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Buying a car after college, new or used?

Gregg2 said:
Not so fast! From Edmunds: ...Snip
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That entirely depends on how "used" the car you buy is. I've purchased a two year old Chevy Suburban with 16000 miles, at 16,000 less than the best price the dealer could give me for a brand new one that was similarly equipped. In this case it makes a lot more sense to buy used. There is practically no difference between how long both of those will last.
However, I would never buy a used car with over 50,000 miles.
 
Buy used. I would find something reliable for around $10K, no more. Since you don't have much experience driving yet, there is a good chance you'll get into fender-benders with this car and wrecking a newer car is awful for resale value. There are other reasons too such as depreciation, cheaper insurance, etc.

If you buy something Japanese like Honda/Toyota/Nissan, etc buy from an owner and bring it to a trusted mechanic before purchase for inspection. That's the best bet. Used car dealerships are more likely to lie. Look for maintenance records from previous owner(s) and do some research on the web for this particular model.

What not to do:

1. do NOT buy a luxury car. Nobody needs one out of college and it will be easier on your wallet as less electronic gizmos means less problems down the road
2. do NOT buy German or European if you live in US. Those tend to be more unreliable than Japanese car and are more expensive to fix as well as requiring more maintenance
3. generally I would avoid American cars. There are a few exceptions to this but they're rare and far between and these tend to nickel-and-dime you to death
4. look for a car with over 100K miles. Ideal mileage in your case is somewhere between 60 and 90K
5. do NOT buy from shady people such as teenagers, racers, ricers, etc

If you learn to do basic maintenance yourself you can save a LOT of $$$. There are many communities on the web, especially for enthusiast models, that are willing to help with diagnostics and fixing. Sometimes people get together and wrench on their cars on weekends, get to know those!

Here is my own example: a couple of years after I graduate from college I bought a very nice Acura Integra from a woman in her 30s. Car was unmodified, well-maintained and in good shape. I got a good deal and it lasted me 6 years without major issues until I traded it in.
 
I calculated 3 year costs of new versus used and it works out to about $2000 per year savings for the used car. I took insurance costs, maintenance, opportunity costs and depreciation into account. I entered a similar 3 year old same model used car with 36,000 miles on it. New was about $37K, used was $25K

You can't say you immediately "saved" $12,000 on a used purchase, because there is value in a new car that's not in a used one. The 3 year old car has 3 years less useful life, don't forget. And, the first 3 years of a new car are nearly cost free.
 
senseless said:
I calculated 3 year costs of new versus used and it works out to about $2000 per year savings for the used car. I took insurance costs, maintenance, opportunity costs and depreciation into account. I entered a similar 3 year old same model used car with 36,000 miles on it. New was about $37K, used was $25K

You can't say you immediately "saved" $12,000 on a used purchase, because there is value in a new car that's not in a used one. The 3 year old car has 3 years less useful life, don't forget. And, the first 3 years of a new car are nearly cost free.
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First 3 years are not free at all. Other than major depreciation you still have to do maintenance which costs quite a bit of money. As for 3 years for useful life that's also very arguable. It would only be the case if you plan on driving the car into the ground. Otherwise it depends on so many things including mileage, use conditions, climate, storage, etc. There are some 20-30 year old cars out there with very low miles with plenty of life left in them which render your algorithm useless.

But the main thing is to buy a car with some miles. I would aim for more than 50K because most modern cars can easily handle 200K with proper maintenance so that's not much.
 
I would suggest buying something that won't bury you in payments. It's not fun if bills take whatever you earn.
 
Is it a bad strategy to buy new with the intent of keeping it 10+ years....I have an 02 and plan on keeping it for as long as it can run....I wanted new because I knew I would maintain the car and drive it with care....I maintain it regularly and have no mechanical issues to pour money into....I feel like when you buy used you have little idea how the car was treated and often they end up money pits for repair costs....
 
PCP plan - Brand new car, with fully warranty and some do a service plan so no extra costs except for wear and tear. You have fixed monthly payments that you know you can afford, at the end of the term you simply hand it back in and pickup your next brand new car!

Also, in my experience brand new cars are cheaper to insure than used cars [like for like].

Used cars are expensive to own unless you have a very good private warranty policy [which is expensive in its own right!], a turbo costs £1600 main dealer, steering rack £2000+, etc.... making it false economy.


.
 
mgartner0622 said:
That entirely depends on how "used" the car you buy is. I've purchased a two year old Chevy Suburban with 16000 miles, at 16,000 less than the best price the dealer could give me for a brand new one that was similarly equipped. In this case it makes a lot more sense to buy used. There is practically no difference between how long both of those will last.
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Yes, that's important; the mileage.
But, my fear is expressed in the last sentence in this quote:

BigPrince said:
Is it a bad strategy to buy new with the intent of keeping it 10+ years....I have an 02 and plan on keeping it for as long as it can run....I wanted new because I knew I would maintain the car and drive it with care....I maintain it regularly and have no mechanical issues to pour money into....I feel like when you buy used you have little idea how the car was treated and often they end up money pits for repair costs....
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No, I don't think that is a bad strategy. Speaking of which...


senseless said:
I calculated 3 year costs of new versus used and it works out to about $2000 per year savings for the used car. I took insurance costs, maintenance, opportunity costs and depreciation into account. I entered a similar 3 year old same model used car with 36,000 miles on it. New was about $37K, used was $25K
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Sure, if you limit your analysis to a 3 year period, used will come out on top. The larger question is that if a long term strategy for car ownership. Then it becomes more complicated, and can tip the balance in favor of buying new.

Still, if you can find that two year old car only driven to church once a week by that immortal little old lady from Pasadena, buy it!
 
Synchromesh said:
First 3 years are not free at all. Other than major depreciation you still have to do maintenance which costs quite a bit of money.
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Two problems with that statement:

1. The first 3 years, a car is not going to need much maintenance. Oil change, tire rotation. Maybe replace the air filter. That's all cheap. Maybe even a DIY job if you're mechanically inclined. You may need new tires, depending on how good the factory ones are and how hard and how much you drive. But tires can be unpredictable - you never know when a well placed nail on the road or a punk ass kid with a sharp knife who thinks slashing tires is fun is going to force you to buy new tires so you should always be prepared for those.

2. A lot of manufacturers now have free maintenance for the first few years now. All of my maintenance on my VW GTI was free for the first 3 years, well, I hit the 36,000 miles first before 3 years because I drive a lot. But you get the idea.
 
I'm graduating this spring 2012, and back my freshman year I thought I would buy an BMW when I graduate 😛 but I'm heading to grad school and the job market sucks....

I will probably be $60-80K in debt...

I will probably buy a used one, in like 4-5yrs from now... But it will be a BMW or Lexus or Toyota from the 2000s.. 😉
 
FYI: You drive thousands of dollars off the lot when you buy new. Immediate depreciation. Buy used with low mileage/mint condish.
 
I've never owned a new car in my life. I find it difficult to pay that much for a new car when I can get a much better car for less second hand. So far I've had a Mazda MX-5, a Jaguar XK8, a Lotus Elise and now have a Porsche Boxster S. The most I've ever paid for a car was £16,000...
 
felixgun said:
FYI: You drive thousands of dollars off the lot when you buy new. Immediate depreciation. Buy used with low mileage/mint condish.
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Hmm. Maybe you should read some more posts in this thread. That point has been discussed in much more depth than your quick version.
 
Gregg2 said:
Hmm. Maybe you should read some more posts in this thread. That point has been discussed in much more depth than your quick version.
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I read all of the posts thanks for looking out though. I was just stating what my opinion was... this IS a forum to discuss opinions right?
 
felixgun said:
I read all of the posts thanks for looking out though. I was just stating what my opinion was... this IS a forum to discuss opinions right?
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You are correct, and your opinion is reasonable and makes sense. Used cars are a better deal, no matter how you cut it. Whether it is slightly used or a piece of crap for $1,000. Your money goes further if you buy used, and know what you're buying (don't buy someone's problem). That being said, I can understand wanting new. I did at one time, and followed through. Don't really see a good reason to again unless a great deal comes along on a leftover or something.
 
ericrwalker said:
You are correct, and your opinion is reasonable and makes sense. Used cars are a better deal, no matter how you cut it. Whether it is slightly used or a piece of crap for $1,000. Your money goes further if you buy used, and know what you're buying (don't buy someone's problem). That being said, I can understand wanting new. I did at one time, and followed through. Don't really see a good reason to again unless a great deal comes along on a leftover or something.
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I agree with all of this! It's just not logical to buy new. If you find a low mileage '11 used it's pretty much like getting a new one anyways as long as the original owner didn't trash it.
 
Gregg2 said:
Ok guys, those folks at Edmunds are just idiots I guess.
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Considering most people drive cars for longer than 5 years total in their lifetimes, I guess I would qualify them as idiots for crafting their argument and financial analysis over an arbitrarily short period of time.

I don't care at all about the new/used debate for a 5 year period. I care about the entirety of my driving life - ie well over (hopefully!) 40 years total. Whether or not it is best for the next [period of time shorter than that] really doesn't matter for me.

What I wish they'd do is some longer term stuff. Where the time value of money matters or financing costs or opportunity costs of spending $400+ a month on new payments matter.

Based on that example, I'm tempted to say the person buying a 10kish car is by far the best financial bet - after 5 years, it seems about 14k less to buy this as compared with the new car (ignoring resale on the new car - the entire point we are talking about though is to keep the car longer?). What this means is you get paid $4k to get another car (as compared with buying new) 5 years when you purchase your second car.

But this also means two things. First, you spend 1/2 as much up front as compared with new - this means you save on the time value of money a TON. If anyone ever says "I'll pay you 30k now if you give me 15k now and another 15k after 5 years" it's an awesome deal - take it. This is somewhat the argument they are trying to make - a much larger initial cost, with "savings" later - or at least comparable figures, is somehow better than a smaller net sum scattered throughout 5+ years.

This also means that instead of investing the full price up front you are far more likely to be able to pay outright instead of financed, which also saves money. I have no idea if that was calculated into the edumnds report but I would assume no.


I guess, people like myself will be glad for others to continue to buy new cars so that we can benefit by them 🙂 The ONLY time I would consider buying new is if I somehow knew I was going to have a certain car for 10+ years, wanted a very specific and unique set of options, trim, and colors for some reason, had the majority (if not all) the cash on hand to self-finance, and had plenty of time to negotiate with dealers.
 
ender land said:
Considering most people drive cars for longer than 5 years total in their lifetimes, I guess I would qualify them as idiots for crafting their argument and financial analysis over an arbitrarily short period of time.
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Similarly, having a discussion about whether it makes sense to lease or buy without considering how new of a car you want to have at any given time is senseless (e.g., comparing someone who leases a car for 2 years and then trades in to someone who buys a new car and keeps it for 8 years ignores the fact that the person who leases the car leases it at least in part for the benefit of never having a car >2 years old). Saying this is of no value to them is like calling everyone who eats chocolate ice cream an idiot because you don't like chocolate.

It also ignores a wide variety of other non-rational aspects of the decision. There's more to this than just TCO.
 
mkrishnan said:
Similarly, having a discussion about whether it makes sense to lease or buy without considering how new of a car you want to have at any given time is senseless (e.g., comparing someone who leases a car for 2 years and then trades in to someone who buys a new car and keeps it for 8 years ignores the fact that the person who leases the car leases it at least in part for the benefit of never having a car >2 years old). Saying this is of no value to them is like calling everyone who eats chocolate ice cream an idiot because you don't like chocolate.

It also ignores a wide variety of other non-rational aspects of the decision. There's more to this than just TCO.
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Absolutely. Lots of factors.

My understanding of this thread's discussion is it is a purely financial perspective, however (I think? 😀).
 
ender land said:
I don't care at all about the new/used debate for a 5 year period. I care about the entirety of my driving life - ie well over (hopefully!) 40 years total. Whether or not it is best for the next [period of time shorter than that] really doesn't matter for me.
_____

The ONLY time I would consider buying new is if I somehow knew I was going to have a certain car for 10+ years, wanted a very specific and unique set of options, trim, and colors for some reason, had the majority (if not all) the cash on hand to self-finance, and had plenty of time to negotiate with dealers.
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That's a rephrasing of something I've already posted, so we agree.
_____

That's what I have done for my last 4 vehicles (in a 2 car household). Kept two of 'em for 12 years, one for 10. The other one is now less than 1 year old. I guess I don't know I'll have the car for 10+ years, but I certainly anticipate that I will.
 
USED.

I will buy a brand new vehicle one day, but for now my wife and I both have "Newer" vehicles which we purchased 2-3 yrs used w/low miles. On each we saved over $10K off MSRP. Each has been virtually trouble free. I'm graduating in 4 months with over $200K in debt, so we'll be keeping these vehicles for several more years, until either they become too expensive to maintain or until my loans are paid off (7-10 yrs from now).

I gotta say, it's amazing to have a $150 car payment (combined)!
 
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