at the general public who do such a damn good job convincing themselves of things, and to point out that same faulty thinking in any of us if we feel tempted to do the same.

If you drive cars until their last breath then you know who you are. Sounds like you may very well be one of those people that can buy a new car and drive it for a long time.


Actually though, let me test that claim for a second...are you 76+yrs old?
If you're claiming to have done this (bought a new car and 'driven it into the ground') 3 times, and we use a fairly conservative 20yr life on each car, and you started driving and presumably bought the first of these cars when you were 16... Then 16 +20 + 20 +20= 76.


I think alot of people perceive that they do a better job of this than they do in reality. The person who got rid of a 16 yr old car? You kiddin right? My car today is 16 yrs old.

(I get that you expressed remorse about not getting but 16yrs of life, but maybe that should be part of the lesson here. When people think they're going to drive their car for 20 yrs, they very likely aren't. )

[obstinate]

Obstinate - My point was that after putting 9K miles on a new Honda CRV, KBB told me I could sell it used for exactly what I had paid for it new. So there is an inversion of prices going on where slightly used vehicles are overpriced compared to new ones.

And my point is that KBB is dead wrong about this, at least on average (i.e. the average similarly situated seller will not be able to find a buyer dumb enough to pay the new price for a used car). There is no actual inversion of prices, nor could any such inversion of prices persist for very long, since people would just all buy new cars. The only inversion is an in imaginary prices made up by KBB, which do not accurately reflect reality.

https://www.investopedia.com/articles/personal-finance/113015/are-kelley-blue-book-values-accurate-and-reliable.asp (TL;DR: KBB prices skew high.)

You are right that a car with 80-100K miles is cheaper to operate if you don't count your time to repair it and don't count occasional breakdowns.  But I DO count time spent on maintenance and a breakdown is not only inconvenient but it can be dangerous when you are woman traveling alone.  So I weigh the *cost* of those higher than you do.   I am still working full time so my time has a premium on it for me.  I would rather pay a 3K per year depreciation cost to avoid the higher likelihood of breakdowns and time spent in maintenance.  Doing Vicki Robins calculation on what an hour of your life/time is worth, this is worth it to me. 

There are plenty of quite reliable cars with 80k miles on them, but I never insinuated that you should buy at that mileage point. In my comparison data that I provided, I looked up used cars at 40k miles, which, due to the bathtub curve, should actually be more reliable than brand new cars.

Fundamentally, used car prices must be substantially lower than new car prices, even adjusting for the change in viable duration of use, in order to entice people to go through the extra hassle of buying them and the extra risk of not having a warranty. The only substantial countervailing factor is the possible existence of more demand at lower price points (i.e. from people who cannot afford to buy new). But, empirically, this does not seem to be sufficient, at least in the cars I looked at during the course of this thread. The used cars still trade at a substantial discount. I know it would be nice if this were not the case, but it is.