Are Used Cars Still a Good Deal?
Because new cars tend to lose value rapidly, the conventional wisdom is that it usually makes more sense to buy a used vehicle instead of a new one. But is this rule of thumb always true? Has it changed in the past few years? That’s what Lily wants to know. She writes:
Time Moneyland recently reported that used vehicle prices have hit a 16-year high. On the radio, car companies are asking people to trade in their used cars because their inventory is low. When I look at used cars, I can’t believe how much they’re selling for. For example, one car dealer is selling a 2010 Honda Civic LX with 44,000 miles for $17,575!
If I were to buy a new Honda Civic (with no miles, without any discounts, and using only the features I care about), its MSRP would be $17,715 (including destination charge) for a 2012 version! (Or $18,925 MSRP for the DX.) I keep hearing that if you want to save money, you should only buy a used car. But is this only true for some makes and models?
I’m looking for a reliable, standard, low-cost model that will last for ten years. I don’t care about adding a lot of features to my car. Is that why some of these used cars cost so much? Because they’re loaded with extra features I don’t care about?
I guess my question is: When looking for reliable transportation in a standard low-cost car, is it better to buy new or used? And if used is better, do you have any advice on getting the prices down and finding a good car that isn’t a lemon?
In general, new cars do lose value quickly. But due to a variety of factors, prices on used cars are indeed high right now. As with many personal finance rules of thumb, the “new cars drop in value the moment you drop them off the lot” guideline isn’t true all the time. Your specific circumstances may differ. In your town, the car you’re looking for might hold its value better (or worse) than average.
Also, a new car isn’t always a bad idea. If you intend to own the car for many years — to drive the thing into the ground — then a new car can often be a good choice. My wife prefers to buy new cars, and I think they’re a fine choice for her. My next Mini may be purchased new, too.
The key to making a smart choice is to take your time and crunch the numbers, just as Lily is doing. If you’re in the market for a vehicle and not sure where to start, do some online research. When I was shopping for a used Mini Cooper a couple of years ago, I spent a lot of time playing with web tools like these:
- MSN Auto has a list of best and worst depreciating vehicles. (The best? The Mini Cooper, which holds 67% of its value after three years. The worst? The Ford Freestar, which loses 75% of its value!)
- Consumer Reports has an even more detailed list of the best and worst used cars. If you’re considering a used car, this is a great place to start your research.
- The Edmunds True Cost to Own calculator lets you see how much it costs to own and operate an average vehicle. You can enter the year, make, and model of the car you’re looking at, and the calculator will break down a number of costs, including depreciation.
- Kelley Blue Book can help you determine whether the price on the used car you’re eyeing is too high (or if it’s a steal!). The site also now has a perfect car finder tool.
Once you’ve picked some candidate cars, you actually have to make the purchase. It’s here that even the best-laid plans can fall apart. Buying a used car can be filled with all sorts of pitfalls. It helps to do be as prepared as possible. Last December, Consumer Reports posted a step-by-step guide to buying a used car. Once you’ve done your initial research, use this guide to help you score a good deal on a used vehicle. It’ll help you be aware of common car-dealer tricks and better negotiate a fair price.
All of this is theoretical, though. Lily wants to hear actual reader experience. Where do you come down on the new car vs. used car debate? Have you purchased a used car? What was the process like? If you bought one recently, did prices seem high? Do you have any hints or tips to help Lily find a good used car at a fair price?
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There are 138 comments to "Are Used Cars Still a Good Deal?".
This could have been me writing this! A year ago, my first car, a 1995 Corolla, kicked it and I was faced with the same questions. I’m also simple when it comes to cars-my must haves were the following: power locks, good on gas, and reliability for 10 years (preferably a Honda or a Toyota).
I didn’t even consider a new car at first, but once I decided what I wanted (a Honda Fit), it was clear that it made more sense to buy new. The best used Fit in my area was only $1,500 less than brand new, and it had 40K miles on it! So I went with new.
Oh, and if by chance you’re interested in the Fit, I LOVE IT! Highly recommended.
To echo Sarah’s comment, when my partner and I started car shopping last summer we initially thought buying used was a no-brainer. Once we realized the Fit appeared to be a perfect match for us we were surprised to find that buying new was arguably the better deal. It was barely more expensive than a ‘nused’ model, came with a great maintenance offer, and we qualified for 0.9% financing that meant we could invest our car fund (we’d saved enough to pay cash) and earn a little extra on it if we wished.
We plan on keeping the Fit for as long as it will run (and were pleased to discover its current Kelley Blue Book value is more than we paid for it in 2010), and it’s entirely possible that buying used will make more sense when the time comes to replace it. But for now I’m really happy that on this particular occasion we overcame our reluctance to buy new.
Same story for me, down to the model (though I wish I had gotten it at the beginning of the year with better incentives). Just have financing ready, then contact local dealers by email about their lowest price for what you want. Avoid the unnecessary extras, and you’re bound to get a good deal!
Preaching to the choir here! My husband absolutely loves his Fit! It’s a great value for the money. For myself, when I was recently shopping for a new car, I decided to splurge and get myself a Prius. I love that car too! Can’t beat the mileage either. 🙂
I’ve had a good experience buying my car new and keeping it for 11+ years. I know the car and its history and that is invaluable to me. Prior to that I owned three used cars that came my way through friends and family. (I had a good idea what I was getting at a decent price.)
I bought new because a good used option wasn’t readily available when I needed to get a new car. Right now my plan is to buy new, but family and friends know that we are looking for a well maintained, low mileage car, too. Another part of new that appeals is new technology (hybrids).
Do your research and test drive whatever car you look at. I had a model picked out when I went to the dealership, but discovered driving it wasn’t comfortable. I test drove several cars that day and bought the next.
For me, it is a new car. My in-laws are GM employees which means that my wife and I are able to take advantage of the GM family discount. Score one for a new GM vehicle. Also, we qualify for 0% financing on a new car, versus a minimum of 2.9% through our credit union. Finally, the car comes with a free warranty and free oil changes/tire rotations. I’m not good, nor have the desire to learn about advanced car maintenance, so for me to be able to take the car into a GM shop for free maintenance, is priceless. I bought a Chevy Cruze Eco, which gets between 40-42 MPG highway. I have been very pleased thus far!
It’s funny you say that about the Family First program. I work for the web team that provides GM the vehicle purchase programs and card incentive programs, including Family First and a bunch of others.
Awesome! Well thank you, even in an indirect way, for your help!
In my experience Honda products are better off being purchased new than slightly used. Both our Odyssey and our Acura MDX were purchased new, not only under sticker price, but under dealer invoice price. Kbb.com listed their resale value as higher than what we’d paid for more than a year.
Since HOndas are sold by model type, the options are the same across dealers. You just figure which options you want and you start sending emails to the dealers. Ask them how much for the car you’re interested in. Get it in writing via email so there are no misunderstandings about destination fees or taxes, etc. Buy it from the cheapest one.
We waited until at least the summer so the dealers are looking at leftover inventory. Of course you can’t be too picky about color if this is the route you’re going to go.
This is how I bought my last three cars, except before there was email I used the phone. 😉 I learned to ask for the drive out price because there seemed to be a big difference between the dealers’ price of the car v. drive out price. I’m still driving the new 2000 Accord I bought in 2001. It has over 270K. Still love it!
So is there a way to negotiate not to pay the destination charge? Thanks.
The most i was able to nego was 500 over invoice on a corolla.
Or better financing instead of my toyota discount.
Thanks for any info. Im looking forward to save on my next new car.
I think it depends upon the inventory. If several dealers have a lot of Corollas on their lots and not much demand for them, your odds of getting the destination fee removed from the “out the door” price is greater.
We did not pay destination fees on either of our two current cars, so it does happen. We did have to pay the destination fee on our previous vehicle (also purchased new, under invoice).
A couple of things from an experienced new car buyer:
1. Remember, a used car also drops in vale as soon as you drive it off the lot (assuming you are buying it from a dealer). There is ALWAYS a difference between the price you pay for the car and what you can sell it for. This does not exist as much when buying from a private party (although you still need to clean and advertise a car when you sell it) but that path is filled with its own major pitfalls (most notably, the fact that there is no business backing up the sale and no recourse if you get a major lemon).
2. With the newest model cars, you may save the difference just in gas price! The focus of auto makers over the last couple of years has been mileage; many cars have much better mileage right now.
In my neck of the woods (Canada), a big factor is all the extra fees that get tacked on to a new car, but not a used car.
When you buy a new car up here, they ding you with a “gas-guzzler” surcharge (unless it’s super-efficient), air conditioning tax, delivery charge, dealer prep fee, administration fee (for the paperwork), and more. Those can add literally thousands to the price of the vehicle.
Then, if you’re financing, those extra fees grow further, since you’ll be paying interest on expenses that wouldn’t have existed at all had you bought used (unless you get a 0% loan).
There’s more to the story than just the price in the window.
In the UK, VAT (our sales tax) is at 20% and I’m pretty sure this applies to cars so if you buy a new car for £10,000 then £2000 of that is tax! In theory, your car has instantly dropped that 20% in value.
I just don’t think there is a one-size-fits-all answer to whether a new or used car is a better choice. It’s going to depend so much on the individual’s needs, finances, future, the economy (both local and national), desired features, etc. We have always purchased used cars, but when we were looking, we did compare what we could buy used vs new. In our case, both times it just made more sense all around to buy used. Both times we purchased the cars from reputable dealers, got the Carfax report, and the vehicles still had manufacturer warranties. We’ve had no problems with the vehicles.
My parents ALWAYS buy used, including cars from private individuals – I think it’s against their religion to buy new. 😉 They’ve only had one real “lemon”, and it’s the only car they didn’t take to their mechanic to get checked before they bought it. So, have a good mechanic, do your research, stick to your budget, know exactly what it is you want, compare all your options, and at the end of the day, whether you go with new or used, you’ll probably have made an excellent decision.
Lily’s question focused on the car itself and didn’t say anything about her driving habits. I’d start there before looking at anything else.
Because I live and work in town, my car gets very light use. So a few years I opted to buy a 1999 Subaru Impreza. It’s reliable and good in snow. But buying an already old car wasn’t a big risk for me because my daily commute usually includes a bike.
And, because I live in the snow belt, my car will rust long before the engine goes.
Someone who has to climb a mountain every day to go to work or who lives in a city without decent public transportation might make a very different choice.
I also picked my dealer first. We have a local dealership that specializes in only a few makes of high quality cars suited to our market–Subarus, Volvos, Hondas. Sorry, no American cars make their list. They have a great reputation and stand behind what they sell.
Also worth considering, if you need to take out a loan to purchase the car, new car loans usually have much better rates than used car loans. 2.9% or less is not uncommon on end of year models, and the last new car I bought was 0% for 5 years, at which point the car costs even less since you can keep your money invested.
If you do plan on buying used, make sure you get the car checked out by a second party. There are a lot of people out there (like me), who know when their car is on the verge of a major repair and prefer to swap it at the dealership rather than foot the bill for a new transmission. This applies more to high performance cars, but there’s still a chance that a Honda Civic was some 16 year old
s training wheels.
If you have to take out a loan to buy the car, perhaps you can’t afford it. The difference between a new and 1-2 year old “nused” car may not be big, but the difference between those and a reasonably reliable and efficient 5-8 year old car is pretty big. More than enough to make up for an interest rate difference.
um, not really (not where we were shopping anyway)
we were looking for a good used car for our daughter as she heads to uni next month.
the sticker shock was amazing, for used cars even more so. the mileage was high (it’s an agricultural state with little transportation, so no surprise there)
our 2006 Grand Caravan, which we feel has about $10000 value is in better shape with less miles than similar cars. They were still approaching 17000-18000.
we decided to wait and perhaps ship one of our current cars to her. And then buy a new car for ourselves.
If you can get 0% financing on a new car, and not tie up cash in a used car purchase but rather leave it in your investment accounts, then new definitely makes more sense. You just have to run the numbers when the time comes for a purchase, and make the call that suits you best.
I buy new for two reasons: I drive my cars 10+ years and maintain them well, so I get a good price for them when I sell them, and I love love love going to dealerships and negotiating. (really, I do. Yeah, I’m weird)
We bought a used car last November, and a new car in February. The used car was almost new though, it only had 3000 miles on it yet was a couple years old. (The proverbial ‘older couple’ owned the car before us, but who knows if that is true.) I have never bought a used car with many miles on it though as that makes me a little nervous. I think that is a personal problem though.
When shopping for a car in February, I could not find a used car that seemed like a great deal. What I do when I am looking for a car is I try to figure out how much it costs to drive the car until it hits 100,000 miles. So if it is a new car, I divide 100,000 by the cost of the car. If the car is $20,000, then my number is 5. Lets say I see an equivalent used car with 30,000 miles on it and costs $10,000 (not realistic, I know). I then divide the remaining miles I could drive until I hit 100,000, which is 70,000 and divide by the price of $10,000, which equals 7. I would then consider buying the used car because it seems to be a better value. (The higher the number, the better.)
That is just my way of figuring out a better deal. I don’t have any science behind it, the formula has just been part of my decision making.
Honda Civic’s hold their values and done depreciate as fast as many other cars. Since it gets good gas mileage and is more in demand when gas prices go up.
This is where your location matters. I was interested in buying a Civic when I was car shopping, but I found out that in our area they are the most frequently stolen model of car. We chose an Accord because it’s less steal-able.
I wanted to buy a new Lotus in 2007, price was £17,500 a bargain at the time, but my head won over my heart and I instead bought a much cheaper smart roadster coupe (it’s also a 2 seater sports, not the kind you get over there in the US). Now, I’m looking again and still want that 07 lotus, problem is the used prices are still around £17,000.
Not that I’ve done badly out of the smart, bought for ~£3500, now worth ~£4000. It’s a very niche car with a bit of a cult following so the prices are rising very slowly instead of dropping.
My advice would be to look out for much older or niche cars that have the potential to hold their value or even go up. A great example would be a 60s mustang – there are parts everywhere, they can be fixed using little more than a hammer and they look great. Price will only go up and servicing / maintenance will not be much more than a new car.
If only I could get my wife to agree with the 60s mustang!
I faced this dilemma when I bought my first car, and will face it again in another couple of years! 🙂 When I got my car, I couldn’t find a decent used one. (there was a shortage back then too!) I ended up buying new because the monthly payments came out to be the same as buying used, only the loan term was longer.
Of course, now I know better than to only look at the monthly cost (I should have considered the total cost) but I have no regrets. Ten years later, I’m still driving it — but I bought with the intention to drive it for 10-12 years. I’ve been happy with the reliability and the value the car has retained. Not having to worry about maintenance and repair for the first few years was also a boon.
Now as I’m saving up for my next purchase, I’m wondering if it’s worth it to buy new. Right now I’m single and don’t have kids, so do I buy for my immediate needs or my future needs? Many of my friends have one-car households and I’d like to do the same when I marry, so does it make sense to buy new if I may not drive the next car for 10-12 years? Friends have suggested I lease instead, but I think that wold be too costly.
I’m trying to figure out these questions, so I’m glad to see this post and look forward to the comments! 🙂
Buy for your future needs! I assume you plan to hold on to the car for a long time — otherwise it will cost you.
Thanks for the response! As a single woman, I’m not about to run out and buy a mini van for the kids and dog I don’t have yet 😉 However, when I bought my current sedan, I figured it would make a great second car for my family someday. Just because that family hasn’t happened yet, doesn’t mean I should abandon my logic I guess!
I would follow the “YAGNI” principle. “You Aint Gonna Need It.” Unless you have a spouse in mind and a very specific timeline for starting a family, there’s no point in buying a car or house to support that. I have a friend who bought a big house for his hypothetical future family; now he’s been paying that mortgage for 10 years, and rooms are just sitting empty.
This applies to almost any “someday I want to be able to…” decision. Of course there are exceptions to the rule. It depends on factors including but not limited to: how sure you are about “someday”; how far off is; what the additional cost is; if you can put the unused capacity to some other use (for instance, buying a bigger house than you need at the moment and renting out some rooms.)
An unintended consequence of the cash for clunkers program. Destroying thousands of used cars and taking them off the market only drove all the used car prices up. supply and demand.
Still, because of advances in automobiles even a decade old car is still more reliable than they were in the 90’s. Low miles on a 2000 model year Honda can still prove as reliable as a new car.
You have to remember things break for two reasons, manufacturer defects and wearing out. so they either break right away or after many years.
Why do you think it was unintended? This is how to force consumers to buy new cars from the government-owned US car companies.
Also consider the financing scenarios. My mother-in-law is looking at a new Hyundai – they are offering 0% for 84 months (on selected models). Seems like a pretty straight up deal. I have never seen 0% on used cars.
The money she “saves” in financing a new Hyundai doesn’t offset the 45% 3-year residual. She would be better off buying a 2008 Hyundai and paying a 7% loan rate.
I’ve bought new and used. As a matter of fact I bought a used car last week to replace my sixteen year old minivan originally bought new. My feeling is much as JD’s in that you have to run the numbers and there is nothing wrong with giving the nod to the new car if it’s a reasonably affordable difference and you honestly see yourself driving it a long time.
With respect to buying a used or new car I provide the following advice which is worth what you paid for it. Regardless of where you go to get the car, decide what you want to spend and the upper limit of what you are willing to spend before looking. Try shopping at the “want to spend” level, not the upper end of the “willing to spend”, first. Know the blue book values of what you’re looking at, but recognize the seller likely knows it to. Consider a carfax report especially if you’re looking at older vehicles and use the report for more than just a cursory glance for major accidents (e.g. knowing a vehicle was in Florida the same year as a major hurricane and finding that the trunk if full of rust can be a good hint that maybe there are hidden issues with the vehicle or give you leverage in price negotiation). This is the real kicker, be willing to walk away and lose the deal if you can’t get a price below your upper limit no matter how much time you’ve invested in getting the deal or how much you “love” the car. So many people, myself included, don’t want to “let go” of the car they think they want and have invested time in. That lets you get talked into paying above your limit, extending payments on the loan, or paying just another $50 a month, etc. I’ve walked away. I’ve lost deals. I’ve also come back the next week, and the week after, and seen the car I was interested in still sitting there. Your offer looks better every time you come back. I recommend reading up on tactics used by car salesman. Not everyone uses all of them or even some of them, but you need to be aware of when you’re being pressured, manipulated, having your credit checked, etc.. You don’t have to be ultra defensive, just know when you might be getting played so you know when you’re better off leaving. If you can, bring along someone who really knows cars and can give you a good opinion, the older the vehicle you’re looking at the more important that is. If you can’t, have them tell you the minimum of what to look for so you can weed out the likely losers before you bring it to a mechanic and pay money to have them provide a good look at the vehicle. Finally, don’t get desperate, especially after a long day of looking. That’s when you’re more willing to blow your budget just to get it done, and that’s one of the reasons you should never buy on the first visit unless the vehicle is in your price and exactly what you wanted.
Best of luck.
I would add, too, that if the car was in a hurricane AND the trunk is rusty, you should be fully prepared to walk away, regardless of whatever price you find on it. There are a LOT of flood-damaged used cars out there, and flood damage can significantly shorten the life of the car. This means that even if the car is dirt cheap it’ll end up costing you more money down the road, ergo it’s not a good deal.
I’ve had great luck with private party used car sales but that’s mostly because I always use my gut about whether the guy/gal seems like a straight-shooter. AND, most importantly, I take the car to my mechanic before buying it.
Car dealers, OTOH, freak me right out–my gut’s screaming “Run! This guy’s a shark!” in those situations. But I’ll concede there are probably decent car dealers out there–but I have no evidence for them! 😉
Turn on the radio! If it is set on a classical music station, take it! If it is set on rap, and reeks of marijuana, pass!
Stereotype much?
You’ll do about the same if you buy a new car and drive it until it falls apart or if you buy a used car (that isn’t a lemon) at a fair price. It’s harder to find a decent used car at a fair price. Often, you are buying someone else’s problems. If you can’t pay cash, and your current vehicle is repairable, you are most often better off to repair your current vehicle. The increased insurance premiums on a new vehicle will cost you more (if you are driving a car that is only worth about $2,000 or so) even when you subtract for the gas savings of a higher miles per gallon new car. My advice is to buy new and drive it until it falls apart. It’s the safest move – but not until your current vehicle is no longer worth repairing. My 97 Ranger need about a $1,000 oil leak repair. It’s worth it to fix it because if I buy a new car with better gas mileage for cash, I’ll still pay more for transportation (versus fixing the Ranger) because of increased insurance costs for a new car.
I once read that the used car market shouldn’t exist. The hypothesis was that everyone would assume the seller was trying to get rid of a lemon. Honest sellers would keep their cars off the market because they couldn’t get a fair price, since all buyers were assuming they were selling a lemon. Thus only lemons would be put on the market, making it a self-fulfilling prophecy. Obviously that’s not what happened in real life.
That’s because there are a few things that people do to keep it existing (certified cars, people moving overseas, lemon laws, trust, repeated games, etc.). The process is still going on, but it doesn’t reach bottom.
Andy, I agree. My 94 del Sol has oil leaks on both sides of the engine. It would cost over $700 to fix the main seal and over $600 to do the timing belt/water pump and fix the oil pump seal at the dealer. Car is only worth 2400 bucks so I have opted to do the work myself at a fraction of the cost. Not much room to work in the garage to drop the tranny for the main seal replacement but it is doable. Thanks to the honda tech site on the internet there are always young people putting up their own photo displays of how they did it as well as the shop manual. I ought to get another 100K miles out of it after that until it needs doing again. I want to keep it until it has half a million miles on it.
We always buy 3-4 year old cars with around 30-40K miles. We buy from private sellers after doing our own research, kbb, carfax, check with mechanic etc. My wife is very good at negotiating it down at least 1K below kbb private party value. Our both cars are 2005 models – one bought in early 2008, the other in late 2008. As of now, KBB shows private party value for one shows $1200 MORE than what we paid in 2008. So if I sell it now, after using it almost 3 yrs, I can get $1200 more!!
So right now, it may not be the best time to buy used. Again your situation may be different, but if I have to buy a car in next couple of years, I will most like go with a new one. Usually around July, Aug, Sept, you may get a much better deal on new car for the current model year as new model year cars starts to show at dealers. You may get current model year cars for a couple of thousands below invoice price!
So do your research, use tools like carfax, kbb, email dealers etc before deciding. BTW, as someone said in earlier comments, buying used car from dealer is not much different than buying a new car from dealer financially! Yes, you pay less than new car, but the value lost is almost the same as soon as you drove off the lot.
Don’t just focus on buying and using part, try and determine what are your plans for keeping it – you want to sell it after few years, trade it in at a dealer, drive it till it dies. Below are some of the scenario when it comes to used cars –
1. Buy used at dealer and trade it in for another used/new car after few years
2. Buy used at dealer and sell it to a private buyer after few years
3. Buy used from a private seller and trade it in at a dealer for another used/new car after a few years
4. Buy used from a private seller and sell it to a private buyer after a few years
5. Buy used at dealer and drive it till its death
6. Buy used from a private seller and drive it till its death.
Among the first four scenario, I would rank them 4, 3, 2, 1 based on financial calculations. 6 is better than 5, but you can’t compare 5 & 6 to 1-4 as it all depends on how long you kept your cars and how much value you lost.
I think for a used car to be a good deal you need to look at private party sales of cars more than three years old. It might also benefit you to look at craigslist listings in a major city near your home or in towns further out if you already live in a city. I’ve seen some big price discrepancies based on location.
Consider a manual transmission – they’re often $1-2k cheaper.
My family has had good luck offering a bank check for private party sales and low balling the seller. Accept less money and you’ll have the car sold and cash in hand. They go to the nearest bank and DMV with the seller and get the transaction done that day. Saves 20% off asking price easy.
Caution: Post in favor of a new car purchase.
Back in 2001 I was looking for a newer used Honda Civic and was surprised people were asking $15-$17K for a 2-3 year-old car. A guy at work bought his new Honda Civic through a professional negotiator and I was able to use his purchase price as a target. I ended up buying my new 2001 Honda Civic LX (manual) for $14.4K + $400 for glass etching.
In this case buying used certainly didn’t make sense and the fact that the car is still going strong 10 years later (paid it off in just 2 years). Maintenance costs are still and have always been very low. This experience has been so good; I plan on buying a brand new car in 3 years or so.
According to Kelley Blue Book, the 2006 Pontiac G6 that I drive has actually increased in value by about 7% so far this year. I have a three mile commute to work so the mileage I put on is very limited, and I guess the market for those mid-priced cars is pretty good these days.
I had the same experience as the author when I bought my honda civic 3 years ago. I could buy a 2 year old used model for 18k, or a brand new model with more features I wanted and the color I preferred for $500 more. And the new one had a 0.9% financing offer (36 months, I paid it in 12); the used one had no offer even close. To me, a new car was the clear winner, at least for that particular vehicle.
With the budget in question, she can buy a new car that will last her ten years. I had the same budget and issue last year while car shopping. I was going to buy a used Subaru. Imagine my surprise when my $18-19K budget would buy a Subaru with no bells or whistles that was already 5 years old. So I ended up buying new: a 2010 Scion xB.
Here’s a list of some models the reader might consider, based on my own research and test drive:
– Scion xC or xD
– Hyundai Eleantra
– Honda Fit or Civic
Go on and buy new. If you must, get a 3 year car loan and use the remaining 7 years to save what used to be your car payment for a new car. That way, you will have most or all of the purchase price
I am not sure what your requirements for a car are, but if you are just looking to get from Point A to Point B, old American cars are hard to beat. I mean, at least 10 years old. I have had really great success driving the quintessial “Grandma” car. I am partial to older Buicks. They have lost a LOT of depreciation, so you get a lot of features for not a lot of money. They’re big and bulky so generally owned by older folks who are more careful and generally care more about maintenance and such. They’re not as high in demand now as everyone and their brother wants a Honda/Toyota. American cars in recent years have gotten a lot better. The money you save in paying less for a car like that is generally more than you’d save in gas, etc, and in my experience the repairs haven’t been all that bad. I had a 1989 Buick Riviera that I just loved… it ended up needing about $1000 in repairs so I sold it for a newer car. I regret it! $1000 would have gotten me back a great car in running condition, whereas $1000 only covered 3-4 payments. My 2 cents.
I have an American truck (2002 chevy Avalanche) and I love it. I’ve traveled across the country with it a few times and it’s got tons of rooms for luggage, gear, and even a cat w/ litterbox (litterbox way in the back with the midgate open).
Comfortable interior, decent mileage for a truck, cheap repairs, fixable anywhere any day of the week, unlimited parts on brick & mortar and online stores. Great handling for a truck, drives great in bad roads (lots of those where I live), commands respect in traffic (people are less likely to tailgate you or cut you off).
I don’t commute, so I don’t mind the big engine. Will buy a similar model when the current one gives up the ghost, 10 years from now.
I bought it off a family member for $7K cash 🙂
The problem with buying way old cars like that is you miss out on a lot of safety features that have become standard over the years (ABS, traction control, additional airbags, etc). Even the difference between my 2004 model Ford and my 2011 model Ford was pretty big…we had two airbags and had to pay extra for ABS on the 2004; now I’ve got 6 airbags, ABS, and traction control standard. And I think I had one airbag (and no ABS) in my first car, a 1991 Honda Civic.
Many people would not consider these kinds of vehicles because of (real or perceived) gas mileage.
For any new or used cars sold at a dealer, a huge percentage (>20%) of the price of a car goes to advertising and commissions. If you buy from a dealer, guess who gets to pay for all those ads/commercials/sleezy salesperson’s commissions/overhead expenses of the building, lot, etc…. you!
Do your homework and save yourself the headaches of dealing with a dealer (hmmm, maybe that’s why they’re called DEALers). The savings can be substantial.
I’ve bought and sold over a dozen cars privately over the years and found that most people are generally honest about the condition and history, and much more willing to negotiate on friendly terms. If you’ve ever tried to negotiate with a dealer’s salesperson, you know what I’m talking about. My rule of thumb is to believe about 60% of what people tell you, and check out the remaining 40% on your own. I’ve found that to be a good safety margin.
You can always have a reputable mechanic inspect a car prior to purchasing(usually costs about $100, but can be money well spent). Call them ahead of time and let them know you are shopping.
Also, for those people who say they bought their cars “below invoice” – it’s a bunch of bologna. No dealer is going to sell their cars below cost, period. How would they keep the lights on? There are a lot of incentives on the back-end that are not made known to the consumer. It’s good if they are giving you a discount, but just don’t fall for it if they lead you to believe they are losing money.
I have been looking around at cars for various reasons.
I’ve been interested in the Ford Fusion, so for the heck of it I went to the local dealers website. A used 2011 Model SE with 26K miles was listed at 22,690. A NEW 2011 Ford Fusion FE was listed at 24,695, checking the website for dealer incentives the price dropped to $22,695, yes you are reading that correctly, only $5 more than the used version! This is a no brainer for those in my area buying a Ford Fusion.
It will be slightly more in my state to register a new car, and slightly more to insure, but so worth it. I am the type who drives cars into the ground.
The time is coming for me to change cars. I’m guessing next year or the year after. My car has 113k miles on it and even though I fantasized about getting something smaller (I’m in a Murano), my kids are showing that’s not going to be a good idea. I do know whatever I end up doing (used or new) I’m not getting a loan, no way, no how. Cash only. We’ll see what the markets are like then and what’s available. These resources will be uber helpful.
If I had to buy now, I would buy new. With the incentives for new cars and the increase in the price of used cars it just would make more sense to buy new. Normally buying used makes more sense though and that is what I have done for my last two cars. When I get closer to needing a new car, 4-9 years from now, I’ll see how the business looks.
I bought a 2002 Subaru Impreza in 2004. It had about 48,000 miles on it, but had only 1 owner, all the maintenance was done at the dealership, it was in pristine condition, and it had brand new tires. Seven years later I’m still driving it, it has just under 100,000 miles on it (I don’t drive that much), and according to KBB it has a $4000 trade-in value. I absolutely love the car, and I think part of what made it worth it for me to buy used was knowing that the car would be very reliable and last a long time without major issues, and it would hold its value over the years. If you’re considering buying used, make sure the car either has very low mileage or can be driven for 200,000 miles or more (like Subaru, Honda, and Toyota have a reputation for). Also, be willing to be patient and wait for a really high quality used vehicle that has the features you want. With a new car you’re likely to have more options immediately available.
Have your tires checked! We didn’t drive our car much and found out that the tires had dry-rotted. The car was garaged, too. They don’t last forever.
I bought my new Corolla in 2002 and have never regretted it. I had a string of cars before that which were promised to be “in great condition” and “a real deal.” Somehow they always forgot to mention that no maintenance had been done on those cars, and between that and being taken for a ride every single time I went to a shop, they cost me more in cost and irritation than any new car ever would have.
Seriously, is it a belief today that if you buy a new car you never have to change the oil? I do the maintenance regularly on mine; it’s just passed 200k miles with no major issues. I guess for me buying used is a matter of trust, and all I’ve learned is not to trust anyone.
Just after cash for clunkers friend was hit and car totaled.This friend carefully selects a vehicle, has specific needs and keeps for 15-20 years. We looked at many options to suit.That time 1 year old used were $2-3000 more than new with a bunch of incentives, more warranty, better loan deal. Worked and worked this to make the used car a better deal as it didn’t make sense. At that time the new was a better deal. My life situation is different. Four years ago bought 2 used vehicles for a total of $9000. One a travel van, one auto. 21 & 9 yrs old. Both run great & and would drive Xcountry and back.I expect to keep both 5-10 more years.Neither vehicle would have fit for my friend. Difference in price over $12,000. That’s a lot of gas, food, anything. If you go used need to go 5-10 years old.Some old man is always going into the nursing home. Good, cheap ride.
That some old man sentence was uncalled for. I realize that it is a fact of life but how you sound like a person that would pull the gold caps out of a dead person before they had gone cold.
Last year I purchased a new 2010 Mazda3. When I went out to buy a car, I was going to go used all the way. Then it seems most of the used cars in my area were pretty high mileage and still cost a lot. The care was questionable. It didn’t seem like a good plan for someone who wanted to keep the car for more than just a few years.
After getting bummed out in the used car market, I did my research and realized new was best in this day and age. I found a new car online at a local dealer that was a “reduced price”. After writing to the sales guy, going to the dealer, testing, etc, I decided that was the one I was going to get.
I said “no” to a lot of the extras they were wanting to pad on. I also said “no” to their first finance deal (high interest rate). The more I said, no, the more they lowered it – eventually to 0%. I also got a few of the “extras” I wanted for free or pennies on the dollar by simply not saying “yes” the first time around. I also got free oil changes for life and an extended warranty. They just wanted to make up for what they were losing with the actual car since it was on sale.
It was my first new car purchase, and I don’t regret it.
From my experience in owning cars – the best thing you can do to be money smart is to comparison shop (get the best price you can) and keep it for a LONG time. New or used if you trade it back in every 2 years – you’re losing money. If you can afford it refrain from buying a ‘for now’ car.
I bought my first car ten years ago, and I’m still driving it. It’s a 1999 Chevy Malibu that I bought used from Enterprise Rent a Car. Say what you want about rental cars, but I’ve been more than satisfied with this purchase.
Fast forward 8 years, and my wife’s junker died. We weren’t in the position to spend much at all on a replacement, and we found a low mileage (well, about 55000 miles) 2001 Plymouth Neon. I thought that was perfect. It was a nanny car from a well-to-do couple, and had been kept in the garage when not used. I thought $4k (kbb value) was reasonable.
Except it was far from perfect. I had to re-up the state inspection next month, and ended up putting $1000 into it. (Note to self: should have told the guy to get an updated state inspection sticker and then we’ll talk) Six months later, brought it in for something else, and put in another grand. 6 months after that, I was getting an intermittent oil light. The shop said it would take $3k to fix. I said “f it.” I’m not one who says “junk it if it costs more to fix than it is worth,” but at some point, you have to know when you’re throwing good money after bad.
My 10-year-old Malibu has 130,000 miles on it. (KBB says it’s worth $1800 in fair condition. Wow! I thought it would be around $1000, if not less.) I wouldn’t hesitate to put $3k into it. Ok, I’d hesitate, but this has been a reliable car for me, and if $3k buys me another five years, it’s worth it. And with a 6 mile commute, I have no reason to believe it wouldn’t last that long.
An issue that hasn’t come up is what you want in the car and how common it is. I prefer cars without bells and whistles (manual tranny, AC, rear defrost (oddly enough an option on some cars) and nothing else) which is are VERY hard to find used in good condition. Add on my wife’s conditions (color, trunk vs hatchback, milage limitations) and the selection is very scanty. Last time I bought a car (2009), the very few used cars I could find were priced at approx. straight line depreciation for an expected life of 100,000 miles. Choice was obvious.
If you are interested in subcompacts, I would wait until 2012 models come out and buy new. There are all kinds of awesome subcompacts coming our way for the very first time (Fiat, Sonic, all-new Yaris, to name just a few). If you want one of those you’ll have to buy it new. (And it gives you an automatic excuse to use on your super-frugal self — I HAD to buy new because it doesn’t EXIST used). At least, that is my plan. 🙂
Ok. Same Dan as above. So we scrapped the wife’s Neon, and went looking for a replacement. Considered used cars, but a solid used car (of the CPO variety) was running well over $10k. Went looking for a new car — still didn’t want to spend any more than necessary…
We looked at sub compacts, and Nissan Versas were getting good reviews. I looked at used Versas, and as best as I could tell, they were only losing a few grand after a year or two. I’d pay that for a brand spanking new car that I know the history of. After taxes, tags, delivery fees, and an extended warranty, we ended up financing a little over $17k. Fast forward 1 year and 15,000 miles, and KBB says the car is worth $15k — exactly what we owe on it, AND we had taken out a six-year loan!
So, here’s one for “do your homework. Used cars are not a better value by default.”
Hi,I have a question for people who have driven cars for more than 10 years. How do you know when to let go?
My car is ten years old, and I’d like to get another 2-3 years out of it. I know it’s worth about $4000 right now, so my concern is that if I want longer I’m going to lose the value on a sale or trade in. Plus, I’ll have to replace the tired and deal with repairs and maintenance.
Waiting would give me more time to save, but I’d have to be able to save more than I’m losing in value and spending on the car.
Any thoughts?
If both you and a trusted mechanic think that the car has life in it, and you are happy with it, don’t get rid of it. However, it can’t hurt to do research on what’s out there, and what you would like to own if your current vehicle dies.
I knew my 1997 Camry had to go when the engine block cracked and the repair estimate was $3100. It gave me the opportunity to buy a new Subaru Forester, which was the vehicle I’d been craving for a few years. Having done my research beforehand meant that I didn’t have to make a spur-of-the-moment, panic choice.
Also, you can’t really project what a 10-year-old car will be worth when it’s 12 or 13 years old. Too many factors will come into play. However, if it’s only worth $4000 now I doubt the value will be tremendously less unless it’s undriveable.
New tires aren’t that expensive unless you opt for overhyped and unnecessary features, and shouldn’t factor into your decision.
I would have put in the new engine for the Camry, if everything else was in good shape. If the car was in the rust belt, then no. I’m guessing the “craving” the Subaru was a factor in that decision.
Funny you would mention research 😉 I was test driving a couple of 2011 models a couple of weeks ago. When I crunched the numbers on buying new — even with all the deals on right now — it just didn’t make financial sense.
What ultimately convinced me to wait was the thought that in two or three years time these cars would be great to buy used!
When my mechanic suggested I either rebuild the engine on my fifteen year old lebaron or seriously consider getting rid of the car, it was definately time to let go.
For me it has to do with a want as well. My sixteen year old minivan is still running okay. I could present the litnany of issues it has, but it really comes down to me feeling I’ve gotten what I want out the vehicle and I’d like something else, preferably with robust air conditioning. So I put out word I was considering buying another car soon and a nice deal popped up a couple of weeks later. The nice thing about not needing another car right away, is that you can wait for a good deal to come along and be ready to pounce. It’s also nice that someone who is having a tough go of it now has asked if they could buy the car, and I’ll probably give it to them for all practical purposes.
Thanks for the response — I love the being ready to pounce idea. It’s a great way to look at it.
I’m using that approach to home buying right now. I thought I was going to invest in a small condo this year, but the housing market looks like it’s going to cool off here in Canada. I figure I’m in no hurry, and the longer I wait the more I can save.
I think the “getting ready to go” attitude is a great one. In 2004, I bought a 1996 Accord wagon for 6K. It now has 188K miles on it with no major issues.
But I’m a single lady in a big city who drives a lot – I don’t feel safe driving something that could get me in trouble (I use AAA as a safety insurance policy, but that only goes so far!). So, I’m saving up for a new car and doing a lot of research on what I want. When the Honda hits 200K, I’m going to be ready both financially and in terms of what to get!
Keep track of the maintenance costs that your car costs above what you would be spending for maintenance on a newer car. When the cost is equal to what you would spend on a car payment per month on your next car it is time to get rid of it. It helps to know someone who can turn a wrench for you. Make a deal to pay for the cost of the parts and a good meal for the labor to fix your car. That will lower your maintenance costs.
I have always bought used. Only one bad experience in 40 years. My last two vehicles were bought from people I knew. They were older vehicles (over 10 years) but I knew their history. They were always dealer serviced according to the manufacturer’s recommendations and their mileage was relatively low, given their age.
My current vehicle was bought from a retired couple who wanted a newer car. It is a 98 Merc Mystique with only 43,000 KM. I paid only $2300. It was in showroom condition.
It takes time to find these deals but definitely worth it.
I bought my FORD Escort wagon new in 1992 – it’s still going strong. Yes, it has ZERO sex appeal, but it’s saved me a lot of money in the long run. I’ve gotten fantastic gas mileage all these years. I take good care of it and have had to put very little into repairs. Only in the last couple of years have I had to do anything major. I wish they still made this model. If you are hard on cars, maybe don’t buy new. If you take care of your cars and would feel OK keeping it for 15 years or more, buying new can save you money. (But having keeping a car that long means you really have to think ahead about what kind of car you will fulfill your needs in years to come).
I used to have one of those early-90s Escorts. It was a hatchback in “calypso” green. I bought it new in 1994. The small engine lacked power on hills, but it never game me a problem in the 100,000 miles I owned it. It only ever needed routine maintenance. I only sold it because I was moving overseas for a year. That was back in 2002. I’m surprised by how many I still see on the road today.
We had a 1992 Escort wagon that was indestructible. Based on that car’s performance, we bought a new 2001 Taurus as an “upgrade”. Shortly after that, we accepted a used 1996 Taurus from family as a second car.
We knew the 1996 car needed some repairs, but every repair we made revealed a new problem. Over $5000 dollars and only a few months later, the car literally fell apart in our driveway, in a puddle of oil and transmission fluid. We assumed the problems were due to poor maintenance, and vowed to continue our regular upkeep on the newer Taurus. We ended up replacing the old Taurus with a new Civic (an end of the year model that was far cheaper than the 2-3 year old used models, lol)
In 2006, despite our prompt and preemptive maintenance, the 2001 Taurus began to fall apart in exactly the same manner as the 5 year old 1996 Taurus had. Experience had taught us not to bother trying to salvage the car once it began to decline in earnest, so we instead found a good deal on a used Honda, as we were very happy with the overall reliability of our other car. It turns out that while 2/3rds or so of Tauruses were incredibly reliable, about 1/3 of them would simply die at around 5-6 years old. We had the bad luck to encounter two of the lemons.
Anyway, I mention this long tale because after all of the heartache, frustration and expense, guess what car is still plugging along? Yup, the 1992 Escort. The people who took it eventually had to replace the transmission, but other than that and some regular sorts of upkeep, the car is still driving happily along. When we got rid of it, it had well over 250K miles on it, so I’m sure it’s nearing half a million by now!
I always drive used cars, buy used cars and suggest used cars. Not too old to cost you money every couple of months, but a relative older ones, say by 3 – 6 years.
Sell it when age reaches 10 or earlier if car starts giving trouble, and buy another used car. You save a lot of money this way over your life time.
Spend on something more valuable and enjoyable to you.
Best investment I ever made: 2003 Honda Accord EX brand new. I still own it and STILL love driving it. It treats me SO well. Every used car I have bought has some issue with it that I cant ever put my finger on. When you are the only owner of a car, you know everything about it
We bought a used Honda Fit last fall.
There was a lot of demand for that particular model and we were having trouble finding used cars available.
Expand your search area. We went 1.5 hours to a nearby city and lots of options opened up.
Find someone who is registered to buy at auction. You can tell them what you are looking for and they can usually find something for several thousand dollars cheaper than a dealership. There are not a ton of people who do this but we had a good experience with it. We found them in the car sale ads because they had lower prices and were not a dealership.
I’m all for new cars. I’m the kind of person who will keep a car until it’s ~20 years old or it breaks. Just last year we retired my wife’s 1990 Accord and picked up a new Mazda 3 (of course, getting the employee discount due to a relative working as a Mazda mechanic sure helps).
With a new car, I can make sure it’s properly taken care of its whole life. With used cars, I can almost guarantee it hasn’t been properly taken care of.
Costco has a service for purchasing new cars. Can’t hurt to look.
We used the Costco program for new cars last week to buy a 2011 Hyundai Elantra Touring. We had already tried the email bargaining system (where you email several dealers) and thought we had gotten the best price. We decided to use the Costco program as a last shot to see if we could get a better deal (I’m a maximizer!). You do have to go to the showroom, but for us it was painless. We were given the “no haggle” pricing sheet upon arrival which was a discount of $1500 off the invoice price. We also received the $500 manufacturer’s rebate. All told, we saved $2000 off invoice or $2400 off MSRP… and it was $1300 cheaper than the email bargaining system. Add on 2.9% financing and we couldn’t be happier, as we will put the money we had saved for the car towards our mortgage instead (which has a higher interest rate).
I have always bought used in the past, but after considering used Toyota Matrix, Pontiac Vibe, etc. we found that buying new (especially with the Costco deal) was actually cheaper.
Buy cars that you can pay for in cash and can maintain! Car values take 60% of their depreciation over the first 4 years. Therefore, I only buy cars that are at least 5 years old. Any “lemon” qualities are going to be weeded out in the first 60,000 miles so get cars with more mileage than that.
Why are you comparing a new car with 44,000 miles on it to another new car? if they are the same price they are both new cars. don’t buy a one year old new car with that much mileage.
My husband is the used-car man. When we met in 2004, he was driving a ’92 Bonneville. He was thinking about a Scion XB a year or so later and the sticker price on the new one and the prices of the used ones with quite a few miles on them were comparable. For the first time in his life, he bought a new car. He’s (obviously?) a drive-it-til-it-doesn’t-go kind of person and will have this one until it dies, so it was a good purchase.
My personal stance is this; either buy New or buy used cash out right(4k and under). Basically, I get a used car for about 3k and put about a thousand dollars worth repairs into it then keep it for about 5years. I do all the maintenance myself.
When I buy new all the maintenance better come with the car because I find working on newer cars to be a hassle (Stupid tire Pressure Sensors).
Is buying a used car a better choice for the environment? How do you calculate better cost and fuel mileage v. environmental costs of buying new? I’m wondering how people incorporate that into their calculations? Not judging, just curious. Kind of like how some people pay more for American-made cars. All things being equal, is their a better choice for the planet?
In Ontario, used cars are required to go through emissions testing every two years. My ten year old Toyota always passes with flying colours 🙂 It also gets better gas mileage than the newer models because it has a smaller engine.
I think used cars can be just as good for the environment as used, if you pick the right one.
If you’re looking at an economy car, I think buying new is nearly the same as a recent model used car. If you’re willing to buy older model, then yes, 8 years old cars are a lot cheaper than new.
I want the latest safety equipment though so I’d rather buy a newer vehicle.
I just wanted to chime in to say that Minis are a money pit and I’ll never buy one again. Save up for a real BMW if you want quality (sorry JD!).
Minis have a low starting cost, but are a lot plastic and break often, which is a real pain. Repairs are as expensive as any other German car– except that they are more frequent. $700 for a windshield? $1600 for a new set of tires? $3,000 for the labor to change some gasket/seal/rubber part because you have to remove the whole transmission to access the thing even though it’s not a transmission repair? No thanks!
I have found that 2-3 yr old cars w/ low miles generally don’t have enough of a discount over new cars. My experience is with Hondas and Toyotas. I actually found some used cars more expensive than new ones because they came w/ features I didn’t want (sun roof, leather etc). I think most of the studies are done w/ sticker prices of new cars. I doubt anyone reading this blog pays that.
I have an easy new car buying process that works great.
1. Research cars you want (I look for reliability and safety)
2. Go to local dealers and test drive the cars you like and pick the one you like best.
3. Come home and go to Edmunds.com and pick out the car you want w/ the options you want. Then select to get quotes from local dealers.
4. Buy the car from the lowest price dealer. (I actually gave the dealer where I test drove the car the opportunity to match the price, which they did, because they helped me with the test drive.)
Note: If you have to borrow money for the car then plan on keeping the car for at least 2x the finance period. 1st 1/2 of the period you pay for the car, 2nd 1/2 you put the money in the bank and the car is paying you back. Then you can buy your next car w/ cash.
My husband & I bought a Golf TDI in May. This is a turbo-diesel & averages 43 miles/ga. He does a lot of driving. We went to one car for 2 1/2 yrs & will get rid of our second car when we retire in a couple of years. We intend to keep the car 10 years; its economical and a pleasure to drive in and to ride in. Since we have a few aches & pains in our middle age – a good ride is a lot more important than it was a few years ago. I think we might have overpaid by about $1-2K – not a perfect decision but a good one. With a major purchase like a house or a car, or a once in a lifetime trip – getting the most economical thing isn’t always going to be the best choice. Settling for less or overpaying by a lot, are I think, two reasons people often have buyer’s remorse.
I think the best advice is to exercise patience if you have the time to wait for the right price/car. I have bought used and had bad experiences with costly repairs for each one (had a pre-purchase inspection done too!). THe next car I bought brand new because I wanted piece of mind that I wasnt going to break down somewhere and/or deal with costly repairs. I did however take my time to find what I wanted and could afford. I conducted research about how much the car models I was looking at depreciated over time, how much my insurance would be on the car, etc. I chose the car that depreciated the least and it also cost less in insurance than the others…it also helped that I really liked it too. It was the best decision for me. I am now on year 7 and have only paid for routine maintenance at the dealership and replaced a dead battery. I am so thankful and I love my car and the peace of mind I have with it knowing that I am not inherting someone else’s car issues.
I go used from a private party all the time, but I’ve always been in a situation where I didn’t need to unload my old car to purchase another vehicle. And having time on your side is the biggest factor when buying used, because you need to do your research to find what models, trim packages, and years are right for you and what maintenance issues they have and when these maintenance issues typically arise. If you’ve done good research, you’ll probably have a narrow selection of cars that you’ll be looking at.
It took me about 7 months to find my most recent car (2002 Subaru Outback LL Bean edition, not because I cared about leather, but because the 6 cylander engine doesn’t have the head gasket issues that the 4 cylander does and it has a timing chain instead of a timing belt, which avoids another common problem for outbacks). That is the sort of research and patience I think it takes to get better odds at a great deal out of a used car. Of course, if you don’t have the time, and a dealer can give you better financing on a car you’ll keep for 10+ years, maybe new is the way to go.
I think it is also worth considering insurance costs when buying any vehicle, new or used.
I have a 2005 Dodge Neon that I bought from enterprise, and before that bought 2 1994 Saturn’s from private dealers. The only issue I have had was that I when bought the Neon, in December, I forgot to check to make sure the air conditioning worked (it didn’t). Once I realized it didn’t work, I had already owned the car for 6 months and at the time I didn’t have the $$ to fix it…so I didn’t fix it, and I still haven’t (I live in New England).
I would recommend getting a used car, I am currently looking to buy my next car through Hertz. Most of the used cars you buy at the dealerships are either returned leases or former rental cars, so many of the rental companies are starting to shut out the middle man (dealer) and sell the cars themselves. So Hertz allows you to “rent” the car for 3 days to make sure you want it, and then if you decide to buy it you just call them up or click “buy” on the website. If you don’t want it you are charged for a 3 day car rental. Its the perfect amount of time to take the car to your mechanic and make sure you love the car before you buy it. I haven’t done it yet, because my car is still running, and I’m taking public transportation to/from work. But I’m putting $$ aside so when the Neon breathes it’s last breath (or doesn’t pass inspection this year) I’ll be ready to purchase a new (to me) car.
This interesting trend in used car prices has been very beneficial to my husband and I for another reason entirely: It allowed us to re-finance our 8% APR dealership loan on our car.
When we bought our new car, we bought it for all of the reasons people have listed for buying new instead of used, not the least of which was the amazing, non-transferable warranty (10 years/100,000 miles powertrain). The only problem was that we had no down payment (Mistake #1), we were not pre-approved for a loan (Mistake #2), and we didn’t haggle as much as we should have on the actual price (Mistake #3).
These mistakes have been weighing heavily on me in the last few years. Several times since we bought the car in 2008, I have tried to re-finance, but because of the original purchase conditions, we were underwater on the loan and therefore ineligible. 🙁
BUT, thanks to the wonderfully high prices on used cars these days, our car “re-appreciated” some of the value that it had lost when we “drove it off the lot.” In 2009 when I tried to refinance, our car was worth $13,000 compared to the $19,500 (incl. taxes and fees) we paid for it. Now it’s worth $15,400, which is $300 more than we owe on it (*whew*), so we can refinance for a much better 3.2% APR.
My son and I were just discussing drive free retire rich slideshow yesterday. It assumes some negotiating skills. But not a bad goal to grow those skills anyway.
Like the prices at car lots on the used car Lily describes. It’s “asking”, they will take what they can get I’m thinking. But don’t let them know you have a narrow scope of just Honda Civics, they should think you’d be fine in a Camry, Corrola, or whatever Acura models are called too.
I think the rule of thumb should change from buying a car “used vs new” to buying a car “dealership vs individual”, and by dealership, I mean a branded car store (Ford, Chevrolet, Carmax). An individual could be someone who owns a small sales lot, and will sale the same car much cheaper than the branded dealership, even though they pay the same price at auction.
At this point in my life (42), I don’t think I’ll ever buy a used or new vehicle from a branded dealership ever again, unless it is something I just have to have…there is just too much extra added to the price, not to mention the lousy service and aggressive sales tactics.
Agree. I just feel uncomfortable at a dealer. I like to go and test drive their vehicles, but I haven’t ever bought a car from a big dealer. Just the thought of sitting at a desk with a slick salesperson makes my skin creep. I’d rather haggle with a dude in his driveway.
You are the perfect mark for some unethical “individual” car seller. If I were some guy with good-looking a piece of junk sitting in my driveway I would be praying for you to come along.
The similarity in price could be explained by disparity between model years. I don’t know much about the Civic except that the 2012 is a new ‘generation’ of the model. Could the similarity in price be explained by disparity in the specs?
I know other models have been ‘dumbed down’ in recent years, probably due to the economy (so they don’t have to raise prices) and due to demand for more fuel efficient vehicles (slower, smaller engines are more fuel efficient and cheaper).
Lily,
I think you’re right to be scratching your head over what is obviously a weird discrepancy between what you know (used cars are cheaper) vs what you see (the cost of a used Civic which barely reflects any discount).
There’s a couple of things going on here which is contributing to this situation:
1) since the financial panic, a move towards austerity is gripping the country. For this reason, used-car shopping is in vogue and it’s pushing up prices.
2) rising gas costs are putting a premium on fuel-efficient models like the Civic.
3) new car sales are still sluggish, and given the anemic economic recovery to date (what, with unemployment still hovering around 10%), it’s not clear what impetus exists to drive new car sales. I think there’s a lot of channel stuffing (manufacturers forcing dealers to take on too much inventory) which will put downward pressure on new car prices for the next 12 months (thereby maintaining the shrinking gap between the price of new/used cars).
4) There is a popular misconception that Japanese care are better than domestic. I think that’s more fiction than fact, but that is my opinion. Thus, when searching for a used car, it would follow that certain high demand brands (Toyota, Honda) will cost more, sometimes much more, than their domestic counterparts. Again, this is 95% perception over fact. IMO.
In short, if you only drive 7,000 miles a year, look for a 5 year old domestic with good gas mileage. You can’t go wrong, you’ll pay pennies on the dollar for a solid car, you’ll win the war against future depreciation, and upkeep will be considerably cheaper (usually lower depreciating models = a buttload of cash to fix/maintain).
Best of luck!
There is plenty of good advice here, but my reaction whenever I read this sort of article is “How used of a car are we talking?” A 2010 model barely counts as used to me. The discussion of used cars seems to start around $15,000, often ignoring that many cars are priced lower.
Due to credit issues, loans are not an option for my family, and our combined income is under $25,000. Our real options are to go without a car or to buy the oldest, cheapest beater we can find, as that’s what we can afford. As you might imagine, we end up pouring money into fixing car problems and still have to buy a “new” one every year or so.
My wife and her family almost always buy cars at a local credit union used car lot. The salespeople there do not work on commission, so there is no sales pressure or hounding customers. They will let you test drive anything on the lot, and they will not go with you unless you ask them to. You can even leave your car there and take their car home overnight! Very very friendly….not your typical used car lot atmosphere. There is no negotiating the lot’s sticker price, so no haggling and no “let me check with my manager” games. I think their way of doing business has more to do with my in-laws loyalty than the prices, but the prices are pretty good too!
The lot has cars of all kinds that were usually rentals (5K-20K miles, always inspected for defects). So the cars don’t have too many miles on them. Financing is done through your preferred credit union, and they will take trade-ins.
We have bought two cars at the lot….the most recent was a KIA Borrego with 11,000 miles on it for about $20,000. Blue Book puts it at $25-$28,000. I really like the Borrego, no problems in six months. My in-laws have bought at least three cars there that I can think of, including a 2010 Mustang GT that they got “for a steal.”
The fact that used cars are more expensive is balanced out by the fact that their resell value is also higher. If you’re going to drive the car into the ground, then resale value is less relevant.
Adding to that, there are more peaches on the market when used prices are higher (the lemons aren’t driving out the peaches so much), so the average quality of the used cars on the market is higher. You’re ok buying either new or used– it evens out. http://nicoleandmaggie.wordpress.com/2010/09/27/how-the-used-car-market-is-like-health-insurance/
That’s the article I had in mind in comment #91
We recently purchased a used car. We had several criteria:
must be a sedan
get good gas mileage
hold its value (somewhat)
good rating according to Consumer Reports
great safety record
be less than 10 years old
have low mileage
get all of the above at a great price
So, the search began! We first grabbed the Consumer Reports 2011 cars report which showed vehicles of all types and their ratings since 2004. From there, we chose the best sedan that fit most of the above requests. We looked at the Kelley Blue Book to get an idea of price. We then checked prices for this car at dealerships (online). We also looked to see how many owners the vehicle had and the repair record. We called dealers and negotiated for a car (it was several states away) and pending the test drive, we would buy IN CASH. We ended up getting a newer BMW that was treated well by its only owner and got it for a STEAL. We drove to Vegas to get it. We are very happy. 🙂
We like to buy used cars over new because we put alot of miles on them. We keep them a very long time as well. We try to find something that fits the above criteria (not easy, I know) but they ARE out there. Cars depreciate quickly so we can usually get a deal somewhere!
I got a ’97 Saturn SC2 for $1200, put about $200 into it (maintenance), and get 30-40 MPG.
They’re notoriously reliable if you keep them filled with oil and coolant and do basic maintenance.
It runs like new at 154k miles. I’m expecting another 100-300k out of it. Someone on one of the Saturn forums has 700k on one.
My folks (80 y/o) just bought a used car to replace their second car that a grand-daughter totaled on loan (accident not her fault, airbags meant she was unhurt vs. dead if no airbags, we are all very grateful).
16,000 miles, 2002 Mazda Protege hatch-back. Perfect for their hiking/snowshoeing/camping activities. Bought from another resident in their retirement community. Don’t worry, they had their mechanic check it out first & have already updated the lubrication!
Makes me think a postcard campaign to a retirement apt complex or 55+ community of “do you have a gently used vehicle that you might be willing to sell? I am looking for a reliable used car” might be a viable car purchase strategy for some of us.
I would never waste money on a new car.
I’ve lived the statistics. I bought a brand-new Nissan in 2006, and indeed, it lost 25% of its value when I drove it off the lot and 70% within 4 years.
We may be in a “bubble” with used car values now, but that bubble will eventually burst.
After filing bankruptcy and beginning my new, debt-free life, I’m currently driving a 10-year old car with less than 100,000 every day and banking $475 a month into a mutual fund that’s been averaging 12%.
In 5 years, unless the ecnonomy totally collapses, in which case everyone will be screwed and not just me, I will be driving a free “slightly” used car every 5 years just off the interest.
New cars will put the average person in the poor house.
The chances of that mutual fund maintaining a 12% annual rate of return are just about nil unless it’s being run by Bernie Madoff #2.
I bought a car back in February, and in addition to Edmunds, Consumer Reports, etc. I found a tremendous website called http://www.truecar.com. (I have no affiliation with them)
True Car shows you the best deal you can get in your local area for the exact car (and features) you want. I used it as a check against used car prices, since I was planning to buy yet another used car (from Hertz, which has terrific deals).
True Car shows you the spread of prices being paid locally, and also gives you three low anonymous offers from dealers. If you like the deal, you click on the price, provide some basic info (name, etc.) and it identifies the dealer and prints out a certificate guaranteeing that price. You don’t have to use it, but if you do, the dealer must honor it.
In the end, the new car price shown was a better deal. I printed the certificate, and the phone began to ring. Five dealers called, each one lowering the price still further. In the end, the bidding stopped at $3500 UNDER INVOICE for a 2010 Mazda 6. It’s the only car I’ve ever owned that was literally driven off the showroom floor.
The internet is now a car buyer’s best friend. As a lifelong purchaser of used cars, I did find a better deal new this time around, and I plan to drive the car for a decade or more. JD’s right — crunch the numbers, do your homework, and have fun. It’s a buyers market!
The only deals are on the undesirable cars! The ones that are not that economical. My friend wants to sell me an 4 year old Infiniti G35 for $12K. This is where the bargains are.
Sixteen-year high! Geez.
My husband and I share a 1989 Volvo with about 400,000 miles on it. The mileage amazes people, but there are Volvos that make it to a million. The car looks fine and runs great. Our insurance is very cheap, and our taxes on it are, too. We put in a nice stereo. About once a year, it’ll start to sound a little funny when it’s running, and we will have to get something fixed to the tune of $600-700. I’m always a little peeved until I remember that that’s about two car payments of the average car, and that’s what we’re paying all year!
When I graduated from college and got my first ‘real’ job, I bought a new car–a 2003 Saturn, fully loaded. (I’m so sad Saturns are gone. My family has driven several, with many years of good service from them.) I was fortunate to get 0% financing from the dealer then; I rather rashly got a 5-year loan to get all those bells and whistles, but at least I wasn’t paying interest. When we decided to become a one-car family and I sold it three years later, I made about $1500 on top of what I owed from it, which I considered a good deal, since I had thoroughly enjoyed the car and gotten good use from it. Plus, many of my friends were upside down in their car loans.
Now that we live in SoCal, I think sometimes about getting a convertible, like an old MG, and maybe we will eventually. But after having a car with no payment where I don’t stress over the possibility of getting dings in it . . . I guess I feel spoiled by it. The money that would go toward that goes to things like our trip to the UK next year. Like so many things, car choices are a matter of priorities.
In 2004 I bought a used Honda Accord for $5000. I realized I had paid too much, but it was in great shape with 100K miles. I use it for driving around town. 7+ years later, it has almost 40K more miles, requires little maintenance and runs great. It’s cheap on insurance and very satisfactory. I’m one of the ones who “drives their car into the ground.” Everyone is different, everyone has a different need and different solutions.
SwampMan just bought a “new” truck that is 11 years old to replace his 20-year-old truck. The “old” truck ran great and, indeed, he just rebuilt the front end, but there wasn’t room enough in the extended cab for the new granddaughter’s car seat along with the grandson’s car seat and the other grandson, so he needed a slightly larger truck. I’m driving my 20-year-old vehicle on a daily 60+ mile commute and, indeed, we will be replacing the A/C unit today and it will be getting a new paint job as soon as I pick out the color.
SwampMan is a high school teacher that rebuilds engines (large and small) for fun. He has a completely equipped shop along with a hydraulic lift bought from a garage going out of business. There’s not much that can go wrong with our vehicles* that he can’t fix pretty cheaply** over the weekend.
Our insurance is very inexpensive!
*American-made vehicle parts are widely available and inexpensive.
**Less than $200.
I’d look at older used cars. My husband and I don’t care much about our car since we ride our motorcycles and bicycles more often. So the most important thing to me is that I can pay cash.
We recently bought a Tundra (01) because we had the idea we were going to haul things, but the truth is that we didn’t use it as often as we thought we would. I love it, but we’re going to sell it (probably for not much less than we paid) and buy an older Miata for the fun of it (they’re cheap!). Go figure.
The way I see it, you can do as much research and haggling as you want and still get a lemon – new, from a dealer, and from a private owner. The less investment you have in a vehicle, the better. Again, I don’t drive much – my motorcycle gets 80 mpg. 🙂
Don’t buy from a dealer. Everyone here is comparing the cost of new to a dealer used car- dealers mark up cars 30-40% easily! Most studies I have read have found that the long term costs of used cars are lower. While annual maintenance may be slightly higher, in the end, the lower depreciation more than compensates.
Having bought both new and used, I’m glad to say that emotionally I’m open to either option depending upon my circumstances. Being as these days both options seem too pricey for me, I’m back to maintaining my 2001 Chevy Impala which I bought from my son who bought it used as a 2nd car. I have put some money into it, but I keep very detailed records and never has it been a monthly cost more than a car payment. And, while not a fuel economy dream car, it does manage to get a consistent 25-27 mpg and this on a 6 cyl engine with power everything. While I don’t love it, fortunately cars are not that important to me, so I don’t really care what it is as long as it starts in the morning and gets me where I’m going. What I do love, however, is not being beholden to a finance company AND having an emergency fund to take care of any unforeseen repairs. I think I’ve done about everything on it, though, so now it’s just routine stuff, and no, the inside lights will never be perfect, but I’m used to it…LOL. this from a person who used to buy a new car if the battery died. My how things can change.
I have come to the conclusion that the used argument at the moment does not hold water for single people. We don’t have the resources or the safety net families do (Extra cars, multiple friends with extra cars) so we’ve got to have a car we can fully rely on and use. The benefit of having new is having multiple years worry free. At this stage in the market a couple thousand more dollars seems well worth it to me.
When I got my first car, I was a substitute teacher! Not having a reliable car meant not working, and could possibly have cost me my job if I’d get the rep of being unreliable. I was newly out of school and while I had no debt, I didn’t have much for a down payment let alone to pay cash for a cash! It was hard to find decent used cars back then, so I went new.
If I’d been asking people on a personal finance blog what to do, I’m sure the advice would have been to take my meager savings and buy a beater. Given my job, that would have been the worst thing I could have done given that I didn’t have spouse to fall back on or friends who could loan me a car at 6:30 in the morning.
Sometimes the best thing to do flies in the face of frugal advice, but really, it isn’t until hindsight if you ever know you’ve made the right choice or not.
We have always purchased new cars and then driven them forever. We currently have a ’92 Honda Civic with over 220,000 miles, and a Toyota Sienna with over 120,000 miles. We purchased new in order to get the fabulous warrenties which came with the cars – they are even better now. We do regular maintenance and thus far have put little money into them other than that. On the cost/ benefit analysis with the Toyota we are reaching the point of diminishing returns because we are putting in so much money with repairs that we could be making new car payments instead. However I am just not ready to accept a car payment at this point. I’d rather drive an old car with issues.
If a car is less than two years old, and is “used”, that usually raises a huge red flag. Maybe someone returned it within X days because they wanted a different combination of accessories, but maybe no.
You need to look back 5-10 years for your car.
I come from a family of car experts, a family with a father who test drives a new car every week for his radio show about cars, but also a family who has bought cars new and driven them into the ground 17 years later, leased a car and then gotten another when the lease was up, and bought and sold used cars. When my dad was in his teens and early 20s, he drove antique cars that he fixed himself.
The trick of it, really, is to know car models, which makes and models will last a while if well-mantained. My dad, who worked for Toyota in the 80s, trusts the brand as reliable (in spite of all the recalls) and encouraged family members to buy Corollas, and failing that, their Geo and Chevy knock-offs. His brother says that there are particular years of (I think) Oldsmobiles and Buicks in the early 90s that are very very good. They find Fords to be a terrible deal. But your mileage may vary.
The price of used cars is more defined by their age than their features. You can buy get a fully loaded car for not terribly more than the non-fully loaded version in the same model year. Or, for the price of a cheaper new car, you can drive a luxury car that’s a decade old.
It’s not like all safety features were introduced yesterday. Airbags appeared in nearly EVERY car by the mid-90s, though ABS is a lot spottier. Pick features that are your deal breakers, and use that to narrow down your search.
With getting a deal on used cars (and reselling them) you are trading your new car savings for the time it takes to research what model will meet your needs, what repairs a car might need to get, as well as waiting for what you want to pop on the market, and taking the time to see cars that turn out to be not what you want. People who actually understand frugality will have to determine if the time and effort added to the price difference will be worth the hassle, as well as the costs of not getting your car RIGHT AWAY, by holding out for a perfect car. The answer is probably yes, though the prospect of the work is daunting. You will also gain knowledge of the used car market and cars themselves that cannot be taken away from you. You can use it to help friends going through the same problem. It is unlikely that this car purchase will be your last, so when the time comes to do it again, you will come into the process wiser and more comfortable and it will be more efficient.
My parents currently have 3 cars that they drive. One is a mini-van that they bought used about 8 years ago, and is almost unsafe to drive, My parents use it when the other two cars are not available, there is a need for 7 passengers that can’t be met by two drivers (rare now) or my dad needs to haul stuff (the seats are perennially missing). The other two cars are Priuses. The first is a leased Prius that he decided to lease one March when Toyota advertised an exceptional deal on a model they never made deals on, but they needed to make a sales quota, so for about two weeks they had this really great deal. Dad always wanted a Prius, Mom and Dad knew enough about leasing to know that they would do better than purchasing the car outright, including if they bought the car at the end of the lease. When the lease expired, it was the height of the acceleration pedal recall crisis, and Toyota was giving away its new cars, and the current lease terms were even better than the original lease, but they did the math and saw that it made financial sense to lease a new car (they had to negotiate to get that deal). The car they got did have the pedal problem, but my dad had it fixed within days of signing the lease. The other Prius is one they found used and was a steal for what it was.
I always search the make, model and year and “recall” and “technical bulletin” and “problems” and similar terms. I see what the usual problems are on the car I’m considering, and if I think I can live with them, I go for it. Of course, the individual car gets inspected by my mechanic, who does it for free for us long-time, loyal customers.
Unfortunately in the past 1-2 years, used car prices have skyrocketed while folks trying to “save money” are skipping new car lots.
Example: I bought a 3 year old Saturn Vue 5 years ago for 10,000 with 65,000 miles. Today a 3 year old Saturn Vue is $17,000 with 80,000 miles. A brand new Hyundai SUV off the lot is $18,000.
I was reading an article recently about the same topic, and the specific example was of Toyota Priuses only a few years old that can sell used for at or above what their sales price was new. I am sure there are some good deals on used cars, but you really need to do your research.
My dad is the most creative person I know for getting a deal on a new car. My parents live in New England and ten years ago or so he got his Nissan Maxima in Canada to save $5000 on the best price he could get in the states. Now that they are in the market for a new car, he is ordering a Volvo straight from the factory in Sweden, for $2000 less than the best price he could get in the states, including airfare and factory tour to pick it up in person and shipping it across the Atlantic.
I was thinking the same as Melissa above (#86)
How used are we talking??
Of course if the plan is to finance and have a payment then looking at a 1 or 2 yr old car may not make a lot of sense compared to new with low rates.
But if we are talking more like 5+ yrs old then that is a whole other ballgame!
As others said, skip the dealers with high overhead and look to other options.
I feel like odd man out here, but our last 2 vehicles were bought at auction. Both were over 5 yrs old and we ended up paying about half KBB value. Did have a few $$ to put in, like new tires on one, and a little brake work, but with a total still well below what the going rates were via private or dealer sales. (and who knows if we’d have had to put $$ into those as well).
I’ve got a loaded Chrysler Town & Country Limited, and DH has a loaded Mercury Mountaineer, so more perks than what we would have gotten if we paid the same $$ on the street.
Just another option to consider in the used car market.
The thing about used is that there is often so much more room on the sticker price. When I got married my husband knew the used car manager of our local Ford dealership so we got $500 over cost on any used vehicle on the lot. So if he got a steal on a trade he would pass it along, which is how I got my current car.
We got DH’s truck when the gas prices skyrocketed a couple years ago and people were panicking and they could barely give those larger vehicles away. Another great used find.
But we found a Fit through Costco for my best friend a few months ago. Couldn’t do anything better at her price range.
It is so dependent on situation and individuals that there isn’t much point in arguing. New was great for my friend because she isn’t mechanically inclined. Then I can do okay because I understand how cars work but wouldn’t do the work myself, and others prefer beaters because there aren’t as many bells and whistles to work around.
hey everyone love the comments and getting some great advice. just want ideas on my particular situation. i have 1999 mits montero sport truck 227,000 miles hubby has 2000 honda accord 240,000 miles. of course looking to replace at least on. btw honda running pretty good have been having problems with radiator caps not working gone through 3 finally bought one from honda so keep fingers crossed. anyway mits pretty good small leaks and tranmission trying go out for last 2years but still driving well. ok friend has 2003 honda oddessy leather capt seat thrid row 163,000miles 5500. i think i offer 4500 no more than 4800 sale my mits and continue to save for the car i really want oddessy it ok but would rather have suv like tahoe or armada but i know one my current cars is going to go out soon so i think i should get this more reliable car while i can since honda is more reliable. btw i have 15,000 save for new car so far. all advice welcomed asap as the car will go fast if i dont make a decision. thanks
My wife and I both drive used cars that we paid under $5,000 for. This is actually an upgrade as the last two we had paid less than $2,500 for. The key is to buy from a reliable manufacturer. I personally like Honda, Nissan, and Toyota. Yes you will have some money in maintenance but it will be NOTHING compared to the depreciation of a new vehicle.
I had a brand new Nissan Altima that lost about $5,000 in a little over a year in value. It also cost more to insure, register plates, and fix if you get in an accident. I vote USED car all the way. The way I see it, if you have $22,000 and only use $5,000 to buy a car, then that leaves you with $17,000 to do whatever you want with. I don’t know about you, but there is a lot I can do with $17,000.
From a dealer perspective, Kelly Blue Book is a pipe dream for both buyer’s and sellers. I would recommend NADA Black Book, Manheim history report or even Ebay selling prices over KBB.
Thanks for sharing this valuable information….really its very difficult to choose the real value of a car you should first inspect the car thoroughly you should check its efficiency .furl consumption per kilometer.no of dents and scratches should not be more because two car may look identical but their value may vary.
Purchasing new car can get full manufacturers warranty, an easy way to have many faults repaired for free and better finance rates Brand new model cars are consequently ergonomy, economy like fuel efficiency,emissions and protection when compared to used cars.Concerns about safety are another top reason to want a new car.
I wonder if this is still the case today? From what I understand, used car prices of gone down. Great post. I know it is a few years old, but interesting to know what people were thinking then, and perhaps what is guiding their buyer behavior today.
I consider buying new is nearly just like a recent model used car.