“This old thing? Oh, I only keep it around because it gets good gas milage.”
If we got together and made a list of reasons why the average person buys a brand new instead of gently used car, it would probably look a little something like this:
- Reliability
- Actually frugal since they intend to drive it into the ground
- Uh, I dunno
- New cars aren’t *that* much more than a used car
- Stop asking me, geez
Let me add another reason, one that exists but nobody ever mentions.
Vanity.
Yes, even though the PF world constantly likes to point out that we’re not the same as the rest of those dumbasses who do stuff like finance vacations and regularly exchange money to kill brain cells, the fact is we’re hardly the epitome of smart decision making.
I can forgive mistakes that are from screwing up an analysis, or even because your wife told you that “God dammit, there’s no way I’m driving a used car.” But what I hate is when we conveniently leave out facts that will make us look bad. But that’s exactly what we do when it comes to cars.
I guarantee you that some of your decision to buy a new car was motivated by having a new car. Hell, I’ll go further and say I’m pretty confident in saying that damn near 100% of the decision was motivated by vanity. We associate success with driving a spiffy set of wheels. That’s the way it is, and will always be.
Answer this question honestly. If I gave you a chance to buy a car from 2005 with only 10,000 kilometers on it for the price of $5,000, would you do it? Or would you spend six times that on something new?
I don’t think many would. They’d hem and haw, making up excuses about how they don’t know if it’s been maintained, or that the deal is too good to be true.
But Nelson, a new car is more reliable! And depreciation doesn’t matter, since I’m going to drive it into the ground!
Man, my straw man arguments are stupid. There has been very little progress made in making engines and tires better in the last ten years. A car with 10,000 kilometers on it that’s been sitting in a garage for 10 years and one that’s only been driven for six months are virtually identical, with the exception of fancy tech doodads. Cars do not deteriorate just by existing. You have to use them.
How about the depreciation myth?
That one is even easier to bust. Assume a more realistic scenario, between a car that’s three years old with 50,000 kilometers and the equivalent brand new one. Assume the used one costs $20,000, while the new one costs $30,000. The first has a projected life of 12 years, while the second will survive 15.
Here’s what your car is worth, assuming 10% depreciation per year
| Year | Used Car | New Car |
| 1 | $18,000 | $27,000 |
| 5 | $13,122 | $17,714 |
| 10 | $7,748 | $10,460 |
| 12 | $6,276 | $8,472 |
| 15 | N/A | $6,176 |
Some observations:
- After their projected lives, the two cars are worth within $100 of each other
- Used car guy paid $13,724 in depreciation, or about $1,100 per year
- New car guy paid $23,824 in depreciation, or about $1,600 per year
- New cars suffer their greatest depreciation in the first three years, meaning we were probably a little generous
Okay, how about reliability? I won’t argue that, in general, newer cars are more reliable than older cars. But there are ways to mitigate those costs, by either using backyard mechanics or other lower-cost options like Mr. Lube. Besides, the difference in repairs in the lives of those two cars above will be next to nothing. The first guy will have a bunch of repairs starting at about year 6, while the other guy will have his start at year nine. Each will put up with 6 years of fixing their car once or twice per year. All the first guy did was push his repairs further into the future.
That leaves us with variations of “X model is practically cheaper to buy new rather than used.” Sure, that’s true for certain models, mostly Toyotas and Hondas. People buy them because they’re perceived to be the most reliable. Think of them as the buy-and-hold of the car world.
Here’s a novel concept. Instead of you buying one, buy American. Most U.S. models are almost as reliable as their Japanese cousins, but come with a much lower price tag as used vehicles. Stop being so inflexible with your model and you’ll save money.
If more people came out and admitted they wanted something new because of vanity, I think I’d be cool with it. But instead we come up with other reasons that dance around the truth. So from now on, every time I see somebody write an “analysis” of why they bought a new car, let’s just go ahead and put vanity at the top of the list.
/raises hand
/blames wife
The next car I buy will be brand new. Here’s why:
New car cost: $17k
Used car (same model, with 50k miles): $13k
Used car (same model, with 100k miles): $9k
The used car prices imply that the first 50k and 100k miles are worth only $0.08 each, ascribing no value to the risk that the car was treated like crap. That’s nonsense. If I could pay just $0.08 per repair-free mile on my current car, I would throw my whole savings account at it. Even if I could get the car with 100k miles at $5k, it still isn’t that great of a deal at $0.12 per mile, in my opinion.
Buying used, based on prices in my local market, is pretty dumb on the low-end of the spectrum. As for cars priced beyond the economy car base models, yeah, I agree with you. I’ll probably never own a car worth more than $20k at any point in its life. Just don’t care, really.
The next car I buy will be brand new. Here’s why:
New car cost: $17k
Used car (same model, with 50k miles): $13k
Used car (same model, with 100k miles): $9k
The used car prices imply that the first 50k and 100k miles are worth only $0.08 each, ascribing no value to the risk that the car was treated like crap. That’s nonsense. If I could pay just $0.08 per repair-free mile on my current car, I would throw my whole savings account at it. Even if I could get the car with 100k miles at $5k, it still isn’t that great of a deal at $0.12 per mile, in my opinion.
Buying used, based on prices in my local market, is pretty dumb on the low-end of the spectrum. As for cars priced beyond the economy car base models, yeah, I agree with you. I’ll probably never own a car worth more than $20k at any point in its life. Just don’t care, really.
Of course, even if it was treated ‘badly’ by old perceptions, it would still be in pretty good shape. With all the forms of electronic management of every aspect of the car mechanicals, cars are much better at dealing with aggressive driving than the the past. Sure, tires and brakes wear out (and the suspension), but a test drive will reveal all of that – gone are the days of carburetors potentially flooding or starving your engine of fuel depending on how well you drive to match the supply.
I think the sweet spot is off-lease or ex-rental cars in the 2 year old range – especially for rentals they’ve been decimated by the bad reputation (who washes a rental car?!), but you’re guaranteed that maintenance was done since that is built into the contract.
But yeah, if it’s close don’t even bother with used. Even if the mechanicals are fine, there is no “Check Interior” light for abuse to the rest of the car.
The used car market in your part of the world is far different than mine. At least, last I checked. But my part of the world is experiencing a bit of an oil slump, so I’m guessing it’s right.
My personal example. The equivalent new car was $21k, I bought it with 40k miles (60k km) for less than $10k taxes included.
There’s definitely logic to your way if the numbers are the same. But in my experience, if you’re not terribly picky about the model, there will always be deals like the one I found.
My last two cars were new. Mazda Protege (owned for 10 yrs – drove into the ground at 300 000 km) and current Hyundai Elantra Touring. Neither were purchased with vanity in mind…just look at them. If vanity was a concern I would have bought something else that might get a glance from a sexy lady… my Hyundai does not. My decision was simple – I don’t know much about cars, I would rather buy a low cost well built new car, drive and maintain it myself from day one and get the benefit of the warranty. Maybe your argument holds up when the new car price is 35 thousand or more and used will be significantly less, but when you can buy new for under 20 G’s, why take a chance on a used car? If the example you gave came up and I could buy good used for 1/6 new price, sure, but to save 2-3 grand and get a used car with little warranty left that might have been driven into the ground by the first owner(s) – no thanks. Also – what JT said – he did the math.
I really should have addressed the point of the previous owner driving the car like crap in the post. I think if you’re buying it privately, it’s pretty easy to determine if someone drove it badly. Just keep your eyes open when you go to their house to look at it. If the yard is nice and the hedges are trimmed, then chances are they take care of the car well too.
One more thing: used car guy still has $9000 to invest… new car guy has $0.
Eh, add diesel Jetta’s to your list of things that don’t depreciate. They were about $5k less and came with 25,000-40,000 km on them for 2-4 year old models. Warranties only last for 60k km on most things these days. They beat the crap out of everything else we test drove, plus the newer ones get equivalent mileage to most of the hybrids on the market with a fraction of the price tag.
Maybe one day I’ll get around to replicating your math on the particular vehicle that we bought.
The key is to not be picky about the model. I agree there are plenty of models that hold up their value really well.
That’s not going to happen with me 🙁