Author Topic: New vs. used auto analysis  (Read 1976 times)

AaronMN

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New vs. used auto analysis
« on: August 03, 2015, 09:18:53 AM »
Good morning,

I am trying to do an analysis of a new versus used auto for my growing family.  If possible, please come into this with an open mind.  I understand that is almost always makes sense to buy used - I, however, still want to run through the financial analysis to make sure that that is correct for my specific needs.  Some background - new auto would be partially financed.  Used would be paid with cash.  All other information should be explanatory.  Please see .PDF for breakdown.

waffle

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Re: New vs. used auto analysis
« Reply #1 on: August 03, 2015, 09:34:22 AM »
So just from your initial analysis its pretty clear that you should go with the ford or the Subaru. I'd get a little more detailed though. Do a multi year breakdown. I'd do at least 5 years. Account for things like tires and depreciation. Look at the total cost of ownership - resale value in 5-10 years.

2Birds1Stone

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Re: New vs. used auto analysis
« Reply #2 on: August 03, 2015, 09:41:07 AM »
An oil change costs ~$20

Why would you change the oil on a car 6x per year?

The insurance also sounds pretty darn high! You can get a pretty accurate estimate from most insurance co's, shop around!

lbmustache

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Re: New vs. used auto analysis
« Reply #3 on: August 03, 2015, 12:00:35 PM »
Good morning,

I am trying to do an analysis of a new versus used auto for my growing family.  If possible, please come into this with an open mind.  I understand that is almost always makes sense to buy used - I, however, still want to run through the financial analysis to make sure that that is correct for my specific needs.  Some background - new auto would be partially financed.  Used would be paid with cash.  All other information should be explanatory.  Please see .PDF for breakdown.

Your numbers are little off because they are missing taxes and depreciation.

Cost of depreciation on Rav4 (first year): $4,121
Taxes on a new car/$25k vs $10k: ???

Let's say tax on the Rav4 is $2k even and $1k even on the older cars.

We are now at $35k for the Rav4, first year.

$700 in financing sounds like a lot, what is your interest rate? IMO only 0% or 0.9% make sense... is this 36 months financed, 48, 60?

KittyCat

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Re: New vs. used auto analysis
« Reply #4 on: August 03, 2015, 12:45:58 PM »
An oil change costs ~$20

Why would you change the oil on a car 6x per year?

The insurance also sounds pretty darn high! You can get a pretty accurate estimate from most insurance co's, shop around!
Lots of newer vehicles use synthetic oil which would make each oil change closer to $40-$50. I get my oil changed whenever my car tells me to, which averages once every 18 months.

Glenstache

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Re: New vs. used auto analysis
« Reply #5 on: August 03, 2015, 12:54:13 PM »
This comparison is a bit apples and oranges. You should compare the new rav4 to one that is used if you want to know if it makes sense to go new or used. beyond that, it is choosing what is the right vehicle unless the options include a vehicle that is not available used (if you wouldn't want it used, you wouldn't want it new either).

For reference: my out the door cost on a 2001 Rav4 was about $6600 including all taxes and registration and I hope to get another 100k out of it.

The general analysis has been done in a number of places and MMM has a whole post on the math behind this. It almost always points to buying used. An additional factor that is not in your table is that buying two used cars in the time you might have one new car incurs an opportunity cost through the higher initial purchase price. That money could have been invested in the interim instead of tied up in an expensive, depreciating asset (no often-used car is an investment).