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 Value® 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:*
*Edmunds.com assumed a 60-month loan term, no down payment with a typical finance rate for new cars and a typical finance rate for one-year-old used cars. Edmunds.com added in destination charges and gas-guzzler taxes as appropriate. Of all available rebates, only national APR subvention, customer and dealer cash programs were applied; consumers should check the Edmunds.com Incentives and Rebates page to learn if they qualify for additional savings. When manufacturers offer special APR lower than market rate APR, we use the special APR in the calculation. If the vehicle has both customer cash and special APR that allows it to be eligible for this list, we will choose the one with a lower monthly payment to ensure the best program is utilized. Also, consumers should research state sales tax and registration fees to determine their total purchase costs.
Didn't see the car you wanted? Check back as this list will be updated monthly.
The idea that paying less usury (interest on non-productive money) is "cheaper" than paying more interest on non-productive money, is a pretty depressing way of putting a "positive spin" on our economic woes.
A one year old certified pre-owned car does not represent what most people buy when they buy a used car. Such a car is very near new and therefore offers little if any savings especially when financing is taken into account as you have done. Most people who buy used cars are buying them several years older with much greater depreciation in effect, often paying cash, both of which makes them much cheaper than new. What a misleading article, probably written buy somebody with close ties to a new car dealer or manufacturer.
Prior to the "carpocalypse" the Big Three had UAW contracts that required them to continue paying salary to furloughed workers. Cutting production, say, in half had minimal effect, other than to spread said labor costs across only half as many cars sold. Perversely, it was "cheaper" to build cars no one wanted than it was to not build them at all.
Fleet sales were the primary means to move this inventory, but were undesirable, as the fleet cars all ended up on the used car market in short order, thus competing directly against the new cars the Big Three were simultaneously trying to sell at retail.
The auto bailout allowed the Big Three to shred their UAW contracts, including the furlough provision, which also allowed them to slash their rental fleet sales operations and concentrate production on meeting retail demand. Rental agencies now must buy cars on terms much closer to retail sales; they are in turn induced to turn over their fleets at a lower rate. They need buy fewer cars to maintain a given fleet size, which means fewer late model used cars on the market. Supply and demand means those cars now cost more, and are less competitive against the Big Three's new cars.
The effect ripples even to import brands (Honda, Toyota, etc.) who never engaged in large-scale fleet sales, as those models compete against models that were sold to fleets.
One error in the article is to imply that TMV represents the price that people pay for a vehicle. Between factory to buyer incentives, factory to dealer incentives that the dealers pass on to buyers, and just plain bargaining, TMV represents more of a maximum price, than an average or low price, for a new vehicle.
It's always amusing to look at the newspaper and compare used fleet sale prices from car rental companies to new car prices from dealers, especially in July and August just before the model year change. Would anyone buy a 2012 Toyota, that's been a rental car, for $500 less than a brand new 2013 that has one year more of warranty and hasn't been driven by 100 different people during its rental period? Apparently yes!
As another commenter pointed out, the new less expensive than used is only true for used cars that are only one or two years old. After that, there's sufficient depreciation that the used car is less expensive, though still not a good deal if you do the math of the expected service life versus the cost per year.
My sister-in-law recently purchased a new Camry to replace her 21 year old Camry. The one to two year old Camrys were more expensive than the new ones due to all the incentives ($500 loyalty discount) and discounting.
The 0% financing was also a good deal even though she had to give up another incentive to get it. $20,000 put into a 2% five year CD, was a better way to go than paying cash and taking the incentive.
I just bought my first new car ever -- for under $15,000 . After 12 years of the same used car, the maintenance starting being the equivalent of a car payment every month. I started looking for something newer but used. When I did a search on auto trader for cars under 15K with under 15K miles I was surprised to find out the most of them were "new" to get something used, Id have to go with something 20,000 miles +. After several years of expensive repairs (AC, Transmission, tires, breaks, tune-up, belts, batteries) I didn't want to see a mechanic anytime soon.
Finally settled on a new Ford Focus SE 2014. After some haggling I go it a brand new car with a 3 year warranty included for under 15k, out the door it was closer to 17K, but I had a $2000 trade in.
I used to follow the used car is a better deal philosophy, but it seems that if you are willing to go with a lower priced model, they can be quite a deal.
I also must add that I was surprised that the "standard" options on todays basic cars were as good or better then the options on my fully loaded 2002. Like Bluetooth and digital displays. Not to mention an array of upgraded safety features.
If buying a luxury or high end car---Yes used is always better. But for basic good quality standard cars you cannot beat some of the new prices as well as the piece of mind that goes with it.
I think in general buying a new car is better. I mean used is fine if you're low on cash, but if you're looking for a long-term investment, new is always better depreciation be damned.
Read more: http://blog.unhaggle.com/5-reasons-better-buy-new-car-used-one/#more-1950
† Edmunds.com received the highest numerical score in the proprietary J.D. Power 2014 Third-Party Automotive Website Evaluation Study℠. Results based on responses from 3,381 responses, measuring 14 companies and measures third-party automotive website usefulness among new and used vehicle shoppers. Proprietary study results are based on experiences and perceptions of owners surveyed from January 2014. Your experiences may vary. Visit jdpower.com.