Author Topic: New vs used car  (Read 13404 times)

purplish

  • Stubble
  • **
  • Posts: 140
New vs used car
« on: March 20, 2015, 06:07:36 AM »
My SO is going to get a car, he wants a new Prius. I suggested getting a used car, for obvious reasons. His view though is that used cars end up needing lots of repairs, based on his past ownership of used cars. Looking back when I've had used cars, they DID seem to have a lot of problems, however they were old crap cars. He also will need a car loan due to the high price. I'm trying to suggest not going this route.

What are your thought of what I could suggest? Any cheaper similar cars to a Prius? He likes that it gets 50+ mpg. But imo the gas savings won't matter if he has a huge payment each month.  Is there a way/place to get a lower interest car loan?  Obviously his decision but he asked my thoughts.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6752
Re: New vs used car
« Reply #1 on: March 20, 2015, 06:47:55 AM »
A 2 or 3yr old car won't need a ton of repairs, but it has depreciated quite a bit already making it a good deal.

Honda Fit is a nice fuel efficient small car that can be had reasonably cheaply.

-- Vik

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: New vs used car
« Reply #2 on: March 20, 2015, 07:13:35 AM »
Quote
Is there a way/place to get a lower interest car loan?

Lots of places around here have 0% financing specials.  You just need great credit.

Philociraptor

  • Pencil Stache
  • ****
  • Posts: 980
  • Age: 30
  • Location: DFW, TX
  • Eat. Sleep. Lift. Repeat.
Re: New vs used car
« Reply #3 on: March 20, 2015, 07:28:47 AM »
Cars depreciate most in the first 5 years. Using consumer reports and other guides, he should be able to find a fuel-efficient, (statistically) reliable 5-year old vehicle for a third the price of a new Prius. Save him from himself!

mschaus

  • Stubble
  • **
  • Posts: 151
  • Location: Chicago
    • blog
Re: New vs used car
« Reply #4 on: March 20, 2015, 07:33:34 AM »
Joshua at Radical Personal Finance just did a podcast on how to think through the buying decision which might be helpful for you:

http://radicalpersonalfinance.com/167-used-cars-vs-new-cars-the-great-debate/

purplish

  • Stubble
  • **
  • Posts: 140
Re: New vs used car
« Reply #5 on: March 20, 2015, 07:34:49 AM »

Honda Fit is a nice fuel efficient small car that can be had reasonably cheaply.

-- Vik

That's what I have!  He's not going to want to get the same car as me though lol, any other suggestions?  What about an older Prius, are they good?  Or still a lot?

Spork

  • Walrus Stache
  • *******
  • Posts: 5753
    • Spork In The Eye
Re: New vs used car
« Reply #6 on: March 20, 2015, 07:36:29 AM »
My experience has not been that used cars take a lot of repairs.  OLD cars may take a lot of repairs, and if you are buying an old used car, the math says: it might need some repairs.

My last 2 were 3 and 5 years old when I bought them.  I've not done anything but maintenance on the 3 yr old.  The 5 yr old had an issue where it wouldn't idle at all that required a $5 gasket (plus regular maintenance stuff.)

slugline

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Location: Houston, TX USA
Re: New vs used car
« Reply #7 on: March 20, 2015, 07:42:17 AM »
What is the motivation for buying a Prius, specifically? If it's "to save money," has he done any rough math to compare the numbers versus a conventional non-hybrid small car of the same age? If your SO's goal is logging a lot of city miles as a Uber/Lyft driver, the gas savings could be substantial. Otherwise, be wary. . . .

young canadian

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Ontario, Canada
Re: New vs used car
« Reply #8 on: March 20, 2015, 07:47:21 AM »
In my experience reading the forum, you have just opened a whirlwind of fury asking this question LoL!

Perhaps take a look at the following MMM article? I think it should answer lots of your questions and give you a great way of addressing some of the points your SO is making with respect to maintenance, etc. in support of purchasing new vs. used.

http://www.mrmoneymustache.com/2012/03/19/top-10-cars-for-smart-people/

In my experience, one of the biggest things people fail to actually wrap their heads around properly is the idea of non-cash expenses, like depreciation. Most people (probably not most readers of this forum, however, ha!) think of their expenses in terms of their cash-flow statement. While important, the income statement is a much better way of looking at expenses! Try working out how much that new Prius will actually cost you to own for the first year, 2-years, 5-years, INCLUDING depreciation costs, then break that down monthly and see what your SO thinks about that number. He'll likely shutter at the site and never talk about buying new again! A quick way of doing this would be to find the sticker price of a one year old, 2-year old, 5-year old Prius, and comparing it with its current value on KBB (and don't forget about taxes!)

Best of luck!


« Last Edit: March 20, 2015, 07:50:02 AM by young canadian »

purplish

  • Stubble
  • **
  • Posts: 140
Re: New vs used car
« Reply #9 on: March 20, 2015, 08:24:14 AM »
Thanks!  This is all very helpful.  I'll have to show him that article.  And the motivation... I guess to save money?  Which doesn't really make sense to me.  But he's thinking since it's a "cheaper Prius" that it's a good deal.  Personally I've never had a car loan though, so to me the interest each month would be canceling out the gas savings.  Then again I have no idea what interest rates tend to be like for loans.  I'm just of the mindset that it's better in general to get things less expensive, to then have the extra money, rather than feeling like you're just scraping by each month cause of a bunch of loans and bills.

young canadian

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Ontario, Canada
Re: New vs used car
« Reply #10 on: March 20, 2015, 08:35:47 AM »
And the motivation... I guess to save money?

Unfortunately, I cannot think of a single scenario where buying new will save you money, on any time horizon, with any vehicle. :(

YTProphet

  • Stubble
  • **
  • Posts: 204
Re: New vs used car
« Reply #11 on: March 20, 2015, 08:39:25 AM »
Thanks!  This is all very helpful.  I'll have to show him that article.  And the motivation... I guess to save money?  Which doesn't really make sense to me.  But he's thinking since it's a "cheaper Prius" that it's a good deal.  Personally I've never had a car loan though, so to me the interest each month would be canceling out the gas savings.  Then again I have no idea what interest rates tend to be like for loans.  I'm just of the mindset that it's better in general to get things less expensive, to then have the extra money, rather than feeling like you're just scraping by each month cause of a bunch of loans and bills.

I'm normally in the "buy used" camp, but you can get a brand new, bare-bones Honda Fit around here for around $16,000. I don't see why anyone would buy a used Fit with 50,000 miles on it to save a few thousand, when there's some expensive maintenance on the horizon at that point (new brakes, rotors, and tires at around 70k to 80k miles normally). That maintenance will run you a thousand or two and drastically eat in to whatever money you saved by buying used. For a car that cheap, it's worth it to me to just buy it brand new.

Spork

  • Walrus Stache
  • *******
  • Posts: 5753
    • Spork In The Eye
Re: New vs used car
« Reply #12 on: March 20, 2015, 08:41:51 AM »
In my experience, one of the biggest things people fail to actually wrap their heads around properly is the idea of non-cash expenses, like depreciation. Most people (probably not most readers of this forum, however, ha!) think of their expenses in terms of their cash-flow statement. While important, the income statement is a much better way of looking at expenses! Try working out how much that new Prius will actually cost you to own for the first year, 2-years, 5-years, INCLUDING depreciation costs, then break that down monthly and see what your SO thinks about that number. He'll likely shutter at the site and never talk about buying new again! A quick way of doing this would be to find the sticker price of a one year old, 2-year old, 5-year old Prius, and comparing it with its current value on KBB (and don't forget about taxes!)


This is a good point.  We actually log a once-a-year expense for our vehicles as depreciation to try to forecast costs for future cars.  Every December I take an expense that is (current value - kbb/edmunds average) for each car.

Spork

  • Walrus Stache
  • *******
  • Posts: 5753
    • Spork In The Eye
Re: New vs used car
« Reply #13 on: March 20, 2015, 08:43:58 AM »
Thanks!  This is all very helpful.  I'll have to show him that article.  And the motivation... I guess to save money?  Which doesn't really make sense to me.  But he's thinking since it's a "cheaper Prius" that it's a good deal.  Personally I've never had a car loan though, so to me the interest each month would be canceling out the gas savings.  Then again I have no idea what interest rates tend to be like for loans.  I'm just of the mindset that it's better in general to get things less expensive, to then have the extra money, rather than feeling like you're just scraping by each month cause of a bunch of loans and bills.

I'm normally in the "buy used" camp, but you can get a brand new, bare-bones Honda Fit around here for around $16,000. I don't see why anyone would buy a used Fit with 50,000 miles on it to save a few thousand, when there's some expensive maintenance on the horizon at that point (new brakes, rotors, and tires at around 70k to 80k miles normally). That maintenance will run you a thousand or two and drastically eat in to whatever money you saved by buying used. For a car that cheap, it's worth it to me to just buy it brand new.

I looked at a really nice not-bare-bones used Fit a few years ago that they were asking $8.5k for (before negotiation).   I think that's enough savings to pay for brakes/rotors/tires.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6752
Re: New vs used car
« Reply #14 on: March 20, 2015, 08:44:47 AM »

Honda Fit is a nice fuel efficient small car that can be had reasonably cheaply.

-- Vik

That's what I have!  He's not going to want to get the same car as me though lol, any other suggestions?  What about an older Prius, are they good?  Or still a lot?

If you need two cars having the same models is quite handy. You only have to stock one type of oil/filters, windshield wipers, etc.. for doing your maintenance at home. Once you learn how to fix a specific problem in one car it makes dealing with the 2nd car really easy. If you need any special tools to work on your car they'll work on both, etc...

He can get a different colour or some funky seat covers if he needs to be special....maybe he can get a black FIT and pull the wheel covers for a murdered out FIT pimp look? ;)

-- Vik

slugline

  • Handlebar Stache
  • *****
  • Posts: 1171
  • Location: Houston, TX USA
Re: New vs used car
« Reply #15 on: March 20, 2015, 08:50:24 AM »
I don't see why anyone would buy a used Fit with 50,000 miles on it to save a few thousand, when there's some expensive maintenance on the horizon at that point (new brakes, rotors, and tires at around 70k to 80k miles normally). That maintenance will run you a thousand or two and drastically eat in to whatever money you saved by buying used. For a car that cheap, it's worth it to me to just buy it brand new.

Everyone's mileage may vary. It would take me more than three years to get a 50K car to 80K. And I'm surprised that brakes and tires on a small car would run into a four-figure job nowadays.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5620
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: New vs used car
« Reply #16 on: March 20, 2015, 08:58:32 AM »
I don't see why anyone would buy a used Fit with 50,000 miles on it to save a few thousand, when there's some expensive maintenance on the horizon at that point (new brakes, rotors, and tires at around 70k to 80k miles normally). That maintenance will run you a thousand or two and drastically eat in to whatever money you saved by buying used. For a car that cheap, it's worth it to me to just buy it brand new.

Everyone's mileage may vary. It would take me more than three years to get a 50K car to 80K. And I'm surprised that brakes and tires on a small car would run into a four-figure job nowadays.

Agreed, 4 tires can be had for $400-500 mounted and balanced. Brakes are ~$100. Replacing rotors is stupid in most cases and something deemed "necc" by shops to take your $$.

tweezers

  • Stubble
  • **
  • Posts: 189
Re: New vs used car
« Reply #17 on: March 20, 2015, 09:02:17 AM »

Honda Fit is a nice fuel efficient small car that can be had reasonably cheaply.

-- Vik

He can get a different colour or some funky seat covers if he needs to be special....maybe he can get a black FIT and pull the wheel covers for a murdered out FIT pimp look? ;)

-- Vik

Just a quick note that we were told putting seat cover on the Fit messes up the effectiveness of side impact airbags, which are apparently in the seats on  the 2008 model. 

Regarding the OP: I've always had older cars (our other car is a 1993 Civic), and while it takes longer to find ones in good shape, they're out there.  I'm not mechanically-inclined so anything I've considered buying I've taken to a mechanic first.  For $30-60 they'll look at it and identify any problems....so worth it!  I've never paid more than $4200 for a used car....the Civic was $1800 when I bought it in 2003, and we've only just had major repairs in the past 2 years (~$2000 total).  Your SO can do waaaay better than a new prius.

olivia

  • Pencil Stache
  • ****
  • Posts: 770
  • From Consumerism to Minimalism
Re: New vs used car
« Reply #18 on: March 20, 2015, 09:02:47 AM »
Depending on the year/mileage of used Priuses, the price difference for new vs. used is not that huge.  I wanted to buy a used Prius last year around this time and the majority of the ones I was looking at (newer, with low mileage) were around $16-17k.  I found a dealership selling new Priuses for $22k and 0% financing, so I went with the new car-the warranty, 0% financing and peace of mind were worth the price difference to me. 

If I had found a killer deal on a used Prius I probably would have gotten it, but they just weren't out there.  Part of the issue was that I was going from having no car to needing a car (I relocated for a job and needed a car in the new location) so I didn't have a ton of time to look.  If you're patient you may be able to find a good deal on a used Prius.

Spork

  • Walrus Stache
  • *******
  • Posts: 5753
    • Spork In The Eye
Re: New vs used car
« Reply #19 on: March 20, 2015, 09:03:07 AM »
I don't see why anyone would buy a used Fit with 50,000 miles on it to save a few thousand, when there's some expensive maintenance on the horizon at that point (new brakes, rotors, and tires at around 70k to 80k miles normally). That maintenance will run you a thousand or two and drastically eat in to whatever money you saved by buying used. For a car that cheap, it's worth it to me to just buy it brand new.

Everyone's mileage may vary. It would take me more than three years to get a 50K car to 80K. And I'm surprised that brakes and tires on a small car would run into a four-figure job nowadays.

Agreed, 4 tires can be had for $400-500 mounted and balanced. Brakes are ~$100. Replacing rotors is stupid in most cases and something deemed "necc" by shops to take your $$.

Even if you have warped rotors and need to replace them... They're not that expensive.  I think I paid $30 each for new Ford rotors last time I bought them.

young canadian

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Ontario, Canada
Re: New vs used car
« Reply #20 on: March 20, 2015, 09:06:54 AM »
Depending on the year/mileage of used Priuses, the price difference for new vs. used is not that huge.  I wanted to buy a used Prius last year around this time and the majority of the ones I was looking at (newer, with low mileage) were around $16-17k.  I found a dealership selling new Priuses for $22k and 0% financing, so I went with the new car-the warranty, 0% financing and peace of mind were worth the price difference to me. 

If I had found a killer deal on a used Prius I probably would have gotten it, but they just weren't out there.  Part of the issue was that I was going from having no car to needing a car (I relocated for a job and needed a car in the new location) so I didn't have a ton of time to look.  If you're patient you may be able to find a good deal on a used Prius.

Ahhhh... you've used the one argument that people looking to manipulate their spreadsheet to sway it in favour (Canadian, eh) of buying new... "peace of mind". If my vehicle-costing spreadsheet were more user friendly, I'd post it up. I think your "peace of mind" is costing you a lot more than you think. (I totally don't want to come across rude or arrogant or "my-way or the highway" (no pun) at all so I'm sorry if I am :( ).

HopefulMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 73
Re: New vs used car
« Reply #21 on: March 20, 2015, 09:09:35 AM »
Depending on the year/mileage of used Priuses, the price difference for new vs. used is not that huge.  I wanted to buy a used Prius last year around this time and the majority of the ones I was looking at (newer, with low mileage) were around $16-17k.  I found a dealership selling new Priuses for $22k and 0% financing, so I went with the new car-the warranty, 0% financing and peace of mind were worth the price difference to me. 

If I had found a killer deal on a used Prius I probably would have gotten it, but they just weren't out there.  Part of the issue was that I was going from having no car to needing a car (I relocated for a job and needed a car in the new location) so I didn't have a ton of time to look.  If you're patient you may be able to find a good deal on a used Prius.

My experience in watching the market for a Prius earlier this year was similar to this... one could save a few thousand by tacking on 3-5 years and 20K-50K miles, but it's up to you if that's worth giving up the warranty, financing, time to repairs, etc. Of course, there's also greater tax implications, etc, from buying the more expensive car. The flipside of this all is that, it seems to me, a Prius will have a pretty good resale value in 3-5 years, regardless of the normal story about cars depreciating quickly.

purplish

  • Stubble
  • **
  • Posts: 140
Re: New vs used car
« Reply #22 on: March 20, 2015, 09:23:23 AM »
This might sound dumb (again, never had a car loan) does zero percent financing mean no interest at all??  If it does I never heard of that.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: New vs used car
« Reply #23 on: March 20, 2015, 09:38:22 AM »
This might sound dumb (again, never had a car loan) does zero percent financing mean no interest at all??  If it does I never heard of that.

Yes, no interest.

They are common on specials when they are trying to get rid of old stock. You do have to have good credit to get them.
« Last Edit: March 20, 2015, 09:40:50 AM by iowajes »

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6752
Re: New vs used car
« Reply #24 on: March 20, 2015, 09:39:38 AM »
This might sound dumb (again, never had a car loan) does zero percent financing mean no interest at all??  If it does I never heard of that.

It means no interest for a certain period if you make the planned payments on time.

There can be fees to setup the loan, close off the loan and if you miss a payment there can be penalty fees.

You have to read the fine print to be sure of the true cost of the loan even at 0%.

-- Vik

Spork

  • Walrus Stache
  • *******
  • Posts: 5753
    • Spork In The Eye
Re: New vs used car
« Reply #25 on: March 20, 2015, 09:43:00 AM »
This might sound dumb (again, never had a car loan) does zero percent financing mean no interest at all??  If it does I never heard of that.

While it does, it may or may not mean the cash price is the same as the financed price.   And it could go either way... you might actually get a car cheaper if you finance it for 0% (due to dealer kickbacks).  Or ... they could "give you a special deal with 0% financing by jacking up the cash price."   It goes both ways.  Don't try to make sense of it.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: New vs used car
« Reply #26 on: March 20, 2015, 09:51:48 AM »
It is best to not mention how you plan to pay until your final price is set.

The days of cash discounts are over, and that can often cause your price to be HIGHER.  As can using private financing, or dealer financing- you know, depending on the exact moment in time.

Set the price, then discuss how to pay.


(I recently noticed dealers will not discuss a trade in value anymore. Rather they negotiate the purchase price "with trade in"- so it isn't negotiate purchase price, subtract trade in. I imagine the end result is screwing the consumer.)

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #27 on: March 20, 2015, 09:54:16 AM »
Depending on the year/mileage of used Priuses, the price difference for new vs. used is not that huge.  I wanted to buy a used Prius last year around this time and the majority of the ones I was looking at (newer, with low mileage) were around $16-17k.  I found a dealership selling new Priuses for $22k and 0% financing, so I went with the new car-the warranty, 0% financing and peace of mind were worth the price difference to me. 

If I had found a killer deal on a used Prius I probably would have gotten it, but they just weren't out there.  Part of the issue was that I was going from having no car to needing a car (I relocated for a job and needed a car in the new location) so I didn't have a ton of time to look.  If you're patient you may be able to find a good deal on a used Prius.

So the difference could be as much as $6,000? I don't know about you, but that's real money to me. A 30% discount for a few years older and maybe 20-30k miles? Sure I'd take that! Priuses hold their value well, but a few years can give a decent discount, even with low miles.

Warranty I don't care about anyway. Most repairs that's worth getting covered (vs a few hundred at an independent dealer) happens long after it expire anyway. And I've heard some require every oil change to be at a dealer? And you'd have to go to the dealer to have things fixed which is annoying. Especially when talking japanse cars. Now if it was a buick or chevy then maybe..

terran

  • Handlebar Stache
  • *****
  • Posts: 2127
Re: New vs used car
« Reply #28 on: March 20, 2015, 10:02:08 AM »
Just to play devils advocate in the new vs used car debate I did a little comparison. My assumptions were that someone would keep the car for 10 or 15 years of total life driving the car 10,000 miles per year and pay 8% sales tax (the rate in my part of NY). I looked up the value of a 2015 Prius Two on True Car, a 2013 Prius Two in very good condition with 20,000 miles in a private sale on Kelley Blue Book, and a 2012 Prius Two in very good condition with 30,000 miles in a private sale also on KBB. Here are the results:

Year201520132012
Cost$21,866.00$16,577.00$15,464.00
Cost w/ tax$23,615.28$17,903.16$16,701.12
Per year (10 yr)$2,361.53$2,237.90$2,385.87
Per year (15 yr)$1,574.35$1,377.17$1,391.76
10 yr vs new0$123.63-$24.35
15 yr vs new0$197.19$182.59

So the most you'll save is $200 per year if you keep the 2 year old car for a total life of 15 years. You'll actually spend more on the 3 year old car if you keep it for 10 years of total life.

You can obviously make arguments that if you keep it longer, get a used car in worse condition, find a better deal from a more desperate private seller, invest the upfront savings, etc that the used car advantage will become larger, but the point is once you accept that a car has some useful life that has already been used up when you buy used, the difference isn't all that much.

The question then becomes whether the extra warranty time, new car smell, knowing the full history, getting to tell people you bought a new car -- whatever you like about the idea of buying a new car is worth the (slight) premium.

(I see that people have made similar points while I've been working on this, so hopefully the numbers make this a valuable addition to the conversation).
« Last Edit: March 20, 2015, 10:09:48 AM by terran »

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #29 on: March 20, 2015, 10:28:25 AM »
You're assuming that a prius only has 100,000 miles in it? That's where this falls apart for me. You'd need to know how much repairs cost at 100k miles vs 130k miles. Which my guess is way less than the $7k difference upfront cost. Or to be exact; take that savings and invest it and then you'd have $14,000 extra to spend on repairs once your car is 10 years old! (And you can of course subtract the difference in resell value which would favor your new car slightly)

No matter the math I can't see how buying a new car is ever a good idea. I frankly don't understand why anyone does it.

young canadian

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Ontario, Canada
Re: New vs used car
« Reply #30 on: March 20, 2015, 10:34:02 AM »
You're assuming that a prius only has 100,000 miles in it? That's where this falls apart for me. You'd need to know how much repairs cost at 100k miles vs 130k miles. Which my guess is way less than the $7k difference upfront cost. Or to be exact; take that savings and invest it and then you'd have $14,000 extra to spend on repairs once your car is 10 years old! (And you can of course subtract the difference in resell value which would favor your new car slightly)

No matter the math I can't see how buying a new car is ever a good idea. I frankly don't understand why anyone does it.

x100

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: New vs used car
« Reply #31 on: March 20, 2015, 10:37:34 AM »
Agreed...I don't see how buying a new car is ever a good idea. But the question is how fundamentally 'bad' an idea purchasing a new car is under select scenarios.

Case in point: We don't know the OP's intended holding period for the potential new car, or the annual estimated intended mileage. If, for example, the annual estimated mileage is at or below 10K per year and s/he purchases a car, like a Prius, with one of the most rock solid reliability records, then a 20+ year holding period could be reasonable. And by the year 2035, I wonder whether the price difference between new and used pretty much becomes a wash.

Forcus

  • Pencil Stache
  • ****
  • Posts: 714
  • Location: Central Illinois
Re: New vs used car
« Reply #32 on: March 20, 2015, 10:41:51 AM »
Depending on the year/mileage of used Priuses, the price difference for new vs. used is not that huge.  I wanted to buy a used Prius last year around this time and the majority of the ones I was looking at (newer, with low mileage) were around $16-17k.  I found a dealership selling new Priuses for $22k and 0% financing, so I went with the new car-the warranty, 0% financing and peace of mind were worth the price difference to me. 

If I had found a killer deal on a used Prius I probably would have gotten it, but they just weren't out there.  Part of the issue was that I was going from having no car to needing a car (I relocated for a job and needed a car in the new location) so I didn't have a ton of time to look.  If you're patient you may be able to find a good deal on a used Prius.

My experience in watching the market for a Prius earlier this year was similar to this... one could save a few thousand by tacking on 3-5 years and 20K-50K miles, but it's up to you if that's worth giving up the warranty, financing, time to repairs, etc. Of course, there's also greater tax implications, etc, from buying the more expensive car. The flipside of this all is that, it seems to me, a Prius will have a pretty good resale value in 3-5 years, regardless of the normal story about cars depreciating quickly.

I would say that buying a new car doesn't make sense as a general rule but the above are reasons why I would lean toward new if I had strictly defined my needs and my needs required something newer (high miles traveled per year, no alternative transportation in case of breakdowns, no car repair knowledge, little time to apply the knowledge I had, etc. etc.). I believe the cheapest new Prius starts around $19k and I think it's essentially a Yaris hybrid. Just glancing at couple year old prices for this area the values are very near the new price for cars with 30k miles on them. I encountered this as well when looking for a newer Focus / Fiesta, used prices very near new prices (now as far as actual transaction costs, tax, etc. does put a little distance between new vs. used).

Also around here a great many of the 1-2 year old vehicles for sale are previous rental cars (Call them program cars, exec vehicles, it is what it is). In general this is not a turn-off but having rented a few cars some of them are not treated well (smoking, etc.). If the spread between new and a used rental car was $2-4k I'd go new every time. Anti-MMM, maybe, but that is me and I am willing to pay for this distinction.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #33 on: March 20, 2015, 10:58:57 AM »
Well yeah, if you have to have a car that's no more than 1-2 years old! But why is that necessary? I checked cars.com in my area. Tons of prius for sale! For $15k I can get a 2011 with 30k miles, or a 2013 with 40k miles. That's $7k less than new! Over 1/3 cheaper. How is the new one worth that extra cost? What is really the difference in reliability on those 30k miles?

And; unless you drive a ton in city traffic I'm not sure a prius is worth it anyway over a similar size car with ~40 mpg.

terran

  • Handlebar Stache
  • *****
  • Posts: 2127
Re: New vs used car
« Reply #34 on: March 20, 2015, 11:02:05 AM »
You're assuming that a prius only has 100,000 miles in it? That's where this falls apart for me. You'd need to know how much repairs cost at 100k miles vs 130k miles. Which my guess is way less than the $7k difference upfront cost.

This isn't true. You're pretending that you will keep the car for the same amount of time if you buy it new or used. I'm saying you keep both cars until they are 10 years old and have 100k miles, not until you have kept them 10 yeas and put on 100k miles. This way, assuming they have had similar use and maintenance in early life to what you would have provided, you can compare apples to apples in that they will require the same repairs, and will sell for the same amounts at the end of the time you own own them. So they both have a brakes replaced at 80k, they both are sold for whatever they would normally be worth at 10 years old and 100k miles, etc. One you keep for 10 years and drive 100k miles, the other you drive for 7 years and 70k miles.

If you're saying you'll keep the 3-year old car for 10 years and drive it 100k miles (for 130k total) then you should keep the new car 13 years and drive it 130k miles. If you make these assumptions the 3 year old car costs $42 more per year.

If you want to take it to an extreme and keep the cars for 30 years and 300k of total life then the annualized cost difference $147.78 for the 2 year old car and $20.84 for the 3 year old car.


Or to be exact; take that savings and invest it and then you'd have $14,000 extra to spend on repairs once your car is 10 years old! (And you can of course subtract the difference in resell value which would favor your new car slightly)

This is a fair point as I said. If you invest the cost difference the used car advantage becomes larger in the exact same way that any larger purchase becomes even more costly than a less expensive purchase.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #35 on: March 20, 2015, 11:13:36 AM »
Fair enough. But isn't that assuming a linear relationship between car age/milage and depreciation and running costs?  Which is not the case. My point is that a 0 year old car and 3 year old car has a big difference in cost, but the difference between a 10 and 13 year old car is not that much (in repair, resell etc). By skipping the initial years you save a lot, but don't loose much at the end. At least that's my theory. 

Forcus

  • Pencil Stache
  • ****
  • Posts: 714
  • Location: Central Illinois
Re: New vs used car
« Reply #36 on: March 20, 2015, 11:14:50 AM »
Well yeah, if you have to have a car that's no more than 1-2 years old! But why is that necessary? I checked cars.com in my area. Tons of prius for sale! For $15k I can get a 2011 with 30k miles, or a 2013 with 40k miles. That's $7k less than new! Over 1/3 cheaper. How is the new one worth that extra cost? What is really the difference in reliability on those 30k miles?

And; unless you drive a ton in city traffic I'm not sure a prius is worth it anyway over a similar size car with ~40 mpg.

If you go older, not many cars other than hybrids have high mpg ratings (you Metro guys can hush). It is mostly a newer development. For myself, I wouldn't buy a Prius or Insight so that leaves mostly standard gas vehicles. I really like the 1.0 liter Fiestas but they didn't come out until 2014. I also like the Cruze Eco's but I think those didn't come out until 2012 (Maybe 2011). I don't think there were any mid-sized sedans before around 2010 that were rated more than 35 MPG HWY now take your pick. I'm not saying one has to buy something newer, my vehicles are 2009, 2005, 2002, 1987, and 1974. But I can see situations where it can make more sense. Then again for the OP's guy it might just be an expensive want.

As far as Prius' goes it might be a regional thing as well. They are here but not in abundance so I think it keeps the prices somewhat high and most people aren't willing to travel to find one. Making a more compelling (but not winning) argument locally for new or newer.


Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #37 on: March 20, 2015, 11:26:04 AM »
Well yeah, if you have to have a car that's no more than 1-2 years old! But why is that necessary? I checked cars.com in my area. Tons of prius for sale! For $15k I can get a 2011 with 30k miles, or a 2013 with 40k miles. That's $7k less than new! Over 1/3 cheaper. How is the new one worth that extra cost? What is really the difference in reliability on those 30k miles?

And; unless you drive a ton in city traffic I'm not sure a prius is worth it anyway over a similar size car with ~40 mpg.

If you go older, not many cars other than hybrids have high mpg ratings (you Metro guys can hush). It is mostly a newer development. For myself, I wouldn't buy a Prius or Insight so that leaves mostly standard gas vehicles. I really like the 1.0 liter Fiestas but they didn't come out until 2014. I also like the Cruze Eco's but I think those didn't come out until 2012 (Maybe 2011). I don't think there were any mid-sized sedans before around 2010 that were rated more than 35 MPG HWY now take your pick. I'm not saying one has to buy something newer, my vehicles are 2009, 2005, 2002, 1987, and 1974. But I can see situations where it can make more sense. Then again for the OP's guy it might just be an expensive want.

As far as Prius' goes it might be a regional thing as well. They are here but not in abundance so I think it keeps the prices somewhat high and most people aren't willing to travel to find one. Making a more compelling (but not winning) argument locally for new or newer.

That should certainly be part of the calculation; better milage of newer model vs increased price. Can go either way. I really like the new Fit with it's 41 mpg hwy, but will probably wait till it's 3-4 years old (of course then the newest one is even better).

The prius is getting a redesign this year or next I believe, and the last one was in 2010 so anything between there would be similar. I would not go older than 2009 for this reason, or wait till this one is cheaper.

ender

  • Magnum Stache
  • ******
  • Posts: 4864
Re: New vs used car
« Reply #38 on: March 20, 2015, 11:34:31 AM »
Agreed...I don't see how buying a new car is ever a good idea. But the question is how fundamentally 'bad' an idea purchasing a new car is under select scenarios.

There have been quite a few really good tax incentives over the past few years for new hybrids.

Though that's a very limited situation :)

cjottawa

  • Stubble
  • **
  • Posts: 152
Re: New vs used car
« Reply #39 on: March 20, 2015, 11:37:43 AM »

Honda Fit is a nice fuel efficient small car that can be had reasonably cheaply.

-- Vik

That's what I have!  He's not going to want to get the same car as me though lol, any other suggestions?  What about an older Prius, are they good?  Or still a lot?

Hyundai Elantra or Mazda 3 would be good bets. The Elantra is a bargain compared to the Fit, larger, almost as good on fuel and comparable for maintenance. Hyundai includes "everything"... power everything, ABS, etc. The Fit base models comes pretty stripped down. You get more for your money with Hyundai.

Let someone else eat the depreciation and buy a late model used. It won't need any more maintenance than a brand new one, if you buy something on the "Lemon Aid Guide to Used Cars" "recommended" or "above average" list.

Seriously, buying new is for chumps. The extra THOUSANDS (or TENS of thousands) you spend on new would buy so much maintenance you could completely replace an engine, transmission, and repaint the whole car before being underwater. BUY USED.

Oh, the only American manufacturer I'd consider is Ford. Under their CEO - former CEO of Boeing - they've turned themselves right around.

The other Detroit manufacturers seem to be up to their old shenanigans; bad value, poor quality control, lack of innovation. While I like some of their offerings (the Chevy Sonic w/6-speed dual-clutch auto...ridiculously good fuel economy) I don't trust them as far as I can throw them. I'd expect a lot of maintenance bills down the road with any American car except Ford.
« Last Edit: March 20, 2015, 11:45:11 AM by cjottawa »

terran

  • Handlebar Stache
  • *****
  • Posts: 2127
Re: New vs used car
« Reply #40 on: March 20, 2015, 12:45:25 PM »
Ok, here's my attempt at accounting for the time value of money (ie investing the savings). I did this using the assumptions above in addition to the following:
> sell the 10 year old car for $5841 (a 2005 prius in very good condition with 100k miles on kbb)
> $250 transaction costs (this should ignore taxes since that's already accounted for) -- total guess. Higher favors new, lower favors used
> $1000 in repairs at year 8 years / 80k miles (for tires, brakes, timing belt, whatever). This lumps smaller ongoing things (oil changes) in. It should include any repair costs you would expect within the first 100k miles. Higher favors new, lower favors used.
> 5% rate of return (intended to be inflation adjusted). Higher favors used, lower favors new.
> At the end of the cycle (year 40) we will sell the 10 year old car without buying another -- this way we're ready to restart the cycle on equal footing to where we started (buying a new or used car)

Based on these assumptions the cost advantage buying 2-year old used cars instead of new for 40 years and keeping them until they are 10 years old would be $48,834 in todays dollars. I picked 40 years because you end back at the beginning of the cycle with either option at the same point.

How does that sound?

Definitely seems to favor used.

dunhamjr

  • Stubble
  • **
  • Posts: 242
  • Age: 44
  • Location: Kent, WA (Seattle)
  • mustachian in training est. July 14
Re: New vs used car
« Reply #41 on: March 20, 2015, 12:59:53 PM »
A 2 or 3yr old car won't need a ton of repairs, but it has depreciated quite a bit already making it a good deal.
-- Vik

^this.

you have to consider that if you buy new you are losing a ton of money in depreciation.
even buying 1-3 yr old cars saves you a lot of money.  whatever you save... turn that into a monthly payment.

say you save $10k.  payment term of 5 yrs.  aka $167/mo.

does he really think that buying a 1-3yr old car will cost them $167/mo in 'repairs' and maintenance? 

buying a 10-15yr old car, maybe but still not likely year in and year out.
buying an essentially new, but used car... very unlikely unless you just get a terrible lemon.

southern granny

  • Pencil Stache
  • ****
  • Posts: 534
Re: New vs used car
« Reply #42 on: March 20, 2015, 01:03:27 PM »
We usually try to buy a used car that still has some factory warranty left.  At least then I know that it wasn't traded in because it had problems.  That has worked out well for us.

dunhamjr

  • Stubble
  • **
  • Posts: 242
  • Age: 44
  • Location: Kent, WA (Seattle)
  • mustachian in training est. July 14
Re: New vs used car
« Reply #43 on: March 20, 2015, 01:05:53 PM »
We usually try to buy a used car that still has some factory warranty left.  At least then I know that it wasn't traded in because it had problems.  That has worked out well for us.

make sense.

helps to remember that many 1-3 yr old cars are very likely lease returns. 
or were owned people who just had to have the newest toys on the block.

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1671
Re: New vs used car
« Reply #44 on: March 20, 2015, 02:34:47 PM »
Priuses are a "weird animal".  They do not follow the classical depreciation curve.  If I were planning on putting significant miles on one and holding at least 5 years with near 0% financing, I would not have a problem with buying a new one.

Most other cars, not so.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: New vs used car
« Reply #45 on: March 20, 2015, 08:57:43 PM »

Priuses are a "weird animal".  They do not follow the classical depreciation curve.  If I were planning on putting significant miles on one and holding at least 5 years with near 0% financing, I would not have a problem with buying a new one.

Most other cars, not so.

Well stated, particularly true in Prius love zones like the SF Bay Area.

olivia

  • Pencil Stache
  • ****
  • Posts: 770
  • From Consumerism to Minimalism
Re: New vs used car
« Reply #46 on: March 25, 2015, 01:30:23 PM »

Priuses are a "weird animal".  They do not follow the classical depreciation curve.  If I were planning on putting significant miles on one and holding at least 5 years with near 0% financing, I would not have a problem with buying a new one.

Most other cars, not so.

Well stated, particularly true in Prius love zones like the SF Bay Area.

Ditto. 

I was actually moving from 1 east coast city to another and looked in both cities as well as all locations in between the cities.  (I'm the obsessive researcher type, so I looked HARD.)  For a few thousand dollars difference it didn't make sense to me to not go new.  0% financing was the icing on the cake-I didn't even put any money down.  I transferred money to do so and then realized it didn't make sense to do so when I could throw the $ in an index fund instead. 

I'll also keep this car as long as possible-I'm not a car person and previously had a '97 Camry for years (even put a new engine in it because it made more sense to do that based on the numbers) until it was totaled by a drunk driver.  So no regrets here, still loving my new Prius!

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2223
  • Location: EastCoast
Re: New vs used car
« Reply #47 on: March 28, 2015, 02:44:13 PM »
Can someone please show me the ad for one of these priuses with 30-50k miles that cost over $20k? I.e close to the cost of a new one.

I see tons of them on the road here, but by just going a few years old I could save $5-7k, at least. Have a hard time imagining any car with <10% depreciation per year, in any mwrket

RWD

  • Magnum Stache
  • ******
  • Posts: 3501
  • Location: Mississippi
Re: New vs used car
« Reply #48 on: March 28, 2015, 03:06:00 PM »
Can someone please show me the ad for one of these priuses with 30-50k miles that cost over $20k? I.e close to the cost of a new one.

I see tons of them on the road here, but by just going a few years old I could save $5-7k, at least. Have a hard time imagining any car with <10% depreciation per year, in any mwrket

2012 with 79k miles for $21k:
http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?listingId=396084482

2011 with 60k miles for $20.6k:
http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?listingId=391257955

2010 with 53k miles for $21.9k:
http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?listingId=321896892

There were a ton more too, I just grabbed a handful. That said, the average list price of a 2010 - 2012 Prius on AutoTrader right now is $16.6k.

RWD

  • Magnum Stache
  • ******
  • Posts: 3501
  • Location: Mississippi
Re: New vs used car
« Reply #49 on: March 28, 2015, 03:15:31 PM »
Have a hard time imagining any car with <10% depreciation per year, in any mwrket

Anecdotally, I purchased my Subaru BRZ two years ago for $26.7k (plus tax) and KBB now puts the value at $19.7k which works out to about 14% depreciation per year (though I imagine the first year was much worse than the second). Now I'm depressed about how much I've lost so far on that purchase...