Quote:
Originally Posted by North Beach Person
But are the odds the same?
Going back to something you mentioned earlier, the average initial ownership length of new cars is just under 8 years (Dodge and Buick being over 9 years and Benz being around 6 years).
http://www.cnbc.com/2014/11/05/
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It depends on the new car you buy, and the used car you buy. All things equal in my opinion based on my past experience with new vs used, the odds are very similar. Follow me here.... I'm going to do the math to explain.
We can go with the 8 year figure as well. I guess times are changing in that loan periods have been extended, which I think in many cases force people to hold onto their cars a little longer. The initial purchase price has also gone up substantially and since depreciation is still existent until about the 5 year mark folks may be holding onto them so as not to take a big hit.
Let's look at an 8 year ownership average. I'll use NADA's valuation of new retail price vs used retail price. We will also go with Toyota's offering in my area of 1.9% financing and my bank's used car financing rate of 3%. We will also go the longest term available on each vehicle to drive down the monthly payment. We will also use a zero downpayment and assume the driver will drive 12k miles per year.
We will also assume that both owners maintain their vehicles appropriately with proper fluid changes and follow a 3k mile service interval (yes I know they're longer but to be consistent will use this number).
We will use these basic maintenance costs for now to keep it simple.
Oil change - $50
Trans flush - $75 - (assuming this is done every 60k miles)
Tires - $600 (assuming tires are replaced every 60k miles)
Timing belt replacement (90k miles) - $800
Spark plug replacement (90k miles) - $200
Vehicle A - brand new:
2016 Toyota Avalon XLE
MSRP - $33,880
Financed for 84 months at 1.9% interest.
$33,880 + 1.9% interest ($6,437.20) = $40,317.20 financed
Monthly payment will be $479.96 + GAP. Let's use $7/mo on GAP. Total monthly payment $486.96.
For the first two years at our local Toyota dealership, maintenance is free. Warranty is the standard 3 yr/36k bumper to bumper warranty.
Total Cost of ownership:
Yr 1 - 12k miles: $5843.52 (monthly pmt * 12)
Yr 2 - 24k miles: $5843.52
Yr 3 - 36k miles: $5843.52
Yr 4 - 48k miles: $5843.52 + 3 oil changes ($150) = $5993.52
Yr 5 - 60k miles: $5993.52 + $75 (trans fluid change) + $600 (tires) = $6,668.52
Yr 6 - 72k miles: $5993.52
Yr 7 - 84k miles: $5993.52
Yr 8 (paid off) - 96k miles: $150 (oil change)+ $800 (timing belt) + $200 (tune up) = $1,150
Total cost of ownership for 8 years: $43,329.64
NADA retail value on an 8 year old Avalon with 96k miles (2008 for reference): $11,550
Total cost per mile in 8 years: $0.45/mile
If you drive this car for 8 years and sell it for the NADA price, the cost to own would be $31,779.64.
Vehicle B - used: (bought from a dealer with all maintenance records. No maintenance required immediately after purchase)
2012 Toyota Avalon XLE (60k miles)
Clean Retail - $20,275
Financed for 60 months at 3% interest.
$20,275 + 3% ($6,082.50) = $26,357.50 financed
Monthly payment will be $439.29 + GAP. $7/mo. Total monthly payment is $446.29
Yr 1 - 72k miles - $5,355.48 (monthly pmt * 12) + 3 oil changes ($150) = $5505.48
Yr 2 - 84k miles - $5505.48
Yr 3 - 96k miles - $5505.48 + $800 (timing belt) + $200 (tune up) = $6505.48
Yr 4 - 108k miles - $5505.48
Yr 5 - 120k miles - $5505.48 + $600 (tires) + $75 (trans fluid)= $6180.48
Yr 6 (paid off) - 132k miles - $150
Yr 7 - 144k miles - $150
Yr 8 - 156k miles - $150
Total cost of ownership for 8 years = $29,652.40
NADA retail value on a 12 year old Avalon with 156k miles(2004 for reference): $7,025
Now, let's sprinkle in some repairs during these 8 years required by some higher mileage vehicles.
Shocks/struts - $600
Tie rod ends - $250
New muffler - $150
Wheel bearings - $200
Transmission replacement (major failure) - $3,000
New Cost: $33,852.40.
Total cost per mile in 8 years (you've put 96,000 miles on the car): $.35/mile
Difference in cost of: $9,477.24 in 8 years.
If you drive the car for 8 years and sell it for NADA price, the cost to own would be $26,827.40.
For the new car to be the better value, the used car would need to require over $9,477.24 in repairs over the course of 8 years.