Grassroots Car Buying: Buying New better than Used?

Currently working on my second car purchase of the year, and I'm noticing something odd: new cars seem to be carrying a much lower premium over used than in the past.

In both cases I started out looking at gently used/pre-owned vehicles and ended up buying something new. I've consistently received quotes on new cars that are $500-700 more than a car that's a year or two old with 7,000-17,000 miles.

Example: Looking for a 2010-2012 GTI. All of the cars I've seen that were a year old or two old with less than 20k miles and the options I want were in the 24-25k range. The great state of CA charges sales tax even on private party, which amounts to 2k. I can get a 2013 GTI in any color for 27k, tax included. That's pretty much the same price as buying someone else's old car.

Just something I've noticed that's 100% counter to the conventional wisdom I was raised on. I thought I got a great deal the first time, but now it seems more like the norm.

Yes; for the time being, the discount of a very-new-but-used car vs. new is so small, you may as well get new and the comparatively cheaper financing that usually accompanies it.

Sister and brother in law bought a '12 Camry this summer for a few hundred more than the CPO '11 also on the lot. Sometimes CPOs get a better warranty though, so - ?

I went shopping for a "nice" car in '09, and all I came up with was 100K mile cars for 10 grand. So I bought a new Fit for 15K, and could still sell it for way more than those other junkers. Weird when the counterintuitive BS that was truth reverts to the way you would expect the world to work, eh?

I have run into this a few times.

The 2011 Accord LX base model I have all the dealers wanted MORE for a 1 year old used model along with 4-5% interest. I bought the brand new 60 month 0.9% interest version instead.

I always wonder who it is that pays the higher price for the more used up car. Must be bad credit customers or something.

It really depends on what you're looking for in most cases. The typical run of the mill car for the masses (accord, camry, civic, corolla) are almost always overpriced used and in those cases better to but new.

Heck, even the Koreans are starting to get that way. I am wondering if the Forte SX we got may be some of the last "deals" on a lightly used car.

Interesting that others have had the same experience.

I think it's a combination of factors: manufacturers are so hungry for volume/market share that they've effectively eliminated the profit (at least from the dealership's perspective) on new car purchases. Less profit on new means you have to make your money on used cars and on service/financing.

It is true that a year-old car will have a slightly better warranty: the 2012 GTI I looked at came with an additional 2 years. BUT one year of the original was gone, so I was left with the only benefit being 1 year and 12k miles. It's a benefit, but for me knowing that I'm the first driver of a car (and can break it in properly, etc.) is worth the extra cost and slightly shorter warranty.

Same here. When looking at the fit, they had a 2010 on the lot with 22k, they wanted 15,600 (PRE tax and all that), picked up my 2012 fit for 16,300 (PRE tax as well).

Now, 2.5 years ago I bought my used 2007 element sc (had 32k on it, everything was perfect). Price was 15,600. I drove it 1.5 years, put an additional 45k miles on it, TRADED IT IN to a dealership, and they gave me 12,900 for it (needed brakes and tires bad). They put brakes and tires on it, sold it in 2 weeks for 17,200. Lol

Quality cars are valuable these days. Period.

[Dave Ramsey mode]

I'll never finance a new car. I'm not above buying new, but once you drive off the lot, it's now worth less than what your car loan is. You're upside down on your car. People get all uppidy about being upside down in a mortgage, but yet it's common to be underwater in a car loan.

[/Dave Ramsey mode]

Not trying to troll, just wanting to throw that out there, food for thought. You're kinda in the wrong place to talk about new cars, this is GRM! We put Megasquirt on S10s with old Volvo motors for pete's sake!

We put Mercedes diesel engines in Miatas! Who wants new when you can have interesting!

NOTE: This post was entirely tongue and cheek and was meant for your entertainment only.

I always wonder who it is that pays the higher price for the more used up car.

Probably almost noone, and those that do are idiots.

See, when a lightly-used car costs the same or more than a new one, that's what you call a ridiculously strong bargaining chip to get that price down...

Or, you could just go pay someone else's slightly lower full price on a new car because it seems like a good deal compared to a made up price on a used car that wasnt going to sell for that anyway.

Either way, if you bought one of these two options without pushing the seller for ANYTHING, you paid more than you had to.

We bought our '06 RAV4 new, for that reason. The earlier models were the same money (and the previous body style). Compound that with better financing rates and better resale down the road (our new one was the newer body style that's still around today), and it was an easy decision.

My father in law bought an '06 Silverado for several thousand less than a comparable used model. It was the 4X4, manual that all dealers use as the loss leader and it happened to be perfect for him.

Now, the other side of the equation is the used car will be cheaper to insure, cheaper for car taxes, and if it's a CPO, you might be able to get a better warranty on it. You've got to weigh everything and see which makes more sense.

Good discussion - I'll be honest in that I expected some push back posting this on the boards.

As for used cars "made up" price, I have had a hell of a time getting dealers to move on a 1-2 year old car price vs. a new car. Again, I think all new cars are somewhat loss leaders at this point, and they're protecting their profit.

And I'm a HUGE Dave Ramsey fan. My wife and I started before she was my wife, lived in a 1 br apartment and saved like hell to start our business a couple years ago. It's paid off for us.

speedblind wrote: Good discussion - I'll be honest in that I expected some push back posting this on the boards.

Don't worry about it. Looking at the annual reader survey, most GRM readers are middle/upper-middle class and lots of us buy new cars.

There is just a very vocal minority that likes to cry about the lack of cool new cars couple with the militant stance that regardless of what is available new, they wouldn't but it anyway because it's stupid.

In reply to BoostedBrandon: That's certainly one approach. Another approach is to Buy new, ignore depreciation and drive it until it's a rusted rotted hulk. I've got just such a vehicle..

The difficulty is the care you need to use when selecting a purchase.. decide what you really need, ignore your ego and focus on the family budget..

I Financed mine for 4 years. and it's been paid for for 11 years..

I've noticed it too. I'm in the market as we speak for a new DD for my wife. As others said, it depends on what you're looking for. I think a lot of dealers advertise their nearly new used cars (i.e. under 15k miles) at a high price, but they probably end up selling for less. I usually look for a car that's been on the dealers' lot for a while and they're just getting ready to wholesale it. I'll swoop in and grab it for a song.

Every time I go new car shopping, the prices make me E36 M3 myself. Want to save money? Buy old.

I just bought a BRZ.

I hemmed and hawed over several other cars (used ones), and in the end it was the financing available for the cars that I wanted that did it for me.

It was either going to be a sports coupe or something like an STi (I've had a WRX for the past 8 years). I was going to buy a 2004 STi that was "priced to move" at $16k (I say this jokingly, because, though it was in good condition, I feel like it would really be worth more like $10k to me....used car prices seem higher than my mind is calibrated to accept, but I guess that's how it goes).

I'll 2nd the experience that many times a car a year old with 10-15k miles on it will be selling for nearly the same price as a new one, which also seems a little crazy.

So, in the end, the new car, with the lower financing interest rate, and full warranty for a few years, won out. The monthly payments would have been close to a few older cars, because I guess the older the car is, the higher an interest rate you can sometimes pay, and the loan durations aren't always available for as long. So that 2004 STi would have ended up costing me about the same each month. And, add on top of that, if the used car bubble holds out for a bit, I could very possibly sell or trade in this BRZ in a year or two for something else, and not lose much money on it. I still wanted the car without that possibility, but we'll see how it goes :)

N Sperlo wrote: Every time I go new car shopping, the prices make me E36 M3 myself. Want to save money? Buy old.

I think it depends on what you're looking for.

When I shop for a new truck that's an equivalent to my current '95 diesel extended cab 4x4, the prices are staggering. $40K - minimum - and pushing $50K isn't hard. I have a hard time stomaching that kind of money for something I plan to beat on doing "truck stuff". Hell, that's about half the value of my house...

Cars, however, don't seem quite as bad. You can buy a pretty nice brand new car for ~$20K. While I can absolutely understand the desire to save money and buy old, doing so often requires an investment in time, space and skills some folks may be lacking to keep an older car running.

I'm going through this debate right now with my truck. While it runs fine, I could easily spend $1000's on a list of repairs and upgrades I'd either like to have or flat-out need. Rust repair (the door sills are GONE), a/c, cruise control, functioning brake controller (need), getting rid of the cursed axle-disconnect front axle hubs (I'll never buy another Dodge or GM 4x4 for this reason...), and a number of other things minor and major. Just doing any one of them wouldn't be a big deal, but if I add it all together and I'll spend enough to buy a much newer truck that doesn't need all of this. Not to mention have absolutely ZERO time available to do these projects. Nor the space to tear apart a 20+ foot long truck, fix it and put it back together.

^Part of the nice thing about dealing with a payment to have a new/newer reliable vehicle.........you have the TIME to work on your toys vs your DD.

Along with getting the time, it's relieved a big chunk of stress knowing that I don't have to worry about "fixing that this weekend or I can't get to work" etc etc.

Vigo wrote:

I always wonder who it is that pays the higher price for the more used up car.

Probably almost noone, and those that do are idiots. See, when a lightly-used car costs the same or more than a new one, that's what you call a ridiculously strong bargaining chip to get that price down... Or, you could just go pay someone else's slightly lower full price on a new car because it seems like a good deal compared to a made up price on a used car that wasnt going to sell for that anyway.

Yeah, I agree, but tell that to the dealers. There's a Subie dealer in town that probably does equal volume in new and used cars. They always have some interesting-looking trades on the lot - clean, solid 5-to-8-year-old Foresters, Imprezas, and some WRXs. They always have ridiculous asking prices and they will never budge more than a couple hundred bucks.

In reply to Ian F:

Hey, truck purchases can be another story, but any vehicle over 15 sacks, and the payment combined with insurance is going to be over rent and thats with a perfect driving record. 95 pickup does good although I'll be some bodywork besides replacing the E36 M3ty plastic door handles and I'm still contemplating buying or fixing the escort. Puh...

In reply to N Sperlo:

Time and space are the killers for me. Not that I'm rolling in cash, but money is less of an issue. My E30 has to find a new home for a number of reasons, but mostly because I don't have time to tinker with it constantly and I have no good place to park it where it won't start returning to earth. You know it's time when every time you have to move a car, it needs a jump because the battery has gone dead from lack of use. If I had a big shop where I could stuff it into a corner and forget about it for awhile and/or be able to leave it as a non-running work in progress, then I'd be more inclined to keep it. My truck has similar issues.

We snagged a great deal on an '12 Focus that sat on a dealer lot for 2 months. The issue was that it was right after they came out (6 months or so) and this one was pretty loaded (SES, I think, auto, Sync but no touch (thank god), leather, pearl paint, sunroof.) The only things it didn't have was the touch center, nav, and the wagon (which we wanted but beggars can't be choosers.) We got it with 5K miles for less than sticker on a brand new stripper and since we paid cash, financing wasn't an issue (Had her old car paid off and got a good trade on it). This is definitely not the norm but this car sat for so long that they were ready to deal.

This was also the case when I bought my 3 last year. My sister had a car in her dealer's network that was a 2010 3 with the same options and 15,000 miles that would have been more expensive than I paid for my brand new one elsewhere. Not only that, but she could have gotten my 2.9% and the new one had 0% financing. And I even got the color I wanted!

I looked at a few other cars at the time, and it was the same deal. The used Civic Si was going for more than the brand new model, even with it's scarcity at the time. If I could have found one, the newer model would have been a better buy.

The deals are out there though. Early last year, we practically stole the wife's 2010 3. She got a great rate, and the dealer where she bought it lost money on the deal to the point where I'm pretty sure they fired the salesman. They also took her POS 2007 Elantra sight unseen that was sitting on the Hyundai dealer lot waiting for a recall to be performed that Hyundai fought us tooth and nail over. They also screwed up a couple of things in the deal and to save face, they ended up giving her an extra key, can of touch-up paint, and floor mats, which would have been another $500 if we had to pay for them out of pocket. The car has been stellar so far.