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The estimate is that you lose around $6-$8k once you drive the car off of the lot, so buying a car with low mileage that is only a year or two old will still cost much more than a much older car, particularly those with high resale values.
This depends on how long you're keeping the car.
If you're buying a car that you plan on keeping until it is 10 years old, is there really much difference buying new versus slightly used? The slightly used was cheaper up front, but with the new one you're keeping it two years longer before buying another one.
You claim that you've observed this type of depreciation with a Honda Accord. As someone who has aggressively looked in the secondary market at Honda Accords as well as Toyota Corollas and Camrys, I have not observed this to be the case. I bought a new Corolla last year for about $15.8K (not including tax and title, etc. A used car purchase would have most of the same costs. And yes, I did go through the additional costs line by line. The amount of "unneeded extra" in there was de minimis if it existed. But let's round up the cost new to $16K, for simplicity).
Well buddy, I have. For one thing, I own the car. I bought the car brand new, and I've kept up with the KBB & Edmunds private party and trade in value on this car since it was three years old. In 2011, I bought my EX-L Accord for $30,000. By 2014, it was worth around $16k. In three years time, you're looking at almost a 50% deprecation. By year 5, it was worth around $12k, and by 2018, it's worth, maybe around $10k (I haven't looked it up lately.) All this considering the car is in great condition.
There is a misconception that Hondas and Toyotas don't depreciate like other cars do. That's not true. They do. It's just that dealerships and some private party individuals prey on the idea that those cars are built to last forever, so they're worth more. Which I will say, is true. So far, I've hadn't had to spend much on my Accord past regular scheduled maintenance. It's got almost 100,000 miles on it, and I'll do the big maintenance on it in a month or so, but I don't expect any major repair (unless I get into an accident) for the next 100,000 miles. Having said that, the car still dropped in depreciation like any other car has, and there is no way I could have put my car up for sale in 2014 and gotten $26k - $28k for it.
Well buddy, I have. For one thing, I own the car. I bought the car brand new, and I've kept up with the KBB & Edmunds private party and trade in value on this car since it was three years old. In 2011, I bought my EX-L Accord for $30,000. By 2014, it was worth around $16k. In three years time, you're looking at almost a 50% deprecation. By year 5, it was worth around $12k, and by 2018, it's worth, maybe around $10k (I haven't looked it up lately.) All this considering the car is in great condition.
There is a misconception that Hondas and Toyotas don't depreciate like other cars do. That's not true. They do. It's just that dealerships and some private party individuals prey on the idea that those cars are built to last forever, so they're worth more. Which I will say, is true. So far, I've hadn't had to spend much on my Accord past regular scheduled maintenance. It's got almost 100,000 miles on it, and I'll do the big maintenance on it in a month or so, but I don't expect any major repair (unless I get into an accident) for the next 100,000 miles. Having said that, the car still dropped in depreciation like any other car has, and there is no way I could have put my car up for sale in 2014 and gotten $26k - $28k for it.
But the test isn't how much you could sell your now 3 year old Accord for, it's how much it would cost someone to BUY that 3 year old Accord vs. a new one, right? Because we're comparing buying new vs. buying used. Also, from looking at the various makes and models, it appears that the price differential between the "base" models (an Accord LX) vs. the higher end models (such as your EX-L) goes away rather quickly (in short, the "higher end" models seem to depreciate a little faster than the base ones). For new cars I was looking at base models of the Corollas/Camrys/Civics/Accords, and trying to find anything 3 years old with 50-60K miles or less at half the cost of new has been...er, "interesting". 30% off from new, sure, but then it's more of a wash between new and used.
I ALSO "own the car" - as noted, I bought a 2017 Corolla (LE), and I own a '99 Prizm and used to own a '94 (which are clones of the Corolla). The '99 was bought new, the '94 was used (in 2005, with 89K miles on it), and it was great because they were built like Corollas but depreciated like Chevys. Our next car will likely be an Accord; maybe we'll splurge and get an EX rather than a base model LX.
I'd agree - if you can find a Honda or Toyota that's 3 years old with <50K miles on it for about half the price of a new one, buy it (assuming it's otherwise mechanically sound and in good condition, blahblahblah). I would've picked up a used Corolla LS or Accord LX for that had I found one. I didn't.
Having said that, I'll also note that financing on new cars is often (but not always) at lower rates than used cars (but DR hates financing, because his target audience is one that takes on way too much debt), so that also narrows the gap. (As previously noted, I financed the 2017 Corolla because the rate was low enough [2%] that it made sense. If the rate had been, say, 6% or higher, I would've paid cash. Hell, my money market fund is now paying almost 2%).
Overall, I don't think we disagree on much at all. We both obviously value cars that are reliable and last for ages. We both purchase cars like that and intend to drive them "into the ground", as it were. I'm just saying that I could not find such cars for sale at almost half off "new" when they were 3 years old. But maybe that was because I was focused on the base models.
And the MAIN point isn't new vs. used. People can buy overpriced impractical used cars that are unreliable. It's buy something that one can readily afford that with an emphasis on function rather than how it looks. Of course, one doesn't have to do that - but then they need to be aware of how much money they're effectively spending on that and adjust their lifestyles elsewhere. For DR's target audience, that's getting a little too nuanced, so he keeps the messages simple.
But the test isn't how much you could sell your now 3 year old Accord for, it's how much it would cost someone to BUY that 3 year old Accord vs. a new one, right? Because we're comparing buying new vs. buying used. Also, from looking at the various makes and models, it appears that the price differential between the "base" models (an Accord LX) vs. the higher end models (such as your EX-L) goes away rather quickly (in short, the "higher end" models seem to depreciate a little faster than the base ones). For new cars I was looking at base models of the Corollas/Camrys/Civics/Accords, and trying to find anything 3 years old with 50-60K miles or less at half the cost of new has been...er, "interesting". 30% off from new, sure, but then it's more of a wash between new and used.
You're comparing base model to EX-L - that's apples to oranges. There's more that goes into the car than just simply cloth verses leather and standard radio verses premium sound. There's big differences within the mechanics of the car you also have to consider.
That's like me taking a base model, regular cab, two wheel drive, work truck Silverado that's brand new, and comparing it to a three year old 4X4 LTZ that's a crew cab with all the trimmings. It's not a like comparison other than the make and model.
Quote:
Originally Posted by synchronicity
I ALSO "own the car" - as noted, I bought a 2017 Corolla (LE), and I own a '99 Prizm and used to own a '94 (which are clones of the Corolla). The '99 was bought new, the '94 was used (in 2005, with 89K miles on it), and it was great because they were built like Corollas but depreciated like Chevys. Our next car will likely be an Accord; maybe we'll splurge and get an EX rather than a base model.
I'd agree - if you can find a Honda or Toyota that's 3 years old with <50K miles on it for about half the price of a new one, buy it (assuming it's otherwise mechanically sound and in good condition, blahblahblah). I would've picked up a used Corolla LS or Accord LX for that had I found one. I didn't.
Having said that, I'll also note that financing on new cars is often (but not always) at lower rates than used cars (but DR hates financing, because his target audience is one that takes on way too much debt), so that also narrows the gap. (As previously noted, I financed the 2017 Corolla because the rate was low enough [2%] that it made sense. If the rate had been, say, 6% or higher, I would've paid cash. Hell, my money market fund is now paying almost 2%).
All depends on your credit score, but the whole premise is, if you can buy used, you can better afford to buy the car in full or take out a very short loan for it - which would mean you don't wind up paying as much on interest as you'd have to with a brand new car loan.
Quote:
Originally Posted by synchronicity
Overall, I don't think we disagree on much at all. We both obviously value cars that are reliable and last for ages. We both purchase cars like that and intend to drive them "into the ground", as it were. I'm just saying that I could not find such cars for sale at almost half off "new" when they were 3 years old. But maybe that was because I was focused on the base models.
And the MAIN point isn't new vs. used. People can buy overpriced impractical used cars that are unreliable. It's buy something that one can readily afford that with an emphasis on function rather than how it looks. Of course, one doesn't have to do that - but then they need to be aware of how much money they're effectively spending on that and adjust their lifestyles elsewhere. For DR's target audience, that's getting a little too nuanced, so he keeps the messages simple.
Well again, remember, buying a higher level trim option isn't just about looks and a better car stereo. Depending on the make and model of the vehicle, it could also mean mechanics. For instance, in some trucks, might have been the Chevy but I'm not quite sure, the lower trim level engine wasn't nearly as reliable as the higher trim level engine.
There is no gain or loss until the asset is disposed of. No sale or other disposition? No gain or loss.
That is the accounting concept of depreciation, but economic appreciation (depreciation) is the gain (loss) in the market value of an asset due to the passage of time.
Such a lost art of keeping cars till the wheels fall off!!!
That's what I do only I do....buy new, and hold only I say, "...until the engine falls out, the doors and wheels fall off."
My brother and others I know have had great success with certified pre-owned rental cars.
From their examples can I say I would NOT go that route next time. I don't know. I'm open to looking at it. How open I don't know yet.
The car I'm currently driving I bought brand new. It's 12 years old. I plan on driving it until it dies. I'm hoping to get at least another 10 years out of it.
I think the issue with most people isn't that the buy new cars, it's that they treat a car payment as if it's a fixed expenditure in life.
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