As a follow up on a recent truck buying thread, I got this in my mail this
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
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-
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---
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.
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%.
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
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. (-:
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
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.
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".
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
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 .
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............
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.
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
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. 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
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>
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)
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
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.
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.
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.
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