New car cheaper than used

Page 1 of 2  
As a follow up on a recent truck buying thread, I got this in my mail this morning
http://ctwatchdog.com/2011/08/12/new-cars-may-be-less-expensive-than-used-says-edmunds
New Cars May Be Less Expensive Than Used, Says Edmunds
By Edmunds.com | Last updated Aug 12, 2011, 9:58 am
In tough economic times it makes sense to maximize every dollar. In terms of car buying, that suggests buying a clean used car instead of springing for the shiny new one. But is buying a used car always cheaper than buying a new vehicle? In most typical economic climates, the answer is a resounding "yes." However, the current economic climate is anything but typical. In fact, the deals on some new cars are so generous they actually make a new car less expensive than both a one-year-old used and certified pre-owned version of the same model.
To illustrate this point, Edmunds.com compared the vehicles' True Market Valueฎ transaction prices and the interest payments typically made for each vehicle. Because used/certified pre-owned cars are generally financed at a higher rate than new cars, a shopper can actually save money by purchasing a new vehicle instead of a used version in some cases.
Since new vehicles have inherent advantages over used vehicles, we also looked at vehicles whose total payment costs for new and used were similar and have included them in our analysis. Below is a list of new vehicles that are either less expensive or nearly the same to buy when compared to their average one-year-old used counterparts:*
See New Vehicles Cost vs. CPO Vehicle Cost
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I found new cars cheaper than used for my last 4 cars-- 1984, 1995, 2001 & 2010. The 2001 was 'sorta' used as it was a salesman's car. it had almost 10K on it - but came with all the *new* warranties, etc. [and now it has 130K on it and is probably good for another 5-6 years or so]

My wife's 2010 Focus had 1% financing-- and books now for more than she paid for it.

The list is here- http://www.edmunds.com/car-news/new-vs-used-car-buying.html#cpo
I don't think this is a particularly new phenomenon. I stumbled on it in 1984-- but I've checked prices each time I've bought since then & have always found it to be true. Part of that may be that I like to buy when the economy isn't doing that well- and I usually buy in the fall when salesmen are looking for Christmas money---
Jim
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Ed Pawlowski wrote:

Fail.
Why don't they compare the full-purchase cash price - no interest payments involved.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Probably because most people finance cars. I agree it's hard to compare based on some True Market Value (TM!) BS. The tables they present doesn't even really support their own contention. A new car may sell for less than a used one for a lot of reasons, some of them not good ones, like no one likes the car! But if the big deal is lower finance rates than before, that means nothing to the all cash buyer.
-- Bobby G.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Tue, 16 Aug 2011 09:47:11 -0400, "Robert Green"

Paying cash is usually foolish these days. The dealer won't give you a break for it because they make money from Ford/GM/whoever for the financing. And if you time your buying the rates are less than what you could make in a secure account of some sort. My last 4 new car loans in the last 27 tears were; 0%, 2%, 1% & 3%.
Jim
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

<stuff snipped>

doesn't
than
that
Buying from a dealer is foolish. I've had more luck with three-year old cars that have a good track record than brand-new from the dealer. Someone else has already wasted their time getting all the recalls that plague new cars done and I can inspect it very carefully. Bought a normally $47K Braun Entervan conversion on a Dodge Grand Caravan SE for $25K cash when it was a little less than three years old with 22K miles on it. Great car, great deal and got a receipt for, well, I'd better not say. Tax man might get angry.
I've bought a few new cars, and it's nice to have a virgin automobile - until you get that first huge dent. Less heartache with a car that's already had its dent cherry popped. (-:
-- Bobby G.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

I have sold cars for a couple of years in my life. Most sellers and dealers do not want to sell a car for cash. They want all the "back end". The profit in numbers from the sale of a car based on the agreed final price is the "front end". The interest and upsells and warranties are the "back end".
Dealerships deal in numbers, and none are going to pass up a sale. But you notice that they are much more interested in selling someone and financing them and making baskets of cash than a cash deal.
As for me, I'll continue to buy two to three year old cars with low miles from distressed individuals and estates. Let them take the beating on the huge depreciation within the first three years.
I have never financed a car in my life, and I am 62 years old.
Steve
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Steve B wrote:

This "depreciation" is a very over hyped concept. For those of us who lack egos, don't get a new vehicle every couple years to "keep up with the Jones's", maintain our vehicles and keep them until they are "used up", there is no such thing as "depreciation".
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
Steve B wrote:

Upsells and warranties can still be applied to a cash sale. So that aspect of your cash-vs-finance argument is wrong.

No, I don't "notice" if dealers are much more interested in financing vs cash.
It's true that almost all new-car advertizing is slanted towards what your payments would be (indicating a financed purchase) but that's probably because the vast majority of potential customers can't afford to pay cash-up-front.
If the industry is geared (through their advertizing) to selling their product on a purchase plan, it may not be because they like to run a financing operation - it might be because that's the only way most people can actually acquire the product.

As for me, I'll buy new (with cash) and keep them 10 to 15 years and drive them into the ground. But at least I'll get the exact car I want, the exact color, option package, etc. You - you have no such choice. You're lucky if you don't end up buying a car that sat 2 weeks half under water .
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Umn. I'm sorry. You failed to state your experience as a salesman or dealership worker that gives you all this wonderful information. I have inside experience working in car dealerships, and enough mechanical experience to evaluate a used car. Even with the new CarFax system, it is becoming easier to vett a car these days. And then there's plain visual inspection, but that's for people who have that experience and don't just buy things on the salesman's say-so. Hundreds of cars have been sold as new from dealerships that sat out hurricanes while up to their door handles in water. It happens today despite mountains of regulations and prohibitions. But hey, when one blindly trusts the dealership, and just HAS to have that color, they got you by the short hairs. As for me, I'll take a $10,000 price break, and learn to live with the color. And lest not we forget about the warranty using dealer items............
Steve
Steve
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

How reliable is Carfax? If you have a dealer or perhaps a major shop do your work, it may show a nice paper trail of good service. But if you change your oil every 500 miles and new hand polished spark plugs every month and do the work your self, nothing shows up. Now would the car that has lots of dealer service reported, but that major transmission problem while on vacation patched up by a small shop is passed by. Still seems like a crap shoot.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Wed, 17 Aug 2011 17:55:18 -0400, "Ed Pawlowski"

CarFax is only an indicator. If the CarFax is bad - RUN. If it is good LOOK.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
<stuff snipped>

Yep. It's a good start. Collecting mileage information from inspections, etc during the life of a car is worth the money right there. But you've got to look. And test drive. And probably have it put on a lift at a garage unless you bring your own creeper. I can't creep anymore so I bought a stalk videocam and monitor from HF. Far more useful than I ever imagined. Would bring it to any car inspection now.
Still, a slick used car salesman can work magic that so astounded legislators (in my state, some idiot used car salesman cheated - and I mean cheated - the daught of a 5 term state senator. Thus was born our state's laws regulating - with a capital R - used car sales. Still, as strict as we are, other states make us look like hippy parents, they're so much stricter.
There's a valid public interest in not allowing drowned, deadlined cars to come back to life after some steam cleaning and deoderant, especially if there's a potential safety issue.
I'll bet that there are car wholesalers and appraisers who could answer our every question about what happens to cars when they soak and how length of immersion factors into it. I've seen thousands of drowned cars in the all the flooding we've had this year. You don't think they are all going to the crusher? (-:
-- Bobby G.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
In typed:

To dealers, all purchases are essentially cash deals so they don't care. They DO have a relatonship to a bank their customers can use for loans, but the dealer gets cash no matter what. The buyer makes payments to the lending institution in the case of a loan. What you described is possble, for used cars under a certain price, but dealers do not want the liability of the loans and very few make their own loans; it goes to a lending institution.

Agreed.
Agreed. They might do a check on the person's records to see if there's any chance of him getting a loan, but once the loan is made, the dealer receives a cash payment from the lender for the price of the vehicle. Err, car. I'm interpretinig from a legal contract here.

That can work OK as long as the original warranty transfers to you, there are no leins on it, and it's low enough mileage and has maintenance records you can look up and verify. It's just amazing how much detail is available on any car back into the 90's.

Ooohhh, those get an awful smell about a month after the sale! I've seen a couple of those from a dealership that was one of three just closed down by the FTC and Attorney General's office for price fixing and falsifying odometer readings.
But cash is a decent way to go, as long as your cut in interest income from it exceeds what the mortgage/loan interest addes up to.
But, the claim that a used car is a better deal than a new car is NOT true and also frought with surprises for the owner. The new vehicle will always cost you more, even with lo-rate taxes, which are coming toan end for cars. It's usually made up for simply from the warranty charges, delivery charges, destination charges, consignment charges, and applicable taxes, not to mention the almost surely higher insurance rates. Have a friend who bought a used 3 year old car with only 2,000 some miles on it. The woman's husband died shortly after the purchase and it sat in the barn for almost three years. Needed all new tires, a battery of course, some rewiring due to mice/rats, whichever it was, upholstery repairs, all new filters, screens, etc., and a fuel tank drain/refill and I imagine other things I don't recall. Oh yeah, oil and transmission brake fluid changes. First the transmission went out. Pretty Expensive. Followed by the brakes. The engine never did run right and it was plagued by wiring problems one after another for the rest of the time he kept it. They donated it to a Figure-8 race about a year later. RIP. <g>
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Thu, 18 Aug 2011 12:51:04 -0400, "Twayne"

The dealer gets commissions/kickbacks from those lending institutions, so they do make money off the financing (not as much as if they lent it themselves and earned all of the interest, of course, but they're also taking much less risk too). I don't know the details; it's possible the commission is reduced if the loan is paid back within X time (that's how the commissions that Amazon Wireless etc get for signing you up for Verizon et al work, and why they have their own extra termination fee if you cancel within 6 months), or it might just be a one-time deal. Either way, the dealer isn't generally losing money when you finance; they're likely making more.
It is an important thing to know -- I bought one car with my own financing (lender just cut a check in the dealer's name), and once with cash, and neither time did I get any better price because of it. In fact, it's often better to at least pretend you'll be considering the dealer financing when doing price negotiations (but never, never, let them negotiate based on on "monthly payments"; always the final out-the-door total before financing)
Josh
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Thu, 18 Aug 2011 12:51:04 -0400, "Twayne"

And depending on the lending institution, the dealer gets a "cut" They "write the paper" then "sell the paper" - and make a profit doing it.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

doesn't
dealers
is
you
Ubetcha. Great minds run in the same ruts. (-: That's why I got a $47K handicapped conversion van with all sorts of bells and whistles for $25K through Ebay without paying the commission. No one bid high enough, including me, so I contacted the seller after the auction and offered $20K. We ended up at $25K because it really was in cherry shape.
The boy they bought it for had recovered from a serious car accident (in the same make and model of car I drove up in - how's that for coincidence). We both realized it was a "meant to be deal" and we both walked away happy. He had bought it used from an estate of a man who died before he could even use it once. That's where the biggest depreciation loss occurred.

I did, once, during the reign of Jimmy Carter at TWENTY PERCENT INTEREST. I needed at car, wanted a new one, had a job, but not enough money to swing it. One of the first Honda Preludes to hit the states. VIN was a lot of zeroes followed by 79. That turned out not to be a good idea to buy the first run of a brand new model of car. Lesson learned.
Bought other cars for cash just to spend the least amount of time in the dealership as possible. Once bought a car through United Buying Service. Got a great price but only because I told them I only wanted a red car, nothing else would do. Then I settled for a white one, the color I really wanted.
Still, there are people (and I know several) who have to have a new car when the ashtrays get full. I love every one of them, especially if they take good care of them, put little mileage on them and sell them dirt cheap privately instead of getting screwed on the trade in.
-- Bobby G.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Tue, 16 Aug 2011 09:47:11 -0400, "Robert Green"

Who is approxemately 1 in 100, at best - even for a used car.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Because "cash" sales are a vanishingly small percentage of all sales. Very few people can come up with dthat much cash.
Also, as the article pointed out, the 'savings' on buying new depend on getting a better deal on the finance charges.
Harry K
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

This coming from the UK where everyone is so far in hock that their great-great-grandchildren won't be able to pay it off... HA!
Fact of the matter is that America being in the shit is what's causing this, not the other way 'round. Everything is so goddamn expensive you got no cash left at the end of the day to save up for a car, then the car takes a shit, and you're forced to finance the next car which puts you even further in the hole with every paycheck.
Add pictures here
โœ–
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Related Threads

HomeOwnersHub.com is a website for homeowners and building and maintenance pros. It is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.