New vs Old Cars

[Exflyboy]

True.. When I remove an airbag I disconnect the battery and leave it overnight (in case there are capacitors that need leakdown a charge etc). I've reconnected a few and not had a problem so far at least..:)

[ketchup]

True.. When I remove an airbag I disconnect the battery and leave it overnight (in case there are capacitors that need leakdown a charge etc). I've reconnected a few and not had a problem so far at least..:)

Yeah, that was my tactic too with my car and I didn't have any issue.  But the plugs are in tight enough that I felt like I was breaking it when removing it or reinstalling it, so I was still sweating a bit when I reconnected the battery after everything.

[spokey doke]

I'm not being super picky about the model but I've just not seen the depreciation everyone is talking about. 

Me neither...try shopping for used Toyota Tacomas...not a lot of bargains in my neck of the woods.

I also wonder what information resources there are combining a look at depreciation/reliability/life-span/cost across makes/models/years...

[Just Joe]

Why, just go to JD Powers of course... j/k

I don't put much stock in their advertisements -errrr, stats.

[Chris22]

I'm not being super picky about the model but I've just not seen the depreciation everyone is talking about. 

Me neither...try shopping for used Toyota Tacomas...not a lot of bargains in my neck of the woods.

I also wonder what information resources there are combining a look at depreciation/reliability/life-span/cost across makes/models/years...

Depreciation is somewhat silly to talk about in general terms, for a couple of reasons.  Really, it all depends on the actual model/models of cars you are considering. 

1.  I can use an example to make an "average depreciation statistic" look silly, from either direction.  On one hand, you've got vehicles like the Toyota Tacoma and Toyota 4Runner which hold an absurd amount of value, and on the other you have vehicles like a Dodge Journey which basically see the retained value of a used condom.  It's like asking what average appreciation for a single stock is.  What stock?  Enron?  Pets.com?  Apple?  GE? 

2.  Depreciation is calculated based on MSRP.  Some cars tend to sell pretty close to MSRP, like most Hondas and Toyotas which you might be lucky to get a few percent off.  Other cars like most American models, can be bought at substantial discount up front, so what seems like incredible depreciation might actually be lower versus what the consumer spent; if a car lost $15k in the first year, but the average selling price of that car is $10k off of sticker, that $15k suddenly means something very different.  And even relatively in demand vehicles can be purchased cheaply in certain circumstances; I bought my 2011 Japanese 4cyl sedan in October of 2011 when the 2012s were already hitting the lot; I got about 15% off sticker purely because I bought a "leftover" model.  Again, my theoretical depreciation will be very different than the actual depreciation I have experienced since I bought at a much lower base. 


It's all case by case.  I've bought used cars and I've bought new cars, every time I am ready to buy I understand the market conditions affecting the specific models I'm looking at and base my decision on what I can actually save, not on trite one-size-fits-all rules of thumb.

[spokey doke]

I'm not being super picky about the model but I've just not seen the depreciation everyone is talking about. 

Me neither...try shopping for used Toyota Tacomas...not a lot of bargains in my neck of the woods.

I also wonder what information resources there are combining a look at depreciation/reliability/life-span/cost across makes/models/years...

Depreciation is somewhat silly to talk about in general terms, for a couple of reasons.  Really, it all depends on the actual model/models of cars you are considering. 

1.  I can use an example to make an "average depreciation statistic" look silly, from either direction.  On one hand, you've got vehicles like the Toyota Tacoma and Toyota 4Runner which hold an absurd amount of value, and on the other you have vehicles like a Dodge Journey which basically see the retained value of a used condom.  It's like asking what average appreciation for a single stock is.  What stock?  Enron?  Pets.com?  Apple?  GE? 

2.  Depreciation is calculated based on MSRP.  Some cars tend to sell pretty close to MSRP, like most Hondas and Toyotas which you might be lucky to get a few percent off.  Other cars like most American models, can be bought at substantial discount up front, so what seems like incredible depreciation might actually be lower versus what the consumer spent; if a car lost $15k in the first year, but the average selling price of that car is $10k off of sticker, that $15k suddenly means something very different.  And even relatively in demand vehicles can be purchased cheaply in certain circumstances; I bought my 2011 Japanese 4cyl sedan in October of 2011 when the 2012s were already hitting the lot; I got about 15% off sticker purely because I bought a "leftover" model.  Again, my theoretical depreciation will be very different than the actual depreciation I have experienced since I bought at a much lower base. 


It's all case by case.  I've bought used cars and I've bought new cars, every time I am ready to buy I understand the market conditions affecting the specific models I'm looking at and base my decision on what I can actually save, not on trite one-size-fits-all rules of thumb.

Yep, a good explanation of the basic point...so how do we make the use of depreciation into a quasi-science, to maximize the bang for the buck on cars that are reliable/good quality?

[joonifloofeefloo]

Awesome post, Chris22! Thanks for that!

[FiftyIsTheNewTwenty]

Depreciation is somewhat silly to talk about in general terms, for a couple of reasons.  Really, it all depends on the actual model/models of cars you are considering. 

1.  I can use an example to make an "average depreciation statistic" look silly, from either direction.  On one hand, you've got vehicles like the Toyota Tacoma and Toyota 4Runner which hold an absurd amount of value, and on the other you have vehicles like a Dodge Journey which basically see the retained value of a used condom.  It's like asking what average appreciation for a single stock is.  What stock?  Enron?  Pets.com?  Apple?  GE? 

2.  Depreciation is calculated based on MSRP.  Some cars tend to sell pretty close to MSRP, like most Hondas and Toyotas which you might be lucky to get a few percent off.  Other cars like most American models, can be bought at substantial discount up front, so what seems like incredible depreciation might actually be lower versus what the consumer spent; if a car lost $15k in the first year, but the average selling price of that car is $10k off of sticker, that $15k suddenly means something very different.  And even relatively in demand vehicles can be purchased cheaply in certain circumstances; I bought my 2011 Japanese 4cyl sedan in October of 2011 when the 2012s were already hitting the lot; I got about 15% off sticker purely because I bought a "leftover" model.  Again, my theoretical depreciation will be very different than the actual depreciation I have experienced since I bought at a much lower base. 


It's all case by case.  I've bought used cars and I've bought new cars, every time I am ready to buy I understand the market conditions affecting the specific models I'm looking at and base my decision on what I can actually save, not on trite one-size-fits-all rules of thumb.

Yep, a good explanation of the basic point...so how do we make the use of depreciation into a quasi-science, to maximize the bang for the buck on cars that are reliable/good quality?

Great explanation, Chris22.

I've always bought older used cars, where the market value is easier to know.  You can use Edmunds, Kelly Blue Book, etc., and also Auto Trader classifieds, to get a good idea.

I've also bought cars with some kind of cachet about them, if not actual classics.  BMW 3 Series, old Porsches, 60s Mustangs, etc.  Others might be Subaru Outbacks, Honda Civics, or F150s.   People always want these.  The market is more active, and there are a lot more private party sales.  So it's easier to figure the value, for both buying and selling.  And when it's time to sell, someone will want it.  Repair is easier and cheaper too, with a big aftermarket of both parts and information. 

Also -- cars like this have a higher terminal depreciation, as long as they're still looking good.

[TomTX]

Mustachians promote used over new cars.  Can someone explain why?

We've always bought new cars and drive them 10 plus years and replace.   The reason I buy new-
I've looked to purchase used cars in the past, but don't understand how they are really a cost savings.   If you figure I buy a new van, pay 30,000 for it (we pay cash) drive it for 10 years that figures out to $3000 a year for the car.  If I buy a 4 year old van, pay 20,000  for it, drive it 6 years, that's over 3,000 a year.

Am I missing something?

Well, I'm driving a 2009 I bought 1 year ago for $2200. Using your metrics, if I sell it at 10 years old, I will have gotten 3 years out of it, for ~$750/year.

Except I'm very likely to get at least $1,000 out of it in 2 years (I sold a 21 year old Saturn SL1 with an oil leak, various body dings and no AC in Texas last year for $550) - So, that gets me down to $400/year.

Yes, getting back to luxury AC was a big reason for me to upgrade cars.

[Arktinkerer]

Learning to do many of your own repairs can also be a big part of owning an older car and a huge cost savings.  We have purchased all of our cars used.  For most, I assumed I would be investing a weekend and up to $1000 right off the bat going over the vehicle and replacing fluids, brakes, maybe suspension items, taking a trip to the pick-n-pull for all the little plastic pieces that might have broken, etc.  Yes, I've invested in my tools over the years to be able to do all this.  But now, I've been able to do repairs that would cost over $1000 in labor to replace a $50 part.  I've done an engine swap for <$450 in a weekend.  When I need a brake job its not that big of a deal and I can often replace pads, rotors, wheel bearings (if needed) for less than the shops want for doing just the pads.  I feel confident enough in my understanding of the general condition of my vehicles that I know when to sell them for $1000 because they are on their last legs and buy an inexpensive vehicle with a good understanding of its condition.  Even if you screw up a repair its usually cheaper doing it twice than paying a shop.  I view it as an investment in your most important tool--your brain.  That investment keeps paying benefits for life.

[use2betrix]

My wife and I bought a 99 Camry around 3 years ago with 88k miles for about 5k. It's been a great car for the 40k miles we've had it, but due to the age and maintenance there's a lot of expensive maintenance items coming up that if you don't care to do them yourselves, your gonna be in for some $. We typically live on a gravel driveway in an RV park in the southern heat and sorry but I'm not going to spend my only day off messing with the car.

It's needed the whole, timing belt, water pump, starter, front and rear struts/control arm type stuff, battery, etc etc. it's always ran good and never left us stranded, but we've probably dumped around 4-5k into it over 3 years. Figure $1500/yr is still wayyyy better than a new car. Plus, now that virtually every possible wear and tear item is replaced, we should have a few good years moving forward.

[risky4me]

I drive a 2004 Tacoma I bought new and hope it is the last vehicle I ever buy for myself.

My wife has always loved Subaru's( they are amazing on snow and ice here in Alaska).
She bought her first new car- a 2010 Outback. Great car BUT- instead of removing boot and twisting out the headlight to replace, you have to raise the car, remove front wheel, remove inside panel, and try to reach up and replace the lamp.
this was not something we thought of when purchasing this car- I now cringe every time I hear the ad" Love, It's what ..."
Believe me- Love is not what I feel when I see we have a lamp out.

Warming up the car at -40F it decided that it would automatically lock the doors for my safety(?). Had to drive 20 miles to get a key to open the door. No Love felt that night.

I actually enjoy the Outback, but all the spiffy conveniences on newer cars come with some irritations. I will stick with my Tacoma with manual windows and quick change headlights as long as I can.

[GetItRight]

Learning to do many of your own repairs can also be a big part of owning an older car and a huge cost savings.  We have purchased all of our cars used.  ... I view it as an investment in your most important tool--your brain.  That investment keeps paying benefits for life.

Good point. I don't do it as much anymore but I do repairs for people now and again as a side job, it's easy money. Occasionally I'll rebuild a transmission or do a performance engine build, all the fun of doing it for yourself but it makes money instead of costing money. I also have a skill I can fall back on if I ever find myself out of work, doing favors for family and close friends is money in the bank with them if I'm ever in need, and I can monetize a hobby once I'm RE.

Somewhere along the line I picked up the mentality of not paying someone to do something I can do myself. Eventually I figured out I can do just about anything, it's just a matter of taking the time to learn it the first time around. I can't fathom paying someone for the luxury of maintaining or improving my vehicles and my house so I can sit around and be lazy doing nothing instead.

[Much Fishing to Do]

So I've done both and if you buy a car that lasts and keep them for long enough, I can't say one is an obvious advantage over another.

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

[use2betrix]

Depends on the mdel but I have been seeing huge depreciations in the first year. Like 40% for a Dodge Charger and 37% on a Chrysler 300 I fancied.

My Wife's 2 year old Chevvy Cruze was $12k.. which if I recall was about 50% depreciation in 2 years.

So depreciation is definitely front end loaded. Add to that I have never taken a car to a mechanic and always pay cash.

Savings for us have been substantial.

My 2013 F250 is worth about 75% of what I paid for it brand new, and now it's 4 years old with 75k miles.. that's barely over 6% depreciation per year.

[JLee]

Aren't we forgetting that taking out extremely low interest loans, which is pretty normal on new cars, allows us more freedom to spend/invest elsewhere? I know it's not the same thing as paying off a mortgage since houses don't depreciate like cars, but it is definitely a "perk" i would say.

Wouldn't the same be true for leasing depending on the numbers? If you had enough money to buy a brand new car in cash, couldn't it potentially be better to instead invest that cash and lease the car. That way your investment gains are paying the monthly payments, and you get a new car every few years without worrying about repairs/maintenance?

I have a 1.99% loan on a 2005 vehicle - low interest financing is not limited to new cars.

[GreatLaker]

I got my 03 civic new.

I'm sooooooo sick of it. But it just won't die!

I'm curious how long it will last. Ultimately if you drive a car 15-20 years, then buying new isn't a huge deal. But almost no one keeps cars that long.

I had a 1994 Civic hatchback that I bought new and kept for 18 years. It is now 23 years old and still on the road. When I sold it, it still had the original clutch, rear shocks and rear brake pads. In total I only spent a couple hundred dollars on repairs (as opposed to normal maintenance).

The reason I sold it is the check engine light was always on due to a fault in a speed sensor that would have been very expensive to fix so I would never know if something serious went wrong. I live in a big city and almost all my driving is either stuck in traffic or on freeways, where a breakdown means a big hassle, blocked traffic and enduring honking horns and rude gestures waiting for a tow truck. If not for that I might still be driving it.

I doubt if I will ever have another car that economical. 

[spokey doke]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

[Drifterrider]

Mustachians promote used over new cars.  Can someone explain why?

We've always bought new cars and drive them 10 plus years and replace.   The reason I buy new-
I've looked to purchase used cars in the past, but don't understand how they are really a cost savings.   If you figure I buy a new van, pay 30,000 for it (we pay cash) drive it for 10 years that figures out to $3000 a year for the car.  If I buy a 4 year old van, pay 20,000  for it, drive it 6 years, that's over 3,000 a year.

Am I missing something?

Yes.  What you are missing is that most people don't keep a car that long so they plan to pay less and buy more frequently.

Also, you can buy a car that is only a few years old, still under warranty, for a substantially lesser percentage of new (people love to use the word depreciation).  New cars lose value in large percentages in the first few years, then at lower percentages each year thereafter.  They are usually always worth something (even if it is scrap value and more if operable).

I bought a new car last fall.  I financed it because the interest rate is ZERO.  The new vehicle I bought before that was in 2004.  I still have it.

[Xlar]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

As Chris22 said, this is highly make and model dependent but here is an example.

This is a 2017 Camry LE with 404 miles on it. Fairly common car that lots of people buy. Here is it for sale at $16,995 https://cargur.us/g8rMX or http://www.toyotaofnorthcharlotte.com/new/Toyota/2017-Toyota-Camry-7918d5330a0e0a171812578ad09eb216.htm

New it looks like they cost $21-22k (MRSP ~24k) so 20% off seems like a pretty good discount for a basically new car! https://www.kbb.com/toyota/camry/2017/le/?vehicleid=419859&intent=buy-new&options=

*fingers crossed that the links work*

[use2betrix]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

As Chris22 said, this is highly make and model dependent but here is an example.

This is a 2017 Camry LE with 404 miles on it. Fairly common car that lots of people buy. Here is it for sale at $16,995 https://cargur.us/g8rMX or http://www.toyotaofnorthcharlotte.com/new/Toyota/2017-Toyota-Camry-7918d5330a0e0a171812578ad09eb216.htm

New it looks like they cost $21-22k (MRSP ~24k) so 20% off seems like a pretty good discount for a basically new car! https://www.kbb.com/toyota/camry/2017/le/?vehicleid=419859&intent=buy-new&options=

*fingers crossed that the links work*

Except for some specialty vehicles, most people don't pay MSRP on standard new vehicles.

On my 2013 truck I bought in February of 2013, I paid 90% of MSRP..

[Xlar]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

As Chris22 said, this is highly make and model dependent but here is an example.

This is a 2017 Camry LE with 404 miles on it. Fairly common car that lots of people buy. Here is it for sale at $16,995 https://cargur.us/g8rMX or http://www.toyotaofnorthcharlotte.com/new/Toyota/2017-Toyota-Camry-7918d5330a0e0a171812578ad09eb216.htm

New it looks like they cost $21-22k (MRSP ~24k) so 20% off seems like a pretty good discount for a basically new car! https://www.kbb.com/toyota/camry/2017/le/?vehicleid=419859&intent=buy-new&options=

*fingers crossed that the links work*

Except for some specialty vehicles, most people don't pay MSRP on standard new vehicles.

On my 2013 truck I bought in February of 2013, I paid 90% of MSRP..

Oh, agreed. 20% off is from $21k down to $17k. 17k is only 70% of the original MRSP of $24k.

[Valhalla]

We buy new cars because we've had terrible luck with used cars - we've always been a one car family, and when that one car doesn't run it spreads a lot of inconvenience and expense around. I'm happy with spending a little more to get those quality, trouble free years...

+1.

After my first two experiences with used, and the shady folks doing "repairs" on them, I was done.

For me, there would be a cost (money, time, energy) of learning vehicle repair on top of everything I already do, and I factor that in to overall "expenses."

However, my kid shows a strong leaning toward the mechanical, and that's where he likes putting most of his energy. If/when he becomes a new resource in that area, our family math will look different. By then the car will be 12 years old and ready for his mechanical wisdom, his purchase from me, or a straight-up sale with no concern from me over the annual costs incurred in the meantime on this fantastic life tool. (I can see trading the car out IF we become homeless and need to move into an RV, but short of that no.)

Ironically, the most troublesome car I've had for a while was a brand new car I purchased.  Trouble with GPS system, electronic mirrors, steering, heated seats issues.  It was all covered under warranty, but still, what a hassle!

The least troublesome cars have been used cars I've purchased.  Change oil / tires / battery and keep on ticking.  Just because something is new does not = better.  I won't be buying a new car again, that's for damn sure.

[Valhalla]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

[joonifloofeefloo]

Ironically, the most troublesome car I've had for a while was a brand new car I purchased.  Trouble with GPS system, electronic mirrors, steering, heated seats issues.  It was all covered under warranty, but still, what a hassle!

The least troublesome cars have been used cars I've purchased.  Change oil / tires / battery and keep on ticking.  Just because something is new does not = better.  I won't be buying a new car again, that's for damn sure.

ha! Fair enough :)

After posting my first account, I remembered all the other used vehicles in my life that were always breaking down. Too frustrating for me. Whereas my dad bought ONE new car, and we had that puppy for 23 years -still going strong (though a gas guzzler)- before finally handing it off to another family. That particular mix of experiences probably factored in for me. I was definitely very researchy before buying mine. Went 17 years without while reading, observing, assessing before buying the one I was most confident in.

[spokey doke]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.  But, that same dealership will turn around and charge a significantly higher price to someone shopping for such a car...poof, there goes that depreciation that the buying public has access to.  Your example (and this one) relies on a good chunk of desperation, which not everyone can take advantage of very easily. Exceptions don't prove the rule.

[Chris22]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.

Exactly.  There's a big bid-ask spread between what your car is suddenly worth to a dealer the day after you buy it, and what a person off the street could buy it for.  The idea that because a brand new car is suddenly worth less back to the dealer that a prospective buyer can capture that savings is incorrect. 

[Valhalla]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.  But, that same dealership will turn around and charge a significantly higher price to someone shopping for such a car...poof, there goes that depreciation that the buying public has access to.  Your example (and this one) relies on a good chunk of desperation, which not everyone can take advantage of very easily. Exceptions don't prove the rule.

I think you've totally missed the point.  Who cares how much the car is worth to the dealer?   Everyone here is talking about how much the buyer loses.  You think the buyer can get the dealer to buy the car back at anything close to original purchase price + taxes + fees?  Not a friggin chance.

Not sure why you're talking about how much the dealer would sell it for.  We all know dealers mark up a lot, and smart buyers know how to buy cars so they don't overpay.  Marking up cars at a dealer is also different from what buyers end up paying after negotiations.

So the examples of the original buyer of the new car losing 20% is perfectly legitimate and valid.   You'd have to be a fool to think otherwise.  Would you buy a used new from someone who's had the car for a few weeks / month at anything close to dealership price?? I highly doubt it.

[Valhalla]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.

Exactly.  There's a big bid-ask spread between what your car is suddenly worth to a dealer the day after you buy it, and what a person off the street could buy it for.  The idea that because a brand new car is suddenly worth less back to the dealer that a prospective buyer can capture that savings is incorrect.

again totally false argument. Why are you looking at it from a dealer perspective??  This makes zero sense.

[RWD]

If KBB is to be believed, a 2017 Camry LE with 50 miles in perfect condition is worth $17.7k private party. MSRP is $23k + taxes/fees/options. That's essentially 23% depreciation for driving it off the lot.

[JLee]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.  But, that same dealership will turn around and charge a significantly higher price to someone shopping for such a car...poof, there goes that depreciation that the buying public has access to.  Your example (and this one) relies on a good chunk of desperation, which not everyone can take advantage of very easily. Exceptions don't prove the rule.

I think you've totally missed the point.  Who cares how much the car is worth to the dealer?   Everyone here is talking about how much the buyer loses.  You think the buyer can get the dealer to buy the car back at anything close to original purchase price + taxes + fees?  Not a friggin chance.

Not sure why you're talking about how much the dealer would sell it for.  We all know dealers mark up a lot, and smart buyers know how to buy cars so they don't overpay.  Marking up cars at a dealer is also different from what buyers end up paying after negotiations.

So the examples of the original buyer of the new car losing 20% is perfectly legitimate and valid.   You'd have to be a fool to think otherwise.  Would you buy a used new from someone who's had the car for a few weeks / month at anything close to dealership price?? I highly doubt it.

Some states charge sales tax on dealer sales but not on private party sales, so seeing a nearly new used vehicle for sale close to MSRP is not uncommon, because you're potentially saving thousands in sales tax.

[JLee]

If KBB is to be believed, a 2017 Camry LE with 50 miles in perfect condition is worth $17.7k private party. MSRP is $23k + taxes/fees/options. That's essentially 23% depreciation for driving it off the lot.

Or you could go buy a brand new one from a dealer. Who pays MSRP on a Camry...?

[RWD]

If KBB is to be believed, a 2017 Camry LE with 50 miles in perfect condition is worth $17.7k private party. MSRP is $23k + taxes/fees/options. That's essentially 23% depreciation for driving it off the lot.

Or you could go buy a brand new one from a dealer. Who pays MSRP on a Camry...?

Are you sure those are actual prices? I found the first one ($16,529) on Autotrader and it says this: "This one's available at the low price of $24,029." TrueCar says their average price for a 2017 Camry LE is $19.3k. Assuming a sales tax of 7% (approximately the US median), you're still looking at 14% immediate depreciation.

[Chris22]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.

Exactly.  There's a big bid-ask spread between what your car is suddenly worth to a dealer the day after you buy it, and what a person off the street could buy it for.  The idea that because a brand new car is suddenly worth less back to the dealer that a prospective buyer can capture that savings is incorrect.

again totally false argument. Why are you looking at it from a dealer perspective??  This makes zero sense.

Because where are you going to buy it for that 20% off price?  How many people go out, buy a brand new car, and then a few weeks later want to sell it private party?  Almost no one.  And if you are telling me I shouldn't buy a new car because I will lose 20%, but I can't go buy a used one a few weeks old for 20% off, why should I care? 

[JLee]

If KBB is to be believed, a 2017 Camry LE with 50 miles in perfect condition is worth $17.7k private party. MSRP is $23k + taxes/fees/options. That's essentially 23% depreciation for driving it off the lot.

Or you could go buy a brand new one from a dealer. Who pays MSRP on a Camry...?

Are you sure those are actual prices? I found the first one ($16,529) on Autotrader and it says this: "This one's available at the low price of $24,029." TrueCar says their average price for a 2017 Camry LE is $19.3k. Assuming a sales tax of 7% (approximately the US median), you're still looking at 14% immediate depreciation.

Sales tax is a transaction cost, not depreciation.

[Daughn]

I buy a car for 2.5k drive it for 4 years and sell it for 500-1k that's around 750 per year. The problem with financing for me is that it conditions you to think you can afford a much more expensive car so you end up spending say 10k rather than a 2-5k second hand car.

Sam
[/quote]

I agree 100%. Plus a lot of people feel the need to "keep up with the Jones's" and go way beyond what they can truly afford. In the end all that gets you is a very unimpressive bank account and tons of expensive stuff you don't really need. I recently bought my wife a used 1997 Toyota Camry for $2500 it runs great and she loves it.

[RWD]

If KBB is to be believed, a 2017 Camry LE with 50 miles in perfect condition is worth $17.7k private party. MSRP is $23k + taxes/fees/options. That's essentially 23% depreciation for driving it off the lot.

Or you could go buy a brand new one from a dealer. Who pays MSRP on a Camry...?

Are you sure those are actual prices? I found the first one ($16,529) on Autotrader and it says this: "This one's available at the low price of $24,029." TrueCar says their average price for a 2017 Camry LE is $19.3k. Assuming a sales tax of 7% (approximately the US median), you're still looking at 14% immediate depreciation.

Sales tax is a transaction cost, not depreciation.

I agree, and that's how I accounted for it when I purchased my new car. Though in some states this is a dealership-only transaction cost (no sales tax on private party used).

[DoubleDown]

Like others have mentioned, I'm now a fan of buying used luxury or classic cars. I bought a 9-year-old Jaguar with about 65k miles for $8,000 that would have cost about $65k back when it was originally purchased. It runs great, and the lower costs for insurance, taxes, etc. have been awesome. Used luxury cars come with so many great features standard -- powerful engine, great handling, great safety features, leather interior, nice audio system, power everything, heated everything, all kinds of fancy stuff, and it looks great too if you care about cachet or need the appearance of wealth for your profession. If you want the absolute latest and greatest technology (like internet connectivity, etc.) you can always find affordable after-market stuff.

I figure I'll drive it a few more years, and probably sell it for only $1k or $2k less than I bought it, then I'll turn around and buy another used luxury car that's 5-10 years old that was only ever driven to church on Sundays by a grandma ;-)

[Valhalla]

Because where are you going to buy it for that 20% off price?  How many people go out, buy a brand new car, and then a few weeks later want to sell it private party?  Almost no one.  And if you are telling me I shouldn't buy a new car because I will lose 20%, but I can't go buy a used one a few weeks old for 20% off, why should I care?

WTF do you mean where are you going to buy it for 20% off the new price?  For fuck's sake did you even look at Craigslist like I suggested earlier? 

I was like you, skeptical that anyone would sell brand new cars.  I decided to look just for fun, and was astounded by how many people were selling brand new cars they've had for less than 1 year, on Craigslist.  Many of them had been languishing and were willing to deal, because almost no one looks for these.

I bought a few months old car with less than 6k miles for more than 20% off the new price.  What the fuck are you arguing with me for? Go take a look for yourself.

You should care because depreciation, and why wouldn't you want to save 20% or more on a virtually brand new car, instead of getting raped by a dealer?   I mean, you can buy a brand new widget for full price, or buy a virtually new widget for 20% or more off, you shouldn't care?  WTF??

Ignore everything I said. Go buy your new car at the dealer.  Go feel good about it.  None of us care.  The math doesn't care.  This is everything Mr. Money Mustache is against, but hey, you're only here to feel good about yourself, right?

Even mr. cheapskate Dave Ramsey is against buying brand new cars, unless you're so damn wealthy that it's pocket change. Go against everyone's wisdom for goodness sake. Why are you arguing with me and the rest of the financial gurus?

[Valhalla]

Some states charge sales tax on dealer sales but not on private party sales, so seeing a nearly new used vehicle for sale close to MSRP is not uncommon, because you're potentially saving thousands in sales tax.

Private sales vs dealer prices are drastically different, regardless of sales tax impact.  A motivated private seller will always take less than a dealer, especially if they can get cash in hand and not deal with buyer financing, etc.

[Valhalla]

Sales tax is a transaction cost, not depreciation.

You could call it whatever you want, but it's still a total cost out of pocket. Just because you call it a transaction cost, doesn't mean it costs the buyer any less.   I always count total cost.  And I tend to buy and register my cars in states where there's no sales tax for buying from private party.  I have a LLC set up for my vehicles, based in a certain state where I do some business and move my cars through the LLCs.

I have owned some wonderful cars, all with minimal total cost of ownership because I look for vehicles with motivated sellers and in high demand or limited supply.  Half of the vehicles I've purchased, used for a while, and sold I've actually made money on. 

[Dave1442397]

We bought a 2011 Acura in 2012 with 14k miles from an Acura dealer for 79% of original sale price.

I also bought my 2010 Cadillac in 2011 with 21k miles for 62% of original MSRP (also from an Acura dealer), but I'm sure the car sold for less than MSRP to the original purchaser. I know I got a good deal because I was seeing the same 2010 model for sale two years later at a higher price than I paid.

[spokey doke]

For those that say a car depreciates 25% when you drive it off the lot, please tell me where I can buy a $25k car for $19k with 100 miles on it, I haven't found it.  When I look around at 1-2 year old cars they seem to generally cost close to what they do new minus about what the years life driven out of it would be worth.  It does seem like once you start looking at 4-5 year old cars you can get them for a good deal less...and if they have another 10 years of fairly maintenance free life in them it turns into a great deal (which many cars do now).

That has been my experience too, I'm calling BS...

Looked on Craigslist, and search for used cars that are current year models.  Search for 2017 XXXX.  I bought a few months old car from the original owner, saved myself 20% off the sales price.  He was in a rush to sell due to a personal emergency, and had few takers.  I gave him a low ball offer and he took it. 

Call BS all you want, it's true.

Sure, true in this case, and some others...I'm not saying you can't find examples of the idea, but that it isn't as prevalent as it is often made out to be.

Part of the issue is just what is being compared, and I think if you compare what you would pay at a dealership for a new car, and what that dealership would pay you for that car the next day...THAT price difference is going to be closer to the instant depreciation numbers that are thrown around.  But, that same dealership will turn around and charge a significantly higher price to someone shopping for such a car...poof, there goes that depreciation that the buying public has access to.  Your example (and this one) relies on a good chunk of desperation, which not everyone can take advantage of very easily. Exceptions don't prove the rule.

I think you've totally missed the point.  Who cares how much the car is worth to the dealer?   Everyone here is talking about how much the buyer loses.  You think the buyer can get the dealer to buy the car back at anything close to original purchase price + taxes + fees?  Not a friggin chance.

Not sure why you're talking about how much the dealer would sell it for.  We all know dealers mark up a lot, and smart buyers know how to buy cars so they don't overpay.  Marking up cars at a dealer is also different from what buyers end up paying after negotiations.

So the examples of the original buyer of the new car losing 20% is perfectly legitimate and valid.   You'd have to be a fool to think otherwise.  Would you buy a used new from someone who's had the car for a few weeks / month at anything close to dealership price?? I highly doubt it.

nope...you miss the point...I'm not talking about what people typically do, I'm suggesting where the source of confusion is on depreciation, and the misleading sources of the huge instant depreciation numbers often cited...which more closely match my (unlikely) example, than what people actually see when shopping for used cars (noting there are exceptions that can be found)

[JLee]

Sales tax is a transaction cost, not depreciation.

You could call it whatever you want, but it's still a total cost out of pocket. Just because you call it a transaction cost, doesn't mean it costs the buyer any less.   I always count total cost.  And I tend to buy and register my cars in states where there's no sales tax for buying from private party.  I have a LLC set up for my vehicles, based in a certain state where I do some business and move my cars through the LLCs.

I have owned some wonderful cars, all with minimal total cost of ownership because I look for vehicles with motivated sellers and in high demand or limited supply.  Half of the vehicles I've purchased, used for a while, and sold I've actually made money on.

Yes, but it does not change the value of the vehicle.  If you buy a $50k car and pay $4k in taxes, you didn't lose $4k to "depreciation."

[runewell]

As the above responders  point out, the financial arguments for buying a used car are extremely compelling. I fully agree. However, what is not discussed are the associated increased RISKS with buying a used car. These risks can vary in a number of ways but must be factored into the final calculus. What a new (or nearly) car does is reduce those risks, sometimes bringing them down to ZERO. Some folks are willing to shell out the extra cash (a lot!) to reduce those risks.

Not me, however. I will buy the used but try to minimize risk buy having a qualified mechanic I trust go over the vehicle from bumper to bumper. I also do my research on car model longevity, average yearly maintenance, safety recalls, etc. This doesnt guarantee the used car I buy will pay off mathematically over the decade or longer I use it, but it does increase the probability that it will. Over the last 20 years, the 2 used vehicles I purchased did work out to be great investments. Luck? Maybe. New vehicle owners may just not want to roll those dice.

You also have no idea how reliable a car is going to be when you buy it new, because there are no data points.

If I buy a 10 year old model, a couple minutes of research will reveal all the common pitfalls that new buyers have discovered for me. I can then take that into consideration.

There ARE data points, it's called Consumer Reports magazine.  Redesign model years can have an increased number of problems which usually get sorted out a year or two later.  Last year's Toyota Camry was incredibly reliable, so the next model year won't be rubbish

[runewell]

One thing that bothers me is having so much equity trapped in an depreciating asset. I'm going to be in the market for a "new" car soon and i'm starting to think I'd rather buy 1 used car every 6 years instead of one new car every 12 years.

I don't get this argument, who cares if the asset depreciates.  By that argument you shouldn't buy new groceries or go to any sporting or entertainment event because those don't hold much value or are easily sold.

[Spork]

One thing that bothers me is having so much equity trapped in an depreciating asset. I'm going to be in the market for a "new" car soon and i'm starting to think I'd rather buy 1 used car every 6 years instead of one new car every 12 years.

I don't get this argument, who cares if the asset depreciates.  By that argument you shouldn't buy new groceries or go to any sporting or entertainment event because those don't hold much value or are easily sold.

If you drop your chicken spaghetti on the floor, you're out $10.  100% depreciation.
If you drive your Model S Tesla into a concrete wall, you're out $70,000.

Big difference.

Depreciation matters with cars because it's potentially the largest portion of your annual cost of ownership.  A $5000 used car driven for 10 years has almost negligible costs.  A $70,000 car driven for 10 years has pretty significant costs, even with a reasonable resale value.

[GU]

Sales tax is a transaction cost, not depreciation.

You could call it whatever you want, but it's still a total cost out of pocket. Just because you call it a transaction cost, doesn't mean it costs the buyer any less.   I always count total cost.  And I tend to buy and register my cars in states where there's no sales tax for buying from private party.  I have a LLC set up for my vehicles, based in a certain state where I do some business and move my cars through the LLCs.

I have owned some wonderful cars, all with minimal total cost of ownership because I look for vehicles with motivated sellers and in high demand or limited supply.  Half of the vehicles I've purchased, used for a while, and sold I've actually made money on.

If you register a vehicle in State X which has no sales tax, but you then bring the car into State Y and use it there, you almost certainly owe use tax on the sale in State Y.  If you are ever audited, expect to pay the tax plus penalties and interest. By purposefully doing this to dodge taxes, you may even incur higher than normal penalties.

[Valhalla]

Sales tax is a transaction cost, not depreciation.

You could call it whatever you want, but it's still a total cost out of pocket. Just because you call it a transaction cost, doesn't mean it costs the buyer any less.   I always count total cost.  And I tend to buy and register my cars in states where there's no sales tax for buying from private party.  I have a LLC set up for my vehicles, based in a certain state where I do some business and move my cars through the LLCs.

I have owned some wonderful cars, all with minimal total cost of ownership because I look for vehicles with motivated sellers and in high demand or limited supply.  Half of the vehicles I've purchased, used for a while, and sold I've actually made money on.

If you register a vehicle in State X which has no sales tax, but you then bring the car into State Y and use it there, you almost certainly owe use tax on the sale in State Y.  If you are ever audited, expect to pay the tax plus penalties and interest. By purposefully doing this to dodge taxes, you may even incur higher than normal penalties.

Sure, just like the tons of people being audited for buying stuff online and who have reported "sales tax" voluntarily as well, right? 

Let me know when this becomes a real problem.  The government has a ton higher priority issues to deal with, from people who do some crazy tax avoidance things, than this area.

Look at how many people are doing back-door Roth IRA conversions... technically those people shouldn't be allowed to contribute to a Roth IRA due to official income limits, and yet they continue to move money to Roth IRA via the backdoor.  If those people aren't taking much of a risk, how much risk do you think I'm taking? 

[JLee]

Sales tax is a transaction cost, not depreciation.

You could call it whatever you want, but it's still a total cost out of pocket. Just because you call it a transaction cost, doesn't mean it costs the buyer any less.   I always count total cost.  And I tend to buy and register my cars in states where there's no sales tax for buying from private party.  I have a LLC set up for my vehicles, based in a certain state where I do some business and move my cars through the LLCs.

I have owned some wonderful cars, all with minimal total cost of ownership because I look for vehicles with motivated sellers and in high demand or limited supply.  Half of the vehicles I've purchased, used for a while, and sold I've actually made money on.

If you register a vehicle in State X which has no sales tax, but you then bring the car into State Y and use it there, you almost certainly owe use tax on the sale in State Y.  If you are ever audited, expect to pay the tax plus penalties and interest. By purposefully doing this to dodge taxes, you may even incur higher than normal penalties.

Sales tax is due in the state where the vehicle is registered.