It’s a lot less dramatic than it used to be over a significant period, like 5 yrs. The lowest depreciation vehicles (usually pick up trucks) sell for almost 70% of new after 5 yrs. Although others depreciate to more like 30% (Nissan Leaf and Chevy Volt are two stinkers for example).
I guess the original comment refers to say a < 1 yr old used car v a new one, where you can realistically say ‘it’s the same thing’, but there’s not a huge market in those. 2-3 yr old cars coming off lease are significantly cheaper than new ones, but you run into stingy people who say ‘oh come on, a 2-3yr car is basically a brand new one’, eh, not to me, and I’m the one buying.
As to whether it’s a good time now, I don’t think you need to consult your (inevitably cloudy) crystal ball to see what the economy generally with be doing in a year or two. Nobody knows, deep long recession maybe, or maybe not. Generally though in a consumer market like cars, which basically revolve around lack of price transparency (then eg TrueCar comes along, oh then wait a minute it kind of gets captured by the car dealers and isn’t 100% trustworthy anymore, etc) you’d kind of expect it to take time for things to settle out and have insight as a buyer into how much better the deals are. As many mentioned, the fact that a lot of car assembly plants also closed is a factor, but it probably also just takes time for the dealers to respond with seriously better discounts when inventory has been weighing on them awhile.
You can always go and shop and make low ball bids and see if you’re taken seriously.
0% financing for 7yrs, so 3.5 average life of amortizing loan, best 3-4 yr CD’s yield around 1.9%, say 1.42% after tax, roughly say 3.5*1.5%, it’s equivalent to ~5% discount upfront. That’s not nothing (unless they are 5% less aggressive on the price than they would be for cash, then it is nothing), but not exactly a steep discount all by itself.
No, pickup trucks do not sell for 70% of their value after 5 years. Average depreciation is 40+% after 5 years, with only the Toyota Tundra being an outlier at around 35% instead.
Depreciation is much worse for most vehicles, especially luxury prestige vehicles. You definitely lose a couple thousand just for driving it off the lot for almost any type of vehicle.
I used to be someone who always bought 1-3 year old low mileage cars. I’d figure out what I wanted and go find it. However, the last 3 cycles (between my wife and me) I haven’t been satisfied with the availability or discount level on what I wanted, so ended up buying new. As I mentioned, I drive a car until it’s DEAD (half the time I give the corpse to some teenager) so I don’t think the depreciation is as much of an issue.
But I do wonder if there’s been a change in the market, where the used car depreciation isn’t as much as it used to be.
There’s always some curmudgeonly guy (almost always is) saying that for as long as I can remember. But how relevant is it given that there’s basically no market in one minute old cars? The next real market after new cars is 2-3 yr old cars just off lease. It’s fair enough if some people prefer those to new cars. In fact I might buy one before long to replace the 15 yr old car which we park on the street in an urban area. It’s gonna get scuffed up by careless parallel parkers, tree stuff, bird crap, out in the sun, so why mess up a new car? However, I’d be kidding myself to say a 2-3 old used car is the ‘same thing’ as a new car. It’s paying less to get less, a trade off based on personal preference and situation, like all kinds of purchases, silly to tell people how much they are ‘losing’ by paying more to get more. Depends how much they value the ‘more’. We rent an indoor space for our other car (2018 BMW M2), bought new. I wanted it so I got it, simple as that and glad I did. If I wanted minimum cost transportation I would not have bought that car at all, new or used. If really trying to minimize expenses we don’t 100% need any car where we live.
Wait until the late fall when the new 21 model year cars come out in full force. Then you will most likely see fire sales on the remaining 20 model year vehicles, especially if they are being replaced by major model changes.
I see “used” new cars all the time. People die, people return their cars, dealers use them as loaners/shuttles for a while. And they don’t sell for the same price as new cars, or even close.
There are VERY few cars (basically Jeeps, Toyota trucks/SUVs, and Porsches) that hold in the 30% range for 5-year depreciation. After you get past the top 5 vehicles, they rapidly approach 40% and are over 40% by #11. And none of those include the best-selling pickup truck manufacturers. So if you want one of 5 cars, most of which are very shitty for commuting, you can keep your 5 year depreciation below 35%
It does seem that used cars hold their value better than before. I bought a new car about a year and a half ago for under $20k, steeply discounted after a lot of negotiation. Dealers were asking about $2k less than i paid for two-year old ones that were missing key safety features standard on the new models but only available as extra-cost options on the older ones. A couple years ago I was looking for a used sporty car under $20k. I saw dealers asking about $20k for 8-10 year old Nissan 370Zs with anywhere from 30-80 thousand miles on them. Brand new ones similarly featured were starting at about $25,000.
All I’ve got is to echo what others have said. I haven’t seen any discounts being offered, but there are plenty of 0% offers floating around.
Si Amigo makes a good point about year end discounts if you’re willing to wait that long and risk interest free loans not being offered. But with good credit, 2-3% loans were standard before COVID so you could potentially get a bigger discount than the interest you would be paying making that the better deal.
If you keep a new car for around 7 years then buying new is about the same as buying used. If you want a new car every few years then buying new is a bad idea.
Remember that the dealers buy the cars from the mfrs and basically re-sell them so they are not going to short themselves if they can possibly help it. 0% on a new car means warranty and most people will take their car (even though they don’t have to) to the dealer for maintenance, which is where the real profit is. If you’re locked into payments for 7 years and bought the extended warranty, so much the better for them.
I was going to pay cash for my last car — well actually, credit card so I get the miles — but Jeep had 0% financing so I jumped on that. OK no miles, but yes it’s free money. Even more so my money can keep earning interest while Jeep has paid for my car.
So I don’t need a car but am seeing good financing offers, and VW has commercials out saying they’ll make the first payment or two.
I would expect to see prices drop, if not now then eventually.
You won’t see the best deals online. You will see the best deals by doing your research on exactly what you want, going into a dealership, playing it cool, and making a lowball “out the door” offer to see if they will take it. Rainy days and end of month tend to be best. Yes it’s stupid you still have to play games but you can save a lot of money.
I bet the rental car agencies are going to be puking up supply real soon.
LAX rental car lots are bumper to bumper full of rental cars. I mean, Avis owns Thrifty and Budget. I rented a Mustang for $50/day last weekend. I was the only one on the airport shuttle going to the rental lot. I was taken to the Avis lot, which serviced Thrifty and Budget from the Avis office. It was 90% bumper to bumper parked cars. They tried the tricked out upsell vehicles out front. Tried hard to interest me in a $20 upgrade for a GT, but I declined as the odds of a speeding ticket or accident is too much for me.
When I returned the vehicle, I almost missed my flight. My bad, I forgot where I actually got my Thrifty vehicle. I went to return it to Thrifty, which was closed and wall to wall vehicles. A worker there told me to return at Budget. So, 2 miles away, I get to Budget and it’s completely closed and bumper to bumper full. I mean, I don’t think they can shoe horn in another vehicle.
I drove by Avis but there are no signs out that it is servicing all 3. Honestly, I couldn’t remember if I had picked up at Enterprise or any of the other brands. I called Thrifty, and they had no clue and gave me the closed address. Web search turned up jack, but finally I saw an article that mentioned Avis, Budget and Thrifty. Drove into Avis, finally saw a sign for Thrifty, and managed to drop off and make my flight. BTW, I am not sure that rentals get covid cleanings before being turned over. I brought my own Clorox wipes and cleaned it out when I picked up.
Anyhoo, that’s a long winded way of saying that the rental car companies are in deep doo doo, and I’ll bet they are flipping cars like no one’s business real soon if they are not already.
We were planning on buying a new car later this year, but the 0% financing options right now are insane. I know exactly the car I want and color, I wrote a bunch of dealers and asked them for their best price and that I’d go with the lowest price. A couple dealers said sent me prices for completely different cars and I just stopped responding to their emails. I have four bids and will probably buy it this weekend. The lock down seems to have helped cut through some of the BS.
As far as used cars, Hertz may go bankrupt which means their fleet of half a million gently used cars could enter the used car market.
However due to the recession, I doubt as many people are buying new cars as normal. Which means used car prices would go up due to that.
But I’m also guessing due to economic desperation a lot of families or couples will be selling their 2nd or 3rd car for extra money, and cutting down to just 1-2 cars instead.
Was new car production impacted by the virus? I thought it was.
It just seems like the used car market will see depressed prices and now could be a good time to buy.
My impression is if you shop around, an ~8 year old car has lost about 75% of its initial value, but may have another 5-10 years of life left in it.
Other than buying a new toyota or honda since those hold resale value well, from a strictly financial POV I don’t know when buying new is the best idea.
Gently used? Shirley you jest! Rental cars can be a crap shoot because people do things to them that they would never do with their car. Still they are well maintained. Also most rental cars have the lowest levels of options (especially the ones they put up for sale at reduced pricing), so take that into account. Possible to get a great deal, I’d recommend checking it out but buyer beware is always the mantra to go buy when buying any used car.
Enterprise had yearly sales back in the day that the local FCU would finance back in the day. Enterprise even gave warranties with the cars. The Nissan and the Subaru which we got through them run very well and have lasted a few years (so far). When I saw Wesley’s post, it reminded me of the conversation I had the other night that if we’d needed the cars now, we would have saved even more money.
Buying new is never the best idea for absolute minimum cost. It is often what I’d call the ‘risk adjusted’ lowest cost for people who aren’t into diagnosing and fixing cars themselves, and/or too busy to deal with car trouble, and/or need maximum reliability.
One of our current cars is 15 yrs old (we bought it new, one of our kids had it for awhile but basically one owner). It’s been reliable (a Lexus) but now getting to the point where it’s having more frequent trouble. Got around a few 1$k repair of air suspension system a few years ago by replacing it with few $100 coil spring kit from Toyota SR5. Now it’s giving a funny combination of ABS and VSC warning lights intermittently when stopped, and sometimes also won’t shift out of Park without pressing the interlock release button (under a little tab you pry up near the shifter). User forums say it’s often as easy as getting a new gas cap…go figure how that would be related, but apparently often does the trick. So I’ll try that, then on to progressively more expensive possibilities like brake light switch on the brake pedal, worn brake pads, $2K+ ABS controller. If I was using this car to commute, or as generally busy as I used to be, it would be long gone. Although that would be more expensive.
And anyway saving money isn’t always the goal. I got my BMW M2 new because I felt like it. I wasn’t aiming to save money. A lot of times on the internet people who seek the cheapest possible transportation talk past people who aren’t seeking that particularly, or solely.
But how relevant is it given that there’s basically no market in one minute old cars? The next real market after new cars is 2-3 yr old cars just off lease. It’s fair enough if some people prefer those to new cars. In fact I might buy one before long to replace the 15 yr old car which we park on the street in an urban area. It’s gonna get scuffed up by careless parallel parkers, tree stuff, bird crap, out in the sun, so why mess up a new car? However, I’d be kidding myself to say a 2-3 old used car is the ‘same thing’ as a new car. It’s paying less to get less, a trade off based on personal preference and situation, like all kinds of purchases, silly to tell people how much they are ‘losing’ by paying more to get more. Depends how much they value the ‘more’. We rent an indoor space for our other car (2018 BMW M2), bought new. I wanted it so I got it, simple as that and glad I did. If I wanted minimum cost transportation I would not have bought that car at all, new or used. If really trying to minimize expenses we don’t 100% need any car where we live.