I have heard from various sources all my life that it is ridiculous to buy a new car since it loses so much value the “the second you drive it off the lot.” How much depreciation does a car take immediately when it is sold and driven away? The reason I am asking is that a friend of mine is wanting to buy a Volkswagen Jetta (about $20,000) and the dealer has a lot of used 2003 vehicles with 500 to 3000 miles on it. Some of them were short term leased vehicles (I don’t know if those are counted as used), but some of them were actually sold (title was changed) and brought back. There are plenty of websites that tell you how much you should pay for a vehicle from the last model year, but none (that I can find) gives you a hint how much to pay for a used vehicle from the current model year. Any insight would be appreciated!
Of course they do, as soon as they ‘leave the lot’ they become second hand and immediately reduced in value!
Wow, chriscya, talk about a leave of absence. Where ya been?
Anyway, to answer your question… yes, the value of pretty much anything (including a car) decreases the minute it becomes “pre-owned.”
I feel i was a bit blunt there, i hadnt actually read the anything other that the thread title. Your sources are right it that they say it is ridiculous to buy a new car due to the immediate and ‘substantial’ decrese in value. The only thing I can really say is that it is nice to have that much money that this does not bother you!
Obviously there are also many incentives to buy cars new like finance deals including free insurance etc. can make it appealing and of course that fantasitc new smell that they have ( which i think is explained somewhere on this site). anyway, i will let someone with some authority on the subject try and help you now!
I feel i was a bit blunt there, i hadnt actually read the anything other that the thread title. Your sources are right it that they say it is ridiculous to buy a new car due to the immediate and ‘substantial’ decrese in value. The only thing I can really say is that it is nice to have that much money that this does not bother you!
Obviously there are also many incentives to buy cars new like finance deals including free insurance etc. can make it appealing and of course that fantasitc new smell that they have ( which i think is explained somewhere on this site). My brother has actually just bought a new golf V5 (here in the UK) one of the advantages from buying new is the ability to negotiate extras on the vehicle, you will not be able to do this with a second hand car. Anyway, i will let someone with a bit more authority on the subject try and help you now!
Edmunds.com is pretty much the gold standard in determining used and new car values. You should be able to find your answer there.
It’s not always as black and white as that. When I bought my car, I originally shopped for a 2 year old car. I had settled on, and almost purchased, a 2 year old car with 30K miles on it. However, I found a sale in the paper where I was able to purchase a brand new version of the car for only 1000 more than the used car (and I walked in and actually paid that price - no bait and switch). As far as I’m concerned, that was the better value.
Another thing to consider these days is financing. You’re looking at a new car, to which I will assign an arbitrary price of 20,000. A number of dealers are offering 0% interest these days. In order to get the same total cost when you include interest (and I don’t think you can get those 0% deals on a used car), your purchase price will have to be a lot less. That new car, at 0% interest, will cost you exactly the same total cost as a used car, costing 17,237 at purchase with 6.7% interest over 60 mos. (The best rate my credit union offers for a used car). If you don’t have access to a credit uniion, let’s say you pay a still reasonable 8% for 60 mos. Now, your price at purchase needs to be 16,769 in order to get the same total price for a car that is older and with some milage on it.
(Please note: Those calculations were made comparing 60 month loans, 8% sales tax on the cars, and a 2000 down payment, with no trade in or rebates considered)
Does a used car make more financial sense sometimes? Absolutely. This is just my suggestion that you might sometimes want to look at all the options, not just rely on conventional wisdom.
I’m not sure how much the automobile itself is depreciated. However, you can’t get back the taxes, dealer profit, dealer prep, and other such charges that are part of the cost to you.
When I worked at a dealership way back when, the list price for a 1989 Porsche 928 S4 was, if I remember correctly, $68,000. We would not purchase a used one, regardless of its mileage, for more than $60,000, and even then it was unlikely that we could turn one around at no profit, which would have been about $60,500.
In fact, it was even worse than that. The “sweet spot,” the price where it was guaranteed to sell, for a used S4 with under ten thousand miles on it was around $57,000 (it’s been a long time, but I’m pretty sure of that). Since we wanted to make money off of it, we usually wouldn’t purchase one at auction for more than $55,000 (and we unloaded more than one of them at auction for that price). However, we would sometimes offer a little more than that if we were taking it in trade. Today, you can expect to buy one of these monsters for under ten thousand bucks, or for less money than the car typically lost in value the moment it sold.
For some reason, the 928 was a hard-luck car as far as holding its value went (maybe it’s because it looks like a stepped-on Pacer). I don’t know how much a '78 or '79 928 went for originally, but I’m sure they were among the most expensive production cars sold in America at that time. When I was looking around for them a couple of years ago they could be had for under $5,000. The '78s and '79s were among the most reliable Porsches ever made, which might not be saying much, and fun as hell to drive. Five grand for one of those is a steal.
That of course is the most extreme example I know. As it happens, regarding the S4, we regularly bandied about the exact phrase you mentioned, chriscya. For that car, at least, it was the God’s honest truth.
Ugh. All this writing is making me nauseous again. I’m going back to bed. Hope I helped.
The short answer is that yes, as soon as the car is titled, it is forever a pre-owned car and therefore worth less. It doesn’t really matter if it only has 1 mile on it, because any title history search will turn up a previous owner.
However, aside from that point, you should advise your friend to RUN, not walk, from the cars you described.
The ones that were never titled but have a few hundred miles on them were most likely demo cars. The dealers used them for test drives, as a monthly perk to the employee of the month, what have you. You can bet that these cars were not properly broken in, were not cared for in any meaningful way, and are in general not a car you want to own.
The other class of car that was bought back is likely a “good will buyback.” Basically the car was/is a lemon that VW bought back from the customer to keep them quiet and not have them legally declare the car a lemon.
Thanks for the help. Y’all guys are right, there are some advantages to buying a new 2003 vehicle over buying a used 2003 vehicle- namely the better interest rate (1.9 or 3.5 for new cars) and the fact that Volkswagen is giving their dealers 500 bucks for each new car that they sell (meaning you can talk them down to invoice price). I know that a 2002 model loses approximately $3,000 in value after one year, so I guess that I would ask for $1500 to $2000 off the current price for a new 2003 (according to Edmunds) for the used 2003. Either way, the difference will be only about 10 to 20 bucks per month the way I figure it. Maybe she should just look for a 2002, take the 3 grand off and be happy that the first owner took the biggest depreciation.