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"Every single completely fictional and baseless number and action is specifically designed to give the answer you want rather than letting reality determine....
I have owned quite a few vehicles with OVER 100K on them and your maintance costs alone are hugely overstated!
Even if revised downward the gap between the two scenarios does not widen that much. The point being is anyone arguing that "used" or "new" is definitively the right answer is wrong - it truly depends on each persons unique situation and what kind of the car they may end up with, etc. New might be better for some and used might be better for others.
With the cost of new cars being so high that it's insane also puts pressure on the entire used car market to satisfy the affordable car market...used cars cost more due to simple supply and demand.
Let's also mention the "kook aid" advertising nonsense foisted on the public by car marketing to sell all the cars produced in years time.
Factor in the wage erosion of the job market for perfect storm to become the new norm for millions of people still working for a living. Buying a "big ticket" item like a car or home becomes a rigged gamble that you never pay the debt off.
That said, millions of people will never be able to afford new car ever again.
Sure they will. Banks will just stretch the payments out to ten years. It doesn't matter if wages are stagnant and prices keep going up. Banks will figure out how to make money off the consumer. A eco sedan will cost 30k out the door now and they will give you 7 years to pay for it. Huge profit for banks.
That may be true in YOUR cases. That's why there is no "right" answer to this debate as everyone's situation is different on what they buy, how long they will keep a car, etc. That being said, since I like numbers let me throw a scenario out there that I just cobbled together. Ironically, enough, it was close to a dead heat on whether new or used is better.
I'm going to run a scenario of someone who buys a common midsize sedan. Here are the assumptions:
1) Average 15K miles per year driving
2) Given that, lets say you have the choice of buying a new car and keeping it 7 years, or buying a slightly used one (say, two years old) with 30K miles on it and keeping it for 5 more years. (This unloads the car right after 100K miles which is common.)
3) Over a 35 year period, this means you'll either buy 5 new cars over that time or 7 used cars.
4) Cost of new car = $30,000, resale value of $7,500 after year 7.
5) Cost of used car at year 2 with 30K miles on it = $20,000, resale value of $7,500 after owning it 5-years. (Which is year 7 of the car's life and matches the $7,500 resale on the new car in #4.)
6) Fuel mileage on new car is 27MPG, used car is 25MPG given new cars usually get a bump in fuel efficiency each year.
7) Maintenance costs are $100 in year 1, $200 in year 2, and raising by $100 each year after that.
8) Non-warranty repairs are zero in years 1 and 2, then $500 in year 3, $750 in year 4, and raising by $250 each year after that.
9) Assume no inflation for this exercise and all-else is equal
So using these numbers it yields a total cost of $210K ($6,000 per year) over that 35-year span for the new car buyer and $203K ($5,800 per year) for the used car buyer.
Pretty close....feel free to pick apart any assumptions. This is just one of a millions different scenarios one may find on the whole new vs used debate.
Ok let's try this again. I'll go ahead and pick this apart fairly easily. I'm going to use cars available today and make very few assumptions. All of the data I provide here is easily proven.
2017 Honda Civic LX Sedan - Autotrader ID AT-1B71794A
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $25,010.57
Finance term - 60 mos
Interest rate - 1.9%
Total amount financed - $25,485.77
Monthly payment (assuming 0 down) - $424.76
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 75k miles
Maintenance costs for 5 years:
Oil changes (assuming first 2 years are free and changing at 7,500 mile intervals) - $300
Brakes - $500 (pads and rotors)
Tires - $700 Total estimated cost of ownership for 5 years = $26,985.77
NADA on a 2012 (5 years older than the current vehicle age) Civic LX Sedan with 75,000 miles = $9,975.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2017 Civic LX Sedan would be around $283.51 per month.
2012 Honda Civic LX Sedan - Autotrader ID AT-1BFC78CA
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $17,083
Current mileage - 22,400
Finance term - 60 mos
Interest rate - 3.9%
Total amount financed - $17,680.91
Monthly payment (assuming 0 down) - $294.68
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 97,400
Maintenance costs for 5 years:
Oil changes (assuming you will pay for the entire 5 years at 7,500 mile intervals) - $500
Brakes - $500 (pads and rotors)
Tires - $700
Timing Belt - $800 Total estimated cost of ownership for 5 years = $20,180.91
NADA on a 2010 (5 years older than the current car) Civic LX Sedan with 97,400 miles = $7,225.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2015 Civic LX Sedan would be around $215.93 per month.
Total cost of ownership of new car ($26,985.77) minus total cost of ownership of the used car ($20,180.91) = $6,804.87 saved in 5 years. Multiply that over buying 7 used cars in similar conditions for a total of 35 years and there is the potential to save $47,600 over 35 years. Granted there may be a maintenance issue once or twice, but they are FAR from your claims.
Ok let's try this again. I'll go ahead and pick this apart fairly easily. I'm going to use cars available today and make very few assumptions. All of the data I provide here is easily proven.
2017 Honda Civic LX Sedan - Autotrader ID AT-1B71794A
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $25,010.57
Finance term - 60 mos
Interest rate - 1.9%
Total amount financed - $25,485.77
Monthly payment (assuming 0 down) - $424.76
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 75k miles
Maintenance costs for 5 years:
Oil changes (assuming first 2 years are free and changing at 7,500 mile intervals) - $300
Brakes - $500 (pads and rotors)
Tires - $700 Total estimated cost of ownership for 5 years = $26,985.77
NADA on a 2012 (5 years older than the current vehicle age) Civic LX Sedan with 75,000 miles = $9,975.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2017 Civic LX Sedan would be around $283.51 per month.
2012 Honda Civic LX Sedan - Autotrader ID AT-1BFC78CA
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $17,083
Current mileage - 22,400
Finance term - 60 mos
Interest rate - 3.9%
Total amount financed - $17,680.91
Monthly payment (assuming 0 down) - $294.68
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 97,400
Maintenance costs for 5 years:
Oil changes (assuming you will pay for the entire 5 years at 7,500 mile intervals) - $500
Brakes - $500 (pads and rotors)
Tires - $700
Timing Belt - $800 Total estimated cost of ownership for 5 years = $20,180.91
NADA on a 2010 (5 years older than the current car) Civic LX Sedan with 97,400 miles = $7,225.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2015 Civic LX Sedan would be around $215.93 per month.
Total cost of ownership of new car ($26,985.77) minus total cost of ownership of the used car ($20,180.91) = $6,804.87 saved in 5 years. Multiply that over buying 7 used cars in similar conditions for a total of 35 years and there is the potential to save $47,600 over 35 years. Granted there may be a maintenance issue once or twice, but they are FAR from your claims.
If anything major happens in the used car, that changes the equation greatly. Trannies can blow even on well maintained cars. It's unlikely, but still a minor risk There's uncertainty when buying a used car compared to new. Where's the money for repairs? You can get hit with a 1k repair easy. Obviously the older the car the more likely a repair will be needed. Also, trading new car after 5 years is not the best time to trade in. Wait a few more years. Also, you've made no allowance for things you'll need on the used car like spark plugs, battery cv axle boot tear potentially when you're approaching 100k, cracks in exhaust if you're in the salt belt, all kinds of things that are wear and tear items. Even when they tell you spark plugs are long lived, they can still go bad.
Finally there are quite a bit of incentives for these new cars. Thousands cash back/0 percent financing at times. End of year sales ect.
Honestly, even using your math(which doesn't take into account repairs) you're only saving about 1k per year to drive a used car that could have problems versus having a brand new car that's all yours and only been owned by you and has that new car smell and is all shiny and NEW.
If anything major happens in the used car, that changes the equation greatly. Trannies can blow even on well maintained cars. It's unlikely, but still a minor risk.
Key word. MINOR. There's also the risk that one could lose their jobs and no longer be able to afford the payment on a brand new car. OR... as was our case with the new car, the manufacturer could refuse to cover a problem with their vehicle and leave you stranded while you're still in warranty. Had it happen.
Quote:
Originally Posted by BeyondtheHorizon
There's uncertainty when buying a used car compared to new. Where's the money for repairs? You can get hit with a 1k repair easy. Obviously the older the car the more likely a repair will be needed. Also, trading new car after 5 years is not the best time to trade in. Wait a few more years.
There's uncertainty with whether or not we will wake up tomorrow. There's such a thing as calculated risk. And lets make sure we are comparing apples to apples. I'm not discussing a car with >100k miles versus a brand new car where the price difference is only a few thousand dollars. We're talking less than 20k miles difference in the vehicle, 1-2 years of age, and over $10k in a price differential.
Quote:
Originally Posted by BeyondtheHorizon
Also, you've made no allowance for things you'll need on the used car like spark plugs, battery cv axle boot tear potentially when you're approaching 100k, cracks in exhaust if you're in the salt belt, all kinds of things that are wear and tear items. Even when they tell you spark plugs are long lived, they can still go bad.
I didn't because those are things that you will pay for whether you buy the car new or used. Nothing changes but the timeline.
Quote:
Originally Posted by BeyondtheHorizon
Finally there are quite a bit of incentives for these new cars. Thousands cash back/0 percent financing at times. End of year sales ect.
Honestly, even using your math(which doesn't take into account repairs) you're only saving about 1k per year to drive a used car that could have problems versus having a brand new car that's all yours and only been owned by you and has that new car smell and is all shiny and NEW.
I love when people bring this up. These "incentives" are already available. They're a shell game used to entice you to buy new. 0% financing is available for "well qualified" consumers, whereas only a small fraction of the population qualify. Again, a ruse to get your attention. Use logic, not emotion.
You're saving a bit over $1k per year with the potential of that being a perpetual savings depending on how you buy. Look at the bigger picture. A lot of our problem today with mismanagement of finances is a failure to recognize that money adds up. We get hung up on the "Oh, it's only $35 more per month" or "well we're not saving much so why bother".
Again, if you buy a car like in my examples, the only time maintenance failures come into play is if you fail to maintain the car. At that point, it doesn't matter whether new or used.
Again, if you buy a car like in my examples, the only time maintenance failures come into play is if you fail to maintain the car. At that point, it doesn't matter whether new or used.
This is not true. Cars can fail even if perfectly maintained, due to a design flaw or just wear (like you're going to routinely inspect the innards of your transmission to find abnormal wear before it fails on you driving to Mom's house 3 states away?). Repair shops aren't losing money because used cars don't break.
When I've bought new (or especially leased) I'm buying a known, fixed low cost for the piece of mind that I don't have to dive into savings or home improvement budget or whatever to repair the car if a transmission fails or something like that (which can happen on Hondas and Toyotas just as easily as it can on Minis and Audis). Budgets don't work on TCO whether you're talking cars or houses or businesses. I don't get paid annually, so I don't run my budget annually.
Ok let's try this again. I'll go ahead and pick this apart fairly easily. I'm going to use cars available today and make very few assumptions. All of the data I provide here is easily proven.
2017 Honda Civic LX Sedan - Autotrader ID AT-1B71794A
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $25,010.57
Finance term - 60 mos
Interest rate - 1.9%
Total amount financed - $25,485.77
Monthly payment (assuming 0 down) - $424.76
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 75k miles
Maintenance costs for 5 years:
Oil changes (assuming first 2 years are free and changing at 7,500 mile intervals) - $300
Brakes - $500 (pads and rotors)
Tires - $700 Total estimated cost of ownership for 5 years = $26,985.77
NADA on a 2012 (5 years older than the current vehicle age) Civic LX Sedan with 75,000 miles = $9,975.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2017 Civic LX Sedan would be around $283.51 per month.
2012 Honda Civic LX Sedan - Autotrader ID AT-1BFC78CA
Total cost out the door (includes 9% sales tax, $16 title fee, $499 doc fee) - $17,083
Current mileage - 22,400
Finance term - 60 mos
Interest rate - 3.9%
Total amount financed - $17,680.91
Monthly payment (assuming 0 down) - $294.68
Miles per year - 15k
Length of ownership - 5 years
Total mileage after 5 years - 97,400
Maintenance costs for 5 years:
Oil changes (assuming you will pay for the entire 5 years at 7,500 mile intervals) - $500
Brakes - $500 (pads and rotors)
Tires - $700
Timing Belt - $800 Total estimated cost of ownership for 5 years = $20,180.91
NADA on a 2010 (5 years older than the current car) Civic LX Sedan with 97,400 miles = $7,225.00
If you sold it in 5 years for the estimated NADA, your cost of ownership on a 2015 Civic LX Sedan would be around $215.93 per month.
Total cost of ownership of new car ($26,985.77) minus total cost of ownership of the used car ($20,180.91) = $6,804.87 saved in 5 years. Multiply that over buying 7 used cars in similar conditions for a total of 35 years and there is the potential to save $47,600 over 35 years. Granted there may be a maintenance issue once or twice, but they are FAR from your claims.
I can see a few problems with your assumptions right off the bat:
- $25K for a new Civic LX is really high. Is that an MSRP? An actual transaction price on that car would be a lower in my opinion.
- You also cannot take current NADA value on a 2012 and use that as your figure for the resale value of what a 2017 model would bring in 2022. That $9,975 figure you are using is understated if the sales price is really $25K. That's only 40% of your new assumption price of $25K which is too low in my opinion. One of these numbers needs to change. Last December I sold my wife's 2012 Focus with 65K miles on it for $9,500 and brand new it was $18K. (The MSRP was $22K when it was new.) I got $9,500 from a dealer, too, as I traded that one as opposed to selling it myself.
- I also don't think you should compare a 5-year ownership cycle of both a used car and new car. The whole point of buying new to many folks is you get to keep your cars longer than if buying used. So I think my scenario of buying 5 new cars over 35 years versus buying 7 used cars over that same time period is more accurate. If you are someone who buys a car every 5 years no matter what you start with then sure, that tilts the equation towards the used and I understand that. I just don't think that's the right way to evaluate a buy new vs used scenario.
- I think your maintenance and repair costs assumptions are a little low on the used car. There are often times more things to fix than just brakes, tires and a timing belt.
Location: Stuck on the East Coast, hoping to head West
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I used to buy only used cars. Now I buy new (and I keep them for at least 10 years).
First of all, the market for used cars is awful. My time is money and in order to find a decent used (and get the best deal), I have to contact numerous individuals, check each car individually, etc. Also, the used car market in my area has crappy old cars. And pretty much everybody lies...about condition, not having records, about accidents, etc. Used car sellers greatly overestimate value of their vehicle. I even ask them for the research backing up their price because I know I can be wrong and they just don't have it, or base the value on what they owe.
Second, a corollary to this is that I can't work on my own cars. So while a used car might be a great deal, I have to factor in the maintenance required. My mechanic is expensive. His tools alone are impressive.
Third, buying new is a breeze. I do all of my research online (including incentives, etc), talk to dealerships from my office, negotiate online, and show up and get the car.
Fourth, technology. I love technology. I will always buy new to replace a car just so I can have that amazing new technology. I recently went on a road trip with a friend who has a 2017 Benz SUV. In addition to seat warmers/coolers, it also has cup holder warmers or coolers. And the back-up camera, blind-spot monitoring and all of the other features were great, too. That really made my ride home in my 2006 Sienna minivan a little uncomfortable, lol.
Fifth, insurance. I was pleasantly surprised at the difference in price when I dropped an old car and added a new. The new apparently had all kinds of safety features the positively impacted insurance.
This is not true. Cars can fail even if perfectly maintained, due to a design flaw or just wear (like you're going to routinely inspect the innards of your transmission to find abnormal wear before it fails on you driving to Mom's house 3 states away?). Repair shops aren't losing money because used cars don't break.
When I've bought new (or especially leased) I'm buying a known, fixed low cost for the piece of mind that I don't have to dive into savings or home improvement budget or whatever to repair the car if a transmission fails or something like that (which can happen on Hondas and Toyotas just as easily as it can on Minis and Audis). Budgets don't work on TCO whether you're talking cars or houses or businesses. I don't get paid annually, so I don't run my budget annually.
Plus, doesn't seem he's taking into account that the new car is owned from years 0-5 of that car's life, while the used one is during the car's 5th through 10th year of existence. You may not need to change spark plugs, etc, until year 7 which in that case it would apply to the used scenario of his, not the new scenario.
I think he is understating the repair dollars needed in his used scenario. Plus, like you said, the risk of a major problem starts to grow exponentially each year as the car ages.
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