Drive a (Nearly) New Car for (Almost) Free!

Edmunds.com

Drive a (Nearly) New Car for (Almost) Free!

Drive a Nearly New Car for Almost Free article on Edmunds.com

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dansullivan

Love it. I remember this article from 2002 and was explaining it to a friend on Facebook. I searched and found it again - awesome. I've shared this advice dozens of times.

sivaram_auto

finding such sweet spot cars is uncommon.... and then because its so much in demand - their prices wont be that down to justify the sweet spot. what is presented above is good for math but overall your odds of getting such a deal may be marginally better than winning the raffle... So please dont read too much into this analysis.

mechanical8

This is not accurate advice. Author states that buying after 1-2 years and selling before 5th/6th year "you have about the cheapest car-buying experience available". NOT EVEN CLOSE.
Article states "What happens after the fifth year? While Edmunds doesn't record this data, longtime used car dealers will say the value "drops like a rock."" Again, not to be taken at face value, because that's hearsay.

Cheapest car buying experience, irrespective of car type/class, is when it's close to fully depreciated. Consider:
* buying a great condition, almost fully depreciated vehicle from a private party, at mid-low end of Kelley Blue Book value (private party = substantially lower price and taxes,fees)
* take a mechanic with you (or mechanically inclined friend) or take the car to the mechanic and choose a car, which has had big services done recently and checks out with the mechanic. Paint's got to look great (easier to resell later)
* dependent on class (ie. mid-size or SUV or luxury car) the vehicle will be 6-10 years old
* you'll get it at a steal, when compared to 2-4 years old cars
* put aside $100-300 from the $4000+ you just saved (for headlight/paint restoration - makes car look amazing.)
* put another $1000 aside for emergency repairs
* and laugh after 1-2 years when you sell the car for similar price you bought it
* while 2-4 year old cars would have lost another $3000+ in that time

davemishem

I work with numbers professionally, and this article is so laughably naive that it should be used in high school as an example of what happens when you don't understand math as an adult...

Of course a car loses a big chunk of value when it's driven off the lot. Your underwear loses a huge chunk of value when you wear them the first time, so do you buy used underwear? Your microwave oven, big screen TV, barbecue smoker, and laptop computer? Same deal. That happens with almost all consumer items, not just cars.

And if you follow the "logic" in this article, why wait until the car is a year old to purchase it? JUST BUY IT WHEN THE GUY IS DRIVING OFF THE LOT! That way you've saved thousands and still are getting a brand new car.

If you find a one year old car with low mileage with sale, run. The seller almost certainly understands depreciation as much as the next person, so there's a reason they're getting rid of the car that early. You're not going to find many either - go through your local used car lot and see how many 2015 cars with 12,000 miles are up for sale.

Depreciation must be calculated against expected longevity. Only a dunce cares about what the car is worth 15 minutes after driving off the lot. YOU'RE NOT GOING TO SELL THE CAR THEN. Look at the depreciation 7 years out, and use that in your numbers. That will paint an entirely different picture.

tvanderhider

I read the original article that edmunds posted about this several years ago, and I did it successfully. I bought a 2 year old honda and sold it right before it was 5 years old for about $4,000 less than what I purchased it for. I sold it outright; not as a trade in. I even sold it to the same place that I bought it from where I had gotten a great deal years earlier. I would have gotten more money for it, but they could tell there had been major repairs from an accident where someone ran me off the road and the driver's insurance company paid $13,000 to repair it. (It should have been totaled, but don't get me started!!) I replaced that car with a 2 year old volvo SUV and planned to do the same thing again, but I've been way too rough on this car because I do dog rescue and haul dogs around. Luckily I love the car, so I'll probably just keep it until it won't go any more.

paperboyccc

The article is wrong, but is on to something. The real key to beating the depreciation curve is to get the dealer to pay the 1st year depreciation by finding a vehicle that is heavily discounted but holds its value well.

JonRobertedmun

I keep cars 15 years. Here is what I do to calculate/compare purchase price cost per mile. Used cars almost always cost more per mile. Pick a milage to compare at like 175,000 miles then divide purchase price by HOW MANY MILES LEFT to reach 175,0000 miles. New car is 175,000 used would be 175,000 minus current odometer. Every time nearly the used car purchase price per mile is more than new. No money is saved by buying used.

kytriya

@JonRobertedmun Thank you for saying what I have been saying for years! The monthly repair costs add up and with todays repair costs, its just higher.

To really save money save up to buy a low number Ferrari while you buy the best of the cheapest beaters around that you can fix yourself for parts, but will last for 3 months at least. After 3 years you can sell the ferrari for a profit. I dont have the money to do this with but another guy I learned about does this and doesnt drive them. Sells very well! Just keep the miles as close to factory to dealer as possible. Porsches can sell well but not always. They also take 10 years before they are normally truely profitable.

The used car needs to be bought with cash and have no more than $150 in repairs per month for you to come out ahead. It just needs to be driveable. I had a friend who did this and never had any repair costs. He would sell the car and buy another used beater.

travelgeek121

All of you talking about this being poor advice... buy older... keep longer are leaving out the fact that a lot of people don't want to drive an old car. Older cars have less tech features, worse gas mileage, and definitely a lot less appeal to many. Of course driving a car 15 years puts a different spin on it and if you're okay in a 10 year old... more power to you and OF COURSE you're going to save money over the guy in the 1 to 2 year old car! This article is saying, hey... if you're planning to buy new, you may want to consider a car that is practically new but with only a couple of oil changes under it's belt and 20% off the purchase price.

taxthinker

Did you factor in sales tax for buying a used car every three years? In CA, it is about 8%. Does it still make sense to buy used every three years?

kyfdx

taxthinker said:

Did you factor in sales tax for buying a used car every three years? In CA, it is about 8%. Does it still make sense to buy used every three years?

Don't you get a trade-in credit on taxes for the old car?

waldipup

Unfortunately , this article fails to factor in the pitfalls of attempting to sell an expensive vehicle .

While dealers can , with detailing , in house financing , guarantees , and both active and passive advertising , attract buyers ,

Attempting to sell on your own to realize the savings noted is extremely difficult , with buyers cruising the "for sale by owner" ads who have the cash or pre financing available looking for steals .

And tradeins greatly reduce your sale price , as dealers have to resell for a profit and cannot pay you what the vehicle is worth or else they'll just be "spinning their wheels" .

IMO , the only 2 choices to limit costs are either keeping a vehicle for a loooooong time - while yes , repairs are expensive , good maintenance and "easy" driving "trump" new car costs - ie; interest , taxes , depreciation , etc. -

OR , if understandably not willing to drive "an older car" (as I am per low miles per year driven) ,

Just plain go with a Toyota or a Honda , or something that holds it's value and remains trouble free much better than most other brands .

RKEM

As far as buying in the "sweet spot" vs an older used car, this fails to take into account some of the added costs of having a newer and higher value vehicle, beyond just purchase price minus eventual sales price. Sales tax and annual registration fees increase with car value and, at least in Washington State, are significant. You are also going to be paying more for insurance, for that higher value car, those two factors wipe out the perceived savings of having a newer car that is less likely to need repairs.

434oldtrail

Agree new takes a drastic hit after the first year. Exp. Dodge 2018 Laramie truck sold for $55, 2 yrs. later value $35K per a report. Looking for a truck and giving up on American makers, have owned several and just tried of recalls and issues. Buying Toyota Tundra.

BarryHo

The author says, "Your total ownership costs for those 36 months would be about $4,130 or $115 per month." but that $4,130 seems to be the savings for only two years: $2,440 + $1690 = $4130 ("The next year it loses much less: $2,440, or a 6.8 percent drop in value. The third year is even less painful: The F-150 depreciates by $1,690, a 5.1 percent drop in value."). What am I missing?