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Old 06-26-2019, 02:07 PM
 
Location: Vallejo
14,057 posts, read 16,063,174 times
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Quote:
Originally Posted by TimtheGuy View Post
New vehicles do not lose 20-30% of the value when you drive it off the lot.

You can't go pick up a house or solar panels like you can a car. Car loans are typically shorter term as well.

I can't see anyone being 50% underwater on any vehicle. That is about a 1 in a million shot.
I guess it depends.

My car had an MSRP of around $25,000 before TTL. I bought it for $20,400 before TTL. If you paid MSRP that's an instant 18% of the value right off the bat. Plus there's some additional loss of value when the vehicle is titled. Doesn't matter if you actually drive it off the lot or not. It the registering of title that causes that loss as there's a good chance it's already literally driven off the lot on test drives. So that's not entirely unreasonable based off MSRP.

But that's the problem with "residual value" type calculations. As a previous poster commented, he bought a new truck for $2,000 more than a year old one with 20,000 miles on it because of the $11,000 off MSRP or whatever it was. That's common on pickups. It's fairly nonsensical that the used one with 20,000 miles is only $2,000 less than new but again not uncommon. I was looking at four-year-old cars with 100,000 mile and it was tough to find them at even 14,000 -- around 6,000 less than I paid new for a car with 100,000 miles on it. But a lot of people don't think for themselves. They just go rules of thumb such as new cars depreciate 20-30% when driven off the lot. That's occasionally true if you go off MSRP and since those people just won't think for themselves they're the ones that do end up buying year-old vehicles for 95% or more of the actual cost of a new one.

50% is a lot but you'd be surprised. I had a coworker who was complaining because she couldn't trade in her Nissan sedan. She still owed around $28,000 on a car she bought almost two years ago for $22,000. Negative equity rollovers. Bought a Jeep Wrangler, had a kid, rolled over the negative equity to a cheaper sedan, got bored of the sedan and wanted a new crossover. At that point the financing just wouldn't approve rolling over more negative equity.

Last edited by Malloric; 06-26-2019 at 02:22 PM..
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Old 06-26-2019, 02:53 PM
 
4,791 posts, read 11,967,913 times
Reputation: 3453
Quote:
Originally Posted by Malloric View Post
I guess it depends.

My car had an MSRP of around $25,000 before TTL. I bought it for $20,400 before TTL. If you paid MSRP that's an instant 18% of the value right off the bat. Plus there's some additional loss of value when the vehicle is titled. Doesn't matter if you actually drive it off the lot or not. It the registering of title that causes that loss as there's a good chance it's already literally driven off the lot on test drives. So that's not entirely unreasonable based off MSRP.

But that's the problem with "residual value" type calculations. As a previous poster commented, he bought a new truck for $2,000 more than a year old one with 20,000 miles on it because of the $11,000 off MSRP or whatever it was. That's common on pickups. It's fairly nonsensical that the used one with 20,000 miles is only $2,000 less than new but again not uncommon. I was looking at four-year-old cars with 100,000 mile and it was tough to find them at even 14,000 -- around 6,000 less than I paid new for a car with 100,000 miles on it. But a lot of people don't think for themselves. They just go rules of thumb such as new cars depreciate 20-30% when driven off the lot. That's occasionally true if you go off MSRP and since those people just won't think for themselves they're the ones that do end up buying year-old vehicles for 95% or more of the actual cost of a new one.

50% is a lot but you'd be surprised. I had a coworker who was complaining because she couldn't trade in her Nissan sedan. She still owed around $28,000 on a car she bought almost two years ago for $22,000. Negative equity rollovers. Bought a Jeep Wrangler, had a kid, rolled over the negative equity to a cheaper sedan, got bored of the sedan and wanted a new crossover. At that point the financing just wouldn't approve rolling over more negative equity.
Why would anyone base the depreciation hit on MSRP instead of what people actually pay for a vehicle? That is a huge part of why people get the misconception that a vehicle depreciates 20% the second you drive it off the lot. (oops, just read your 2nd paragraph which covers this). This is why I dispute this claim heavily, so that the clueless can potentially be slightly more informed.

My buddy's wife just bought a Subaru Outback up here in MN. He has always been in the "I would NEVER buy new camp". I asked if he at least priced out the new ones. He said they bought brand new as the used ones were not all that much less than the new. Wise decision.
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