Buy Used Or New Cars?

Yesterday, while we’re going to the market, my wife noticed a small little car was on the test drive with the price $14999 sticker on the front windshield.  A young girl was test driving it and seemed very excited with the car. I looked at the car and told my wife that car should be sold for not much more than $15000 new.  I buy many cars in my life, leased, financed, cash, new, used, all types, but I’ve never bought a near new cars,  2-3 year old, it’s not SOUND in every way,  especially if we buy economical cars like Japanese or Korean cars, with high resale values. I don’t know why people buy near new cars? Sometimes we bought used cars without planning, never did any homework, never wanted to save money. We would go out to trade in our old car when it’s dying, breaking down and drive to the first dealer that the car could get to and take whatever the dealer gave us. The best money making for the dealers are the used and especially 1 or 2 years old cars.  

Unless you’re paying cash for the car, finance any car, the monthly payment and terms are the main thing that counts, that’s why sometimes, we even lease instead of buying, only when the lease is extremely good, it’s stupid. I’m going use the most popular cars to compare the pluses and minuses of buying new vs near new – Honda Accord LX – 4dr – 4 cylinders  - 2013 with CVT transmission (save gas) and the same model but 2 years older 2011. Besides the new body style, the new Accord LX has more features than the older generation.

There are 2 websites that we use to research for buying or selling our cars – Edmunds.com (mostly for consumers) and Kelly Blue Book (mostly for dealers) – Buying cars with Edmunds prices are normally close to market values and lower than Kelly Blue Book, especially with new cars. Also use the payment calculator to check the work.

People tends to get sticker shock when looking at new cars, and jump straight to used cars, but dealers never sell full sticker price on popular cars, sometimes, they even sell below invoice prices which thousands below the sticker. So, when we look at 2013 Honda Accord LX – sticker price should be around $23270.00 and if we look at a 2011 with 30k miles only $17.999, wow, what a savings. NO IT’S NOT!!!!! Use our logical and analytic heads to do the math which some people refuse to do.

If we look in the weekend newspaper ads or shop on the internet, most dealers will come up with the best deals for us and they sometimes will sell at invoice if you finance with them, they use the interests and incentives to dealers for profit. So, let’s look at Edmunds TMV, this is the basic standard LX Accord, no extras and don’t put these 18-20″ wheels on these cars, waste of money especially when it’s time to change tires.

    

Assuming all dealers want to beat each other deals and some sell for $21k and some sell for $22k and we definitely can buy it for $21500. Now here is the catch when we buy new cars, the interests are always lower than used cars at least 3-4%. If we plan well, sometimes, manufacturers even give 0% on their new cars. So don’t wait until our car break down and go get one in a hurry. We have good credit and $2000. down. We use here 1.99% as average for new car right now.

     

Now, $2000 down, $378/month for 60 months and we’re driving a brand new 2013 – CVT with better gas mileage than the 2011 and more features and 3 years 36000 miles warranty, brand new smell without the Armor All  chemical smells from dealers used cars.

But, I still want the used car because the idea of owning new car is too much for me!!! OK, let’s look at the 2011 LX cars with 30k miles or more (which the warranty is about to end and we have to buy extended warranty for about $1k or $2k extra).

Pre-owned cars at dealers now have CPO (certified pre-own vehicles), which doesn’t mean much, just cost more. Yes, they do tons of inspections or NO CPO, price are off a little.

     

So, we got a great deal for a CPO with 30k miles for $18000 and we also have $2000. down, but even with good credit, we only qualify for the best used car interests of 5.99%. But, if we buy the extended warranty that the business manager recommended, he/she may get the interest down to 3.99%, but the warranty for additional 3 years 36k miles (as a new car with deductible) will be $1500.00. We don’t want the warranty and take our chances. So the payment will be, then we worried so we bought the warranty then the payment became $357 for 60 months.

        

So, after said and done, how much did we save by buying a 2 years old car with 30,000 which brakes and tires may be needed soon. We have a warranty that is NOT a new car warranty and we saved $20 per month. 

Just think a little, 3 years later or 5 years later, we paid off the car and normally we may need to change to a new one. Which one would sell easier and more money, we only drive 10k miles a year?

5 year old Honda Accord LX with 50k miles or 7-8 year old Honda Accord LX (old body style) with 80k miles.

For those who have kids going to college – let’s do this calculation.

We expect to pay 4 years for our kids to get a bachelor degree of some kinds. First year in DORM, no need car, second – graduation 3 years, may need a car and we have $10k to buy an old car for the kid.

Look at the manufacturer national lease programs for cars, take your pick, We would pick the one with free maintenance for the whole lease then we know for sure we only worry about the payment- We’ve seen lease from $159 a month for 3 years to $225/mo, we can actually use the $10k to write a check for the whole lease, but we don’t want to. We wouldn’t want our daughter or son to have to worry about car breaking down, and 3 year lease is also a dead line for them to graduate, no fooling around. Well, they’re new drivers, god forbid, if the car got stolen or totaled, the lease gap -insurance will pay for it all, we don’t have to put a dime out as if we bought a used car, we only get a small portion of it back.

Random Popular Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>