Author Topic: What's the sweet spot in used car prices?  (Read 44617 times)

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
What's the sweet spot in used car prices?
« on: February 26, 2014, 11:30:11 AM »
I'm not currently on the market myself, but just something I have been contemplating. Buying cheap used cars is one of the pillars of mustachianism (if you must have a car at all), so what is the "sweet spot" in terms of age and mileage where you are getting the maximum discount?

For example: 1 year and 10,000 miles will make a huge difference in price when compared to a new car.

But for a car 15 years old with 150,000 miles, in another year and another 10k miles the price will probably be virtually unchanged.

So what is the sweet spot in age/mileage where you are getting the best bargain and still getting a reliable car?

My hunch would be a just-out-of-warranty car, 3-5 years old with about 50-75k miles. with a reliable make/model you should be able to get 10 years and 100k miles out of them from that point on.
What do you guys think?

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #1 on: February 26, 2014, 12:41:56 PM »
It depends on how long you intend to keep it and what your intended usage will be.

Personally, I feel the sweet spot is at around 75,000 miles.  At this point the car has taken a bulk of its depreciation hit, but isn't so high up there that the savings on depreciation doesn't get eaten up with inevitable repairs.  That's the point where the depreciation curve goes from being a cliff to being more of a gentle slope, and the price per mile from a depreciation standpoint becomes significantly more favorable.

That said, if you plan on keeping the vehicle for as much as 200,000 or 300,000 miles, it can be cost effective to purchase it brand new.
« Last Edit: February 26, 2014, 12:45:55 PM by Mykl »

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: What's the sweet spot in used car prices?
« Reply #2 on: February 26, 2014, 12:50:41 PM »

That said, if you plan on keeping the vehicle for as much as 200,000 or 300,000 miles, it can be cost effective to purchase it brand new.

Is this simply because you can make sure it's maintained properly?  Or something else? 

I definitely value my decade old car, which I bout new, more than what I could sell it for.

Self-employed-swami

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Canada
Re: What's the sweet spot in used car prices?
« Reply #3 on: February 26, 2014, 12:57:49 PM »
It depends on how long you intend to keep it and what your intended usage will be.

That said, if you plan on keeping the vehicle for as much as 200,000 or 300,000 miles, it can be cost effective to purchase it brand new.

No.  It is never cost-effective to buy a brand new car, that is an emotional (or otherwise influenced) decision, not a mathematical one.

http://www.mrmoneymustache.com/2011/11/28/new-cars-and-auto-financing-stupid-or-sensible/

Quote
When you buy a brand new car, you’re buying up to 200,000 miles of automotive inventory. Even if you are one of the extremists who drives 15,000 miles per year, that is still over 13 years of inventory – meaning that although you are paying for all of those future miles when you buy the car and paying additional carrying costs for them constantly for the 13 years of ownership, you don’t get to actually use up those last miles until the year 2024.

So let’s imagine two 15,000-mile-per-year drivers:

Consumer Carl buys a new 2012 Toyota Corolla S with a 5-speed manual transmission, for $20,000 including taxes and fees and registration. This is one of the best new-car values on the market when measured on a cost-per-mile basis when you factor in its long term reliability and fuel efficiency. He drives it for 13 years, traveling 200,000 trouble-free miles.

After 13.3 years, tying up that $20 grand in a car cost Carl about $38,269, compared to putting the money into paying off part of a 5% mortgage or making another investment that pays a 5% annual return.

Mustache Mary buys a 2006 Toyota Corolla with 90,000 miles on it for $9,000 including taxes. She can only get 110,000 miles out of this car which takes 7.3 years to use up. At that point, she buys a second used Corolla to cover the remaining 90k miles. To make our numbers clean, let’s say she buys a slightly older one such that it only has 90,000 miles of life remaining. This costs her $7,500.

She has to go without that $9000 for the entire 13.3 years, which could have earned her $17,221 if she had used it to pay off her mortgage.
Then she spends an additional $7,500 which is missing for the final 6 years at a cost of $10,050.

So at the end of 13 years, Consumer Carl spent $38,269 on Corolla ownership, while Mustache Mary spent $27,271. She saves about $11,000 even while doing the same amount of driving, and she will repeat that windfall every 13 years or so by continuing this strategy.

Even while driving a nearly-equivalent car for exactly equivalent mileage, Mary saves 30% on the cost of driving simply by buying her Corollas used instead of new.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #4 on: February 26, 2014, 12:59:45 PM »
It depends on how long you intend to keep it and what your intended usage will be.

Personally, I feel the sweet spot is at around 75,000 miles.  At this point the car has taken a bulk of its depreciation hit, but isn't so high up there that the savings on depreciation doesn't get eaten up with inevitable repairs.  That's the point where the depreciation curve goes from being a cliff to being more of a gentle slope, and the price per mile from a depreciation standpoint becomes significantly more favorable.

That said, if you plan on keeping the vehicle for as much as 200,000 or 300,000 miles, it can be cost effective to purchase it brand new.

I don't know if it's ever cost effective to buy a car brand new. no matter how long you are going to keep it. You can get a car 1 year old with less than 10K miles for a significant discount off brand new prices. And that is for a car that is mechanically good as new, and still under warranty.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #5 on: February 26, 2014, 01:13:31 PM »
Is this simply because you can make sure it's maintained properly?  Or something else? 

I definitely value my decade old car, which I bout new, more than what I could sell it for.

Yes, because you can ensure that it will be maintained properly.  Generally speaking, people don't treat their cars very well, and there is a certain level of risk that you assume when you purchase a used one.  In effect, you are gambling a bit. 

We'll use my recent purchase as an example.  I bought a 2007 Toyota Camry with 93,000 miles on it for $12,000.  I could have purchased a brand new Camry for $18,000.  Up front I saved that $6000, but most of that $6000 goes up in smoke if the transmission eats itself.  Now I'm in it for nearly the same as if I had purchased a new one, and I'm still not covered against further repairs like I would have been had I chosen the new one.

No.  It is never cost-effective to buy a brand new car, that is an emotional (or otherwise influenced) decision, not a mathematical one.

http://www.mrmoneymustache.com/2011/11/28/new-cars-and-auto-financing-stupid-or-sensible/

Except in the real world, cars, even Toyota Corollas, break, and they do so in expensive ways and your risk of that happening increases with the age and milage of the car.  If you're not factoring in that risk to your calculations, you're doing it wrong. 

Not only that, but many cars need extra money thrown at them for maintenance items, particularly at around 100,000 miles.  So add a couple thousand on top for that 90,000 car for potential brake work, tires, transmission servicing, timing belts, basic tune-up stuff like spark plugs, coolant drain and fill, etc. and you're THAT much closer to what it would have cost to purchase the brand new car that needing none of that, nor has the risks associated with neglectful and abusive prior owners.

I'm not saying that you're wrong, I'm saying it depends.  To completely write off new car ownership as an option to consider without running the numbers based on your unique situation is folly.

I don't know if it's ever cost effective to buy a car brand new. no matter how long you are going to keep it. You can get a car 1 year old with less than 10K miles for a significant discount off brand new prices. And that is for a car that is mechanically good as new, and still under warranty.

Why didn't the original owner want to keep that car?  Was there something wrong with it or did the car simply not meet the person's needs?  These are questions you have to explore, but yeah you could save a ton of money that way, but you have to be on your toes to be sure you're not getting someone else's mess.
« Last Edit: February 26, 2014, 01:23:10 PM by Mykl »

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: What's the sweet spot in used car prices?
« Reply #6 on: February 26, 2014, 01:22:03 PM »
There's also this http://en.m.wikipedia.org/wiki/The_Market_for_Lemons

And the fact that in the last few years, the new car premium was severely reduced (not sure if it still is - this was during the aftermath of financial crisis where used cars were in higher demand and manufacturers were hurting for sales)

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #7 on: February 26, 2014, 01:25:13 PM »

Why didn't the original owner want to keep that car?  Was there something wrong with it or did the car simply not meet the person's needs?  These are questions you have to explore, but yeah you could save a ton of money that way, but you have to be on your toes to be sure you're not getting someone else's mess.

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty.

Getting a brand new car can be a logical choice if you are knowingly doing so just to have piece of mind, but realize that you are paying for that little extra bit of security, so I wouldn't really call it "cost effective".

Realize also that even a barely used car liek i mentioned would be $2K to 3K cheaper than new, so it would take a serious mechanical issue to surface, AFTER warranty expire, just to break even with buying a new car.

You just have to realize there is price a premium attached to getting a car totally new that has nothing to do with the mechanical superiority compared to a barely used car.

MrMoneyPinch

  • 5 O'Clock Shadow
  • *
  • Posts: 82
  • Location: Soviet Canuckistan
Re: What's the sweet spot in used car prices?
« Reply #8 on: February 26, 2014, 01:26:40 PM »

I don't know if it's ever cost effective to buy a car brand new. no matter how long you are going to keep it. You can get a car 1 year old with less than 10K miles for a significant discount off brand new prices. And that is for a car that is mechanically good as new, and still under warranty.
You are presuming that the used car has had a good driver and good maintenance.  This is especially dubious if a car has not stayed long with it's last owner.  A 1yo car was probably a rental or a company car, and was probably abused.
From my experience, a 20k$ used car is more difficult to buy than an under-5k$ car since on the former the profit made from hiding defects or the real mileage is much greater.  At the upper end, I encountered rebuilt cars with forged titles and curbstoners.  At the lower end, most sellers just want to sell it and be done.  I bought good items in both cases, but the process was much easier in the lower bracket; due diligence and inspections won the day.
Buying new, despite what you hear about dealerships, is a point-and-pay affair.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #9 on: February 26, 2014, 01:28:30 PM »
There's also this http://en.m.wikipedia.org/wiki/The_Market_for_Lemons

And the fact that in the last few years, the new car premium was severely reduced (not sure if it still is - this was during the aftermath of financial crisis where used cars were in higher demand and manufacturers were hurting for sales)

You can get a brand new Altima, Camry, or Fusion for $18,000, right now.  The going rate for a used Camry or Altima with ~75,000 miles is in the area of $12,000 to $13,000.  You can get a better deal on a used Fusion if you like the car.

Right now used car prices seem to be somewhat inflated, which makes buying a brand new one a potentially better long term option.  It hasn't always been this way, but if you can see far enough ahead to know that you're going to keep the car for a very long time, a brand new $18,000 Camry or Altima could be a great value for your money.

The only reason my wife and I didn't go this route was because we didn't have the cash to cover it like we did for the car we chose, and we weren't certain that the car was going to meet our needs for more than five years...  so we rolled the dice on the used one.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #10 on: February 26, 2014, 01:34:52 PM »

Why didn't the original owner want to keep that car?  Was there something wrong with it or did the car simply not meet the person's needs?  These are questions you have to explore, but yeah you could save a ton of money that way, but you have to be on your toes to be sure you're not getting someone else's mess.

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty.

Getting a brand new car can be a logical choice if you are knowingly doing so just to have piece of mind, but realize that you are paying for that little extra bit of security, so I wouldn't really call it "cost effective".

Realize also that even a barely used car liek i mentioned would be $2K to 3K cheaper than new, so it would take a serious mechanical issue to surface, AFTER warranty expire, just to break even with buying a new car.

You just have to realize there is price a premium attached to getting a car totally new that has nothing to do with the mechanical superiority compared to a barely used car.

Based on the research I've done over the last month that isn't 100% true.  Used car dealers are counting on people to believe that a used car is always the cheaper option and that they aren't even considering new.  I encountered a great number of used cars being sold for within $1000 of the same exact car being sold brand new.

I almost made this mistake until I discovered how much certain manufacturers are cutting the price of their vehicles to move them off the lot.

For me, if the Camry I purchased needs a few thousand in repairs over the next two years who do you think is going to be kicking himself for not buying a new one instead?  You can call that simple peace of mind if you want, but I don't think that's doing it justice.  At the end of a day a used car with a certain amount spent on maintenance and repairs costs the same as a new one with a warranty.

MrMoneyPinch

  • 5 O'Clock Shadow
  • *
  • Posts: 82
  • Location: Soviet Canuckistan
Re: What's the sweet spot in used car prices?
« Reply #11 on: February 26, 2014, 01:37:03 PM »

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty. compared to a barely used car.
That is a common misconception.  Abuse or neglect is NOT covered.   If that tranny has been damaged by racing, or that oil change has not been done, the only guarantee is that you are left holding the bag.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #12 on: February 26, 2014, 01:39:21 PM »

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty. compared to a barely used car.
That is a common misconception.  Abuse or neglect is NOT covered.   If that tranny has been damaged by racing, or that oil change has not been done, the only guarantee is that you are left holding the bag.

....and heaven help you if you buy a sporty car with a turbocharger that got flagged by a dealer for having had the ECU reprogrammed by a tuner.

If something breaks, your wallet is toast.

Self-employed-swami

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Canada
Re: What's the sweet spot in used car prices?
« Reply #13 on: February 26, 2014, 01:43:49 PM »
If you are concerned about the vehicle's maintenance record, ask the seller for it.  Or, take the VIN, and head to the dealership, and have them pull the records.

There are many people who look after their vehicles, and you can generally tell who those people are, by talking with them.  I've only ever once bought a used vehicle off a car lot, the rest of the time (and we've owned 9 vehicles in the last 8 years) have been private sales.  No sales tax, and you can negotiate.

Self-employed-swami

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Canada
Re: What's the sweet spot in used car prices?
« Reply #14 on: February 26, 2014, 01:44:24 PM »

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty. compared to a barely used car.
That is a common misconception.  Abuse or neglect is NOT covered.   If that tranny has been damaged by racing, or that oil change has not been done, the only guarantee is that you are left holding the bag.

....and heaven help you if you buy a sporty car with a turbocharger that got flagged by a dealer for having had the ECU reprogrammed by a tuner.

If something breaks, your wallet is toast.

And why would you buy such a ridiculous car in the first place?

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #15 on: February 26, 2014, 01:48:03 PM »
And why would you buy such a ridiculous car in the first place?

That's a pretty aggressive judgement to be making.  What makes that ridiculous and why should anyone care what you think?

You realize that many basic cars are coming with smaller engines and turbochargers these days, right?
« Last Edit: February 26, 2014, 01:56:24 PM by Mykl »

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: What's the sweet spot in used car prices?
« Reply #16 on: February 26, 2014, 01:59:46 PM »
I don't think there is any 'sweet spot' that applies to all makes.  I certainly wouldn't hesitate over buying a Honda or Toyota with over 200K miles.  (I own one of each: the Honda has about 175K, the Toyota something over 225K.)  I'd hesitate over a Ford or Chevy with 100K, and wouldn't have a Chrysler fresh from the factory.

As for the random major expense (like the pretty much imaginary $6K transmission), buy cars cheap enough that you can simply replace the whole car for less than the price of a major repair.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #17 on: February 26, 2014, 02:02:21 PM »
(like the pretty much imaginary $6K transmission)

Yeah, transmission replacements tend to not cost that much.  I'm not sure where you got that from.

(if you're going to snipe at me at least do so based on what I actually said)
« Last Edit: February 26, 2014, 02:05:35 PM by Mykl »

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: What's the sweet spot in used car prices?
« Reply #18 on: February 26, 2014, 02:02:50 PM »

It would have to be a mess that would take more than 2 years and 23,000 miles to surface, otherwise the car I mentioned is still under warranty. compared to a barely used car.
That is a common misconception.  Abuse or neglect is NOT covered.   If that tranny has been damaged by racing, or that oil change has not been done, the only guarantee is that you are left holding the bag.

I'm also guessing the kind of person who buys a new car every 1-2 years isn't treating the drivetrain well.  But that's just, like, my opinon man.

I'd probably pay a small premium for a new car vs. 1-2 years.  But I'd also be OK going out further on the depreciation curve.  It hasn't really come up, since I'm hoping my car will last a long time.

edit:
buy cars cheap enough that you can simply replace the whole car for less than the price of a major repair.

As an aside, my biggest regret with my current car is that I got the V6 without knowing anything about car maintenance.  If I had more information, I would have realized that it's very expensive replacing the timing belt, which has to be done every 7 years or risk ruining the engine.  On the other hand, the 4 cylinder model has a timing chain with (I gather) no maintenance.
« Last Edit: February 26, 2014, 02:06:02 PM by dragoncar »

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: What's the sweet spot in used car prices?
« Reply #19 on: February 26, 2014, 02:20:00 PM »
(like the pretty much imaginary $6K transmission)

Yeah, transmission replacements tend to not cost that much.  I'm not sure where you got that from.

(if you're going to snipe at me at least do so based on what I actually said)

I got the $6K figure from your earlier post.
I bought a 2007 Toyota Camry with 93,000 miles on it for $12,000.  I could have purchased a brand new Camry for $18,000.  Up front I saved that $6000, but most of that $6000 goes up in smoke if the transmission eats itself.

As to why I say that price is pretty much imaginary...  Well, you could take it to the dealership, and I'm sure they'd be happy to charge you close to that for a brand-new replacement.  But as Mustachians, we fix things like that by going to the salvage yard, where you can find a transmission for $500 or so http://car-part.com/cgi-bin/search.cgi  Then we either do the work ourselves, or get a friend to do it for much less than dealer shop rates.  So instead of nearly $6000, you're looking at something like $1000 or so.


Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: What's the sweet spot in used car prices?
« Reply #20 on: February 26, 2014, 02:27:56 PM »
I think the sweet spot is just over 100K miles on a well built model.  People still irrationally believe that 100K is some magical cutoff where things start going wrong.  But cars today are made much better than in the past and 100K should only be 1/2 to 1/3 of the life of a car.

Self-employed-swami

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Canada
Re: What's the sweet spot in used car prices?
« Reply #21 on: February 26, 2014, 02:30:39 PM »
And why would you buy such a ridiculous car in the first place?

That's a pretty aggressive judgement to be making.  What makes that ridiculous and why should anyone care what you think?

You realize that many basic cars are coming with smaller engines and turbochargers these days, right?

It is judgemental, so shoot me :)

This is MMM, not a car enthusiasts forum.  None of our vehicles are newer than 2005.  Both are high milage, the most recent was bought last year, with more than 200,000km on it.  It should see another 200,000km, with nothing more than minor repairs and regular maintenance.

The other car we bought 2 years ago, is also a 2005 (Yaris) and it had no freaking engine in it, and had to be towed off a driveway.  It was $1400, and had more than 290,000km on it.  It clearly hadn't been well maintained (no oil changes in the last 100,000km, which instigated the melting and fusing of a lot of the engine components).  Oh, and then we had a *disaster* with it this summer, when it needed a new $68 water pump! The horror!
« Last Edit: February 26, 2014, 02:36:59 PM by Self-employed-swami »

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #22 on: February 26, 2014, 02:33:47 PM »
(like the pretty much imaginary $6K transmission)

Yeah, transmission replacements tend to not cost that much.  I'm not sure where you got that from.

(if you're going to snipe at me at least do so based on what I actually said)

I got the $6K figure from your earlier post.

I bought a 2007 Toyota Camry with 93,000 miles on it for $12,000.  I could have purchased a brand new Camry for $18,000.  Up front I saved that $6000, but most of that $6000 goes up in smoke if the transmission eats itself.

So I guess the words surrounding that number you chose to focus on are completely meaningless to you?  Specifically the word "most" that suggests that I don't know the exact number, but that it could certainly be around or greater than half of that?

As to why I say that price is pretty much imaginary...  Well, you could take it to the dealership, and I'm sure they'd be happy to charge you close to that for a brand-new replacement.  But as Mustachians, we fix things like that by going to the salvage yard, where you can find a transmission for $500 or so http://car-part.com/cgi-bin/search.cgi  Then we either do the work ourselves, or get a friend to do it for much less than dealer shop rates.  So instead of nearly $6000, you're looking at something like $1000 or so.

Right so lets say that I'm deployed to the other side of the world, a very real possibility in my line of work.  Do you think my wife is going to go to a pick-a-part yard to pluck a transmission to install in the garage herself?

Do you not see how you can't just apply your situation to everybody else?

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #23 on: February 26, 2014, 02:40:13 PM »
So apparently my idea that buying a new car might be a better option is a very unpopular one.

The core of my point is that you have to analyze your own situation and make the best decision on what your specific needs are.  To flat out write off an idea without even asking the question is about as bad as refusing to purchasing anything other than a brand new car.

prodarwin

  • Bristles
  • ***
  • Posts: 299
Re: What's the sweet spot in used car prices?
« Reply #24 on: February 26, 2014, 02:40:20 PM »
I think the sweet spot is just over 100K miles on a well built model.  People still irrationally believe that 100K is some magical cutoff where things start going wrong.  But cars today are made much better than in the past and 100K should only be 1/2 to 1/3 of the life of a car.

This.  I don't see how the "sweet spot" could be anything less... unless you are talking about an older model that has depreciated simply due to age.

There's also this http://en.m.wikipedia.org/wiki/The_Market_for_Lemons

And the fact that in the last few years, the new car premium was severely reduced (not sure if it still is - this was during the aftermath of financial crisis where used cars were in higher demand and manufacturers were hurting for sales)

You can get a brand new Altima, Camry, or Fusion for $18,000, right now.  The going rate for a used Camry or Altima with ~75,000 miles is in the area of $12,000 to $13,000.  You can get a better deal on a used Fusion if you like the car.

Right now used car prices seem to be somewhat inflated, which makes buying a brand new one a potentially better long term option.  It hasn't always been this way, but if you can see far enough ahead to know that you're going to keep the car for a very long time, a brand new $18,000 Camry or Altima could be a great value for your money.

The only reason my wife and I didn't go this route was because we didn't have the cash to cover it like we did for the car we chose, and we weren't certain that the car was going to meet our needs for more than five years...  so we rolled the dice on the used one.

You can buy a ~100k mile '02 Camry/Alitma/Whatever for $4-6K.  Drive it for 100k+ miles and sell it for like $3K.  Rinse and repeat.

I paid $3000 for my car several years ago.  It had 100k miles on it.  Now its a little over 140k, and should be worth around $2500.  I'll sell it at 200k* for like $1800.

*I'll probably get bored of it and sell it before then, but I like to think that maybe one day I'll keep a car longer than 2 years.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #25 on: February 26, 2014, 02:48:13 PM »
You can buy a ~100k mile '02 Camry/Alitma/Whatever for $4-6K.  Drive it for 100k+ miles and sell it for like $3K.  Rinse and repeat.

I paid $3000 for my car several years ago.  It had 100k miles on it.  Now its a little over 140k, and should be worth around $2500.  I'll sell it at 200k* for like $1800.

*I'll probably get bored of it and sell it before then, but I like to think that maybe one day I'll keep a car longer than 2 years.

Finding a 12 year old car whose owners only put an average of 7142 miles per year on is not as easy as it sounds.  They exist, but they're certainly not common.

Self-employed-swami

  • Handlebar Stache
  • *****
  • Posts: 1090
  • Location: Canada
Re: What's the sweet spot in used car prices?
« Reply #26 on: February 26, 2014, 03:07:05 PM »
You can buy a ~100k mile '02 Camry/Alitma/Whatever for $4-6K.  Drive it for 100k+ miles and sell it for like $3K.  Rinse and repeat.

I paid $3000 for my car several years ago.  It had 100k miles on it.  Now its a little over 140k, and should be worth around $2500.  I'll sell it at 200k* for like $1800.

*I'll probably get bored of it and sell it before then, but I like to think that maybe one day I'll keep a car longer than 2 years.

Finding a 12 year old car whose owners only put an average of 7142 miles per year on is not as easy as it sounds.  They exist, but they're certainly not common.

Indeed, those cars are rare, but 18 out of 20 Toyotas sold in the last 10 years, are still on the road.  Personally, I prefer a higher milage vehicle myself, in the $2-3000 range.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 9923
  • Registered member
Re: What's the sweet spot in used car prices?
« Reply #27 on: February 26, 2014, 03:26:25 PM »
My 2003 has around 70k miles. 

Not sure if I should be proud of that or ashamed.  Probably a little of both.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #28 on: February 26, 2014, 03:41:36 PM »
Indeed, those cars are rare, but 18 out of 20 Toyotas sold in the last 10 years, are still on the road.  Personally, I prefer a higher milage vehicle myself, in the $2-3000 range.

« Last Edit: March 31, 2015, 08:29:31 PM by Mykl »

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: What's the sweet spot in used car prices?
« Reply #29 on: February 26, 2014, 05:21:16 PM »
So I guess the words surrounding that number you chose to focus on are completely meaningless to you?  Specifically the word "most" that suggests that I don't know the exact number, but that it could certainly be around or greater than half of that?

Sure.  So I guess that you can't understand that I've implicitly included that context, but don't choose to spend time & space carefully duplicating every word you type.  The point is that while 'most of' might be $5k, or even $4K, it certainly isn't the more reasonable $1-2K.

Quote
Right so lets say that I'm deployed to the other side of the world, a very real possibility in my line of work.  Do you think my wife is going to go to a pick-a-part yard to pluck a transmission to install in the garage herself?

I don't see why not.  Is this not the 21st century, in which women ought to be as capable of any task as a man?  (And vice versa, of course: if your wife was away, could you figure out how to cook & clean for yourself?)  It's also fairly easy to find independent mechanics who'd do the job of getting & installing a used transmission for far less than a dealer.

So apparently my idea that buying a new car might be a better option is a very unpopular one.

It's not that it's unpopular, it's simply that when you do a logical analysis, that's the way thn numbers work out :-)

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #30 on: February 26, 2014, 05:58:29 PM »
Sure.  So I guess that you can't understand that I've implicitly included that context, but don't choose to spend time & space carefully duplicating every word you type.  The point is that while 'most of' might be $5k, or even $4K, it certainly isn't the more reasonable $1-2K.

You were very specific in what you chose to focus on.  Given that it was a small snippet in a large post, it gives others the impression that that's what I mean.  If you don't like being called out for being deceptive, don't be deceptive.

I don't see why not.  Is this not the 21st century, in which women ought to be as capable of any task as a man?  (And vice versa, of course: if your wife was away, could you figure out how to cook & clean for yourself?)  It's also fairly easy to find independent mechanics who'd do the job of getting & installing a used transmission for far less than a dealer.

I DO see why not, because asking a woman who is dealing with the stress of living without the support of her spouse for months to a year to go to a junkyard to pull a very large and heavy part out of a car and have her figure out how to install it to save a couple thousand dollars is beyond selfish.  Have you ever pulled a transmission out of a car before?  I'm going to say with near certainty that you have not, because it is a fair bit more involved than making waffles or mopping the floor.  That you would actually suggest this as an option makes me believe that you're less interested in exchanging ideas and more interested in winning an argument.

Yes, it's more likely that in that event I would do some research and direct her to an independent shop to get the work completed.  But that still means that it's likely to cost anywhere between $2000 to $4000.

It's not that it's unpopular, it's simply that when you do a logical analysis, that's the way thn numbers work out :-)

I wish my world were so black and white, it sure would be a lot easier to live in.

lsl129

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: What's the sweet spot in used car prices?
« Reply #31 on: February 26, 2014, 06:03:51 PM »
Nice to find someone who also believes new cars are a logical and cost effective choice. Especially with factory rebates, you can buy a new car with a warranty for LESS than the same model car several years old. Plus you get the benefit of knowing the history. In the few instances we have looked for a car, we considered both used and new, but couldn't find a cost benefit to buying used.

Undecided

  • Handlebar Stache
  • *****
  • Posts: 1237
Re: What's the sweet spot in used car prices?
« Reply #32 on: February 26, 2014, 06:17:03 PM »
Nice to find someone who also believes new cars are a logical and cost effective choice. Especially with factory rebates, you can buy a new car with a warranty for LESS than the same model car several years old. Plus you get the benefit of knowing the history. In the few instances we have looked for a car, we considered both used and new, but couldn't find a cost benefit to buying used.

The premium for a new car vs. an almost new used car (at least the ones I've considered) doesn't seem so significant, and although I would expect that on average buying an older used car would work out to be less expensive, (1) I'm likely only buying 1 every decade or so, so the "averages" aren't the only thing I consider---there's also the desire to minimize the risk of having a much worse than average outcome---and (2) continuous reliability is important to me, and generally seems likelier with a newer car. That I could resurrect my dormant mechanical skills and fix many problems on a used car, or even pay someone to fix any problem at lower total cost than having a newer car, doesn't fully address the fact that any number of scenarios involving car trouble can present immediate headaches that I'd like to avoid, even if they can ultimately be cured. We have one car, and two small kids, and minimizing the odds of getting a call from my wife about car trouble when she's out with them has some value to me.

skinnyninja

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Kalamazoo, MI
Re: What's the sweet spot in used car prices?
« Reply #33 on: February 26, 2014, 06:50:50 PM »
My 2 cents:  used cars are no longer a great deal over buying new.  The prices are ridiculous.

prodarwin

  • Bristles
  • ***
  • Posts: 299
Re: What's the sweet spot in used car prices?
« Reply #34 on: February 26, 2014, 06:59:52 PM »
Yes, it's more likely that in that event I would do some research and direct her to an independent shop to get the work completed.  But that still means that it's likely to cost anywhere between $2000 to $4000.

Ok, lets say the chances of your used car having a catastrophic transmission failure are astronomically high, and every used car will need one between 100k and 200k miles.

$5000 used car + say $2000 in average repairs over the next 100k miles, a massive $3000 transmission repair bill and finally the car is resold for $3000 = $7000/100k miles

A new $20000 car sold for $3000 @ 200k which miraculously needs no repairs whatsoever would still cost $8500/100k miles, NOT including the time-value of the additional $15000 outlay at the beginning.

We can all agree that the above is an extremely optimistic view of new cars, yet they still fail to compete with used cars financially.

Undecided

  • Handlebar Stache
  • *****
  • Posts: 1237
Re: What's the sweet spot in used car prices?
« Reply #35 on: February 26, 2014, 07:13:54 PM »
Yes, it's more likely that in that event I would do some research and direct her to an independent shop to get the work completed.  But that still means that it's likely to cost anywhere between $2000 to $4000.

Ok, lets say the chances of your used car having a catastrophic transmission failure are astronomically high, and every used car will need one between 100k and 200k miles.

$5000 used car + say $2000 in average repairs over the next 100k miles, a massive $3000 transmission repair bill and finally the car is resold for $3000 = $7000/100k miles

A new $20000 car sold for $3000 @ 200k which miraculously needs no repairs whatsoever would still cost $8500/100k miles, NOT including the time-value of the additional $15000 outlay at the beginning.

We can all agree that the above is an extremely optimistic view of new cars, yet they still fail to compete with used cars financially.

You can conclude anything if the assumptions are right.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #36 on: February 26, 2014, 08:05:50 PM »
Yes, it's more likely that in that event I would do some research and direct her to an independent shop to get the work completed.  But that still means that it's likely to cost anywhere between $2000 to $4000.

Ok, lets say the chances of your used car having a catastrophic transmission failure are astronomically high, and every used car will need one between 100k and 200k miles.

$5000 used car + say $2000 in average repairs over the next 100k miles, a massive $3000 transmission repair bill and finally the car is resold for $3000 = $7000/100k miles

A new $20000 car sold for $3000 @ 200k which miraculously needs no repairs whatsoever would still cost $8500/100k miles, NOT including the time-value of the additional $15000 outlay at the beginning.

We can all agree that the above is an extremely optimistic view of new cars, yet they still fail to compete with used cars financially.

So in your engineered scenario the premium you pay for a brand new car is $1500 every 100,000 miles?  That sounds like an absolute bargain.  The safety features alone in a brand new car are worth that to me (I love my wife, and I'm willing to pay a reasonable amount of money to protect her), and the massive increase in fuel economy in even a car as big as a Nissan Altima will likely save you nearly that much over the course of 100,000 miles.

Given that a brand new Nissan Altima (or Camry, or Fusion) can be purchased for $18,000, you're now paying extra (factoring in fuel costs and resale) for the privilege of driving a used car, in your scenario.  Then, since you're factoring resale into this, you sell the car.

What I'll give you is that it's not guaranteed that your $5000 car will need a new transmission.  But it is guaranteed that the used car will need a fair amount of maintenance (if it were 100% up to date the car would cost more than $5000).  If you do all the maintenance on a car you purchased brand new you'll enhance the amount of money you could get selling it...  and at that point, this is not even a fair comparison, even if the transmission on your used car doesn't fail and it stays 100% reliable.
« Last Edit: February 26, 2014, 08:11:13 PM by Mykl »

newideas2013

  • 5 O'Clock Shadow
  • *
  • Posts: 55
Re: What's the sweet spot in used car prices?
« Reply #37 on: February 26, 2014, 08:14:50 PM »
I like driving beaters, easy~ish to work on, tons of parts both OEM and OEM-equivalent plus junkyard parts. Competitive market in the bottom end of the spectrum from private sellers so your cash in hand takes you pretty far if you are flexible. I find it tough to beat the value in my eyes of a 92-95 hatchback civic manual for anywhere between 500 to 2000 dollars with 32mpg (easily with manual trans) and a wide assortment of parts. They are cheap enough that I can own 2-3 vehicles with ease, and insurance is cheap enough where I live that I can get away with that.

End of the day I do most of my own work and enjoy it. I reinvest savings into more tools and look forward to a lifetime of DIY automotive work. I consider myself to be saving 90/hr after tax income (my mechanics shop rate) plus his markup on materials which I assume to be 200% + shipping (they get same day delivery from parts services, buy local parts which commands somewhat of a premium and get to mark them up). They have major overheads to cover, mechanic wages are high in my town, so is commercial rent/building values.

I don't make anywhere near 90/hr after tax so this is one of the best investments I can do, driving beaters and fixing them. I buy an old car and basically assume it will need new pads, possibly rotors, wheel bearings, tie rods, shocks and do as much as possible. Every vehicle I learn more. When I have a house with a garage I'll be able to do even more. Some jobs I'll always have to farm out to a mechanic like wheel bearings, but my long term goal is to be able to do 95% of automotive jobs myself with my own tools. I'll setup my home workshop with air tools and an oxy/acetylene torch for removing the most stubborn fasteners. I truely believe in the value of working on your own vehicles and I don't have much in common with consumers who want to gamble 10-20k away just to pray they get some magic car that needs no maintenance/time in the shop.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #38 on: February 26, 2014, 08:19:38 PM »
I've been argued into a corner.  My position is not that buying a brand new car is *the* right choice.  I would even say in most situations it isn't the right choice, especially if you have to finance it and factor in the extra cost that goes along with that.

What I'm saying here is that the right choice is highly dependent on your situation and where you're at in life.  If you're 45 years old, retired, with a house that has a garage with tools and you're willing and able to maintain and repair an older car....  a used vehicle should certainly save you money.  But not everybody lives in that box, what if you're 60-65 years old with some physical issues that make it difficult or painful to do that kind of work?

There is no one right answer here.

newideas2013

  • 5 O'Clock Shadow
  • *
  • Posts: 55
Re: What's the sweet spot in used car prices?
« Reply #39 on: February 26, 2014, 08:26:05 PM »
I agree and there is some value (especially now) in new cars as dealers seem desperate. People just aren't buying as many cars anymore (at least that's how I perceive it).

Taking an 18k car from 0 to 200,000 miles with minimal issues is not bad, I don't know how far the warranty will take you and what is covered, and if you have to pay for routine service (I will probably never find out first hand). I've done work at a dealership, a big remodel where they were building a new service building to keep up with demand. They are shiny and enticing. Even caught myself a few times thinking "I like that truck, ooh thats a nice car" and I'm frugal as hell.

My main issue with warranties is dealing with the dealers themselves. I find their shops to be shifty. I took a car to one in my earlier days and got $2300 quotes and $800 quotes from other mechanics explaining (even showing me with my car up on their lift) what the dealer "claimed" I needed vs showing me live in person. I found it shady I am absolutely barred from entering the service bays to see problems with my car. Problems you want me to pay thousands for.

It's well known dealers make no money now on new cars. Maybe 3-6% a car. They make money in 2 ways, creative financing and insane shop rates and inflated service work estimates. That is one disadvantage not listed to new cars, you leave your vehicle service at the mercy of the most expensive mechanics on the planet. And you kind of have to get work/service done there to honor your warranty. Many (IMO) will also nickel and dime you, ie: you changed your oil at 5100 miles not 5000, warranty void! Slight exageration but those are the kind of stunts I see them pulling.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #40 on: February 26, 2014, 08:32:47 PM »
My theory on why used cars are clinging to their value at the moment is that there's some scarcity.  Over the last recession new car sales slumped pretty dramatically.  So that 75,000 mile Camry that should cost less than $10000 and actually be a good deal is currently hanging on for $12,000 or more (I JUST spent weeks shopping for and test driving Camrys, that's what they go for where I'm at), and that's for a sketchy example that either has incomplete service records or was a part of a rental fleet.  Yeah, you can get a Camry for $5000 or $6000, but it has at least 150,000 miles and looks like it's lived a rough life.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #41 on: February 26, 2014, 08:35:00 PM »
I've been argued into a corner.  My position is not that buying a brand new car is *the* right choice.  I would even say in most situations it isn't the right choice, especially if you have to finance it and factor in the extra cost that goes along with that.

What I'm saying here is that the right choice is highly dependent on your situation and where you're at in life.  If you're 45 years old, retired, with a house that has a garage with tools and you're willing and able to maintain and repair an older car....  a used vehicle should certainly save you money.  But not everybody lives in that box, what if you're 60-65 years old with some physical issues that make it difficult or painful to do that kind of work?

There is no one right answer here.

Nobody is arguing that it might not be the right choice for some people, but you were originally arguing that specifically it is CHEAPER. Which is only true under specific what-if situations. In reality it just is almost never the case over the long term


The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #42 on: February 26, 2014, 08:42:51 PM »

So in your engineered scenario the premium you pay for a brand new car is $1500 every 100,000 miles?  That sounds like an absolute bargain.  The safety features alone in a brand new car are worth that to me (I love my wife, and I'm willing to pay a reasonable amount of money to protect her), and the massive increase in fuel economy in even a car as big as a Nissan Altima will likely save you nearly that much over the course of 100,000 miles.

if you value the simplicity of not having to do the maintenance more than you value $1500, it may be a bargain to you,but the point stands that the used car IS cheaper.

And come on, is there really that much of a difference in fuel economy and safety between a 2014 altima and, say, a 2006 altima?

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #43 on: February 26, 2014, 08:52:12 PM »
I've been argued into a corner.  My position is not that buying a brand new car is *the* right choice.  I would even say in most situations it isn't the right choice, especially if you have to finance it and factor in the extra cost that goes along with that.

What I'm saying here is that the right choice is highly dependent on your situation and where you're at in life.  If you're 45 years old, retired, with a house that has a garage with tools and you're willing and able to maintain and repair an older car....  a used vehicle should certainly save you money.  But not everybody lives in that box, what if you're 60-65 years old with some physical issues that make it difficult or painful to do that kind of work?

There is no one right answer here.

Nobody is arguing that it might not be the right choice for some people, but you were originally arguing that specifically it is CHEAPER. Which is only true under specific what-if situations. In reality it just is almost never the case over the long term

I was never arguing that it was cheaper.  I was arguing that it can be cheaper.

MrFancypants

  • Pencil Stache
  • ****
  • Posts: 605
Re: What's the sweet spot in used car prices?
« Reply #44 on: February 26, 2014, 08:58:04 PM »

So in your engineered scenario the premium you pay for a brand new car is $1500 every 100,000 miles?  That sounds like an absolute bargain.  The safety features alone in a brand new car are worth that to me (I love my wife, and I'm willing to pay a reasonable amount of money to protect her), and the massive increase in fuel economy in even a car as big as a Nissan Altima will likely save you nearly that much over the course of 100,000 miles.

if you value the simplicity of not having to do the maintenance more than you value $1500, it may be a bargain to you,but the point stands that the used car IS cheaper.

And come on, is there really that much of a difference in fuel economy and safety between a 2014 altima and, say, a 2006 altima?

I value the enhanced safety of my family more than I value $1500 over the course of five years.

...and yes, the fuel economy difference is drastic.  A 2006 Altima gets 27 mpg on the highway, and at 20,000 miles a year costs $2333.33 ($3.15 a gallon for fuel, last price I paid).  A 2014 Altima gets 38 mpg on the highway, costing you $1657.89.  That's a difference of $675.44 a year, or $3377.17 over the course of 100,000 miles (assuming gas prices don't go up, which isn't likely).

So again, you're paying more to drive an older car, held to a lower safety standard, even if the transmission in the old car doesn't eat itself.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: What's the sweet spot in used car prices?
« Reply #45 on: February 26, 2014, 09:57:19 PM »
...asking a woman who is dealing with the stress of living without the support of her spouse for months to a year to go to a junkyard to pull a very large and heavy part out of a car...

You may not have noticed that the link I posted is for parts pulled off the car already, which the salvage yard will ship to you.

Quote
Have you ever pulled a transmission out of a car before?  I'm going to say with near certainty that you have not, because it is a fair bit more involved than making waffles or mopping the floor.

You'd be way wrong.  I think I was about 17 or 18 when I did my first, and in the years since have pulled transmissions (and engine/transmision as a unit, which is often easier) from vehicles ranging from an Austin-Healey Sprite to a D7 Cat.  Honestly, most are not all that hard, and the hard cases might be easier for a woman, since the problem is limited access to bolts.

Quote
That you would actually suggest this as an option makes me believe that you're less interested in exchanging ideas and more interested in winning an argument.

Heck, I didn't even realize we were having an argument.  I thought we were having a discussion about how to minimize car costs.

Quote
Yes, it's more likely that in that event I would do some research and direct her to an independent shop to get the work completed.  But that still means that it's likely to cost anywhere between $2000 to $4000.

OK, so multiply that number by the (small) probablility that the transmission (or any other major part) will fail, to get your expected cost. 

Quote
I wish my world were so black and white, it sure would be a lot easier to live in.

It's not the world that's black & white, it's the purely financial question that you originally asked.  You are the one choosing to drag in all sorts of unquantifiable other factors to try to justify the choice you want to make.  Which of course is your privilege: if you want a particular sort of car (and can afford it), then go for it.  (Just as I, for instance, would never buy a 4-door sedan or a car with automatic transmission, even if it worked out to be the least expensive option.)  Just don't try to lie to yourself, or to us, about your choice being the financial 'sweet spot'.

Jamesqf

  • Magnum Stache
  • ******
  • Posts: 4038
Re: What's the sweet spot in used car prices?
« Reply #46 on: February 26, 2014, 10:06:34 PM »
...and yes, the fuel economy difference is drastic.  A 2006 Altima gets 27 mpg on the highway, and at 20,000 miles a year costs $2333.33 ($3.15 a gallon for fuel, last price I paid).  A 2014 Altima gets 38 mpg on the highway, costing you $1657.89.

But the 2014 and 2006 Altimas are not at all the same car.  It's a fact that you can buy 2006 model year cars that will get 38 mpg, or better.


beltim

  • Magnum Stache
  • ******
  • Posts: 2957
Re: What's the sweet spot in used car prices?
« Reply #47 on: February 26, 2014, 10:13:33 PM »
...and yes, the fuel economy difference is drastic.  A 2006 Altima gets 27 mpg on the highway, and at 20,000 miles a year costs $2333.33 ($3.15 a gallon for fuel, last price I paid).  A 2014 Altima gets 38 mpg on the highway, costing you $1657.89.

But the 2014 and 2006 Altimas are not at all the same car.  It's a fact that you can buy 2006 model year cars that will get 38 mpg, or better.

I don't understand this comment.  What 2006 Altima gets 38 mpg?

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #48 on: February 26, 2014, 10:19:17 PM »
I was never arguing that it was cheaper.  I was arguing that it can be cheaper.

Geez, of course it CAN be, just like it CAN actually benefit you in certain crash conditions to not be wearing a seatbelt. But we are trying to find actionable data here, so I choose to focus on the situation that is true the vast majority of the time.

The Money Monk

  • Pencil Stache
  • ****
  • Posts: 619
  • Location: Nevada
Re: What's the sweet spot in used car prices?
« Reply #49 on: February 26, 2014, 10:21:47 PM »
...and yes, the fuel economy difference is drastic.  A 2006 Altima gets 27 mpg on the highway, and at 20,000 miles a year costs $2333.33 ($3.15 a gallon for fuel, last price I paid).  A 2014 Altima gets 38 mpg on the highway, costing you $1657.89.

But the 2014 and 2006 Altimas are not at all the same car.  It's a fact that you can buy 2006 model year cars that will get 38 mpg, or better.

I don't understand this comment.  What 2006 Altima gets 38 mpg?

He was saying that you can find other cars that old that get that mileage. but as i'm sure you are waiting to point out, while true it isn't really relevant to the discussion.

We have to compare the same car or none of these arguments make sense. Otherwise you could say it's cheaper to buy a brand new civic than a 5 year old benz.

 

Wow, a phone plan for fifteen bucks!