Vehicles under $15k are 1.6% of the market, and their share of the market has dropped over 90% since 2019. The old advice that you can get a beater and drive it in to the ground for $5k hasn’t been true for years but it still seems pervasive in personal finance spaces.
I grew up hearing all sorts of addages about vehicles. “New cars lose tons of value as soon as you drive off the lot, so you’re much better off buying used”.
Once I grew up and started buying my own cars, I learned that the best miles a car has are usually right out of the factory. The sound dampening wears over time. The foam in the seats wears out. Scratches accumulate, colors fade, odors accumulate. Hoses leak, mechanicals fail.
A lot of this can be fixed, or mitigated with proper maintenance. But the ultimate lesson I learned is that the resale value only matters if you actually intend to sell the car while there is still meat left on the bone. I’m fine driving a car into the ground until it’s scrapped, so I don’t factor resale value into my purchasing decisions.
Even back in 2018 I noticed the price gap between new and used cars wasn’t as wide as I remembered it being back in 2011. I ended up with an Impreza with ~12k miles for $17k, but a new one would have been just over $20k. I was strapped for cash at the time, but I wonder if a new car would have been a better value even back then.
This was exactly the calculus I was doing with my wife in 2017~2018. Her car was a fourth-hand 2003 Hyundai Elantra which had been run in to the ground before she ever even got it (but to be fair, it was both free and better than what she was driving before). I was looking at used car prices and thinking, is it really worth it to save less than $5k when I get a car that’s 5 years newer with 50,000 fewer miles and all of its warranty in-tact? The PF advice I was seeing at that time was maddening, and mirrored a lot of what you’re saying - “cars lose half their value off the lot, buy a used civic for $5k and drive the wheels off” - but that had already not existed for years. And then the pandemic supercharged used car prices and they just sort of never came back down. And then rates went up and they still won’t come down.
We ended up buying a brand new 2019 Impreza in an undesirable color for $19k, financed with nothing down and 0.9%. Now it’s paid off, I feel like in retrospect it was very much the right call.
Those PF posts drove me nuts too. And if you pointed out that you got a new car for a little more than a used one, someone would immediately post up how they found a shitty used Civic 3,500 miles away from where I live for slightly cheaper, therefore I was a dumbass for buying a new car.
I’m on the very last life of my current car and I’ve been watching prices. To compare, I bought my current car for 8k. It had 99k miles on it and it has lasted 10 years with no major service other than an A/C compressor.
Granted the market 10 years ago was a lot different, but there is nothing in my area that I would feel comfortable financing for under 20k. At that point I can get a brand new Versa or Corolla for a few grand more. With either of those I get a warranty and brand new components. It’s not even a question which is the better deal.
Yeah, it’s very much YMMV. I got a Prius for ~$10k w/ <60K miles about 10 years ago, and new models were going for >2x that (I think MSRP was ~$25k). It now has 145k miles and has needed practically no repairs (maybe $2k?). So at the time, used was absolutely a better deal.
Today, a similar car would go for >$20k, and MSRP is similar ($28k-ish). So today, buying new is absolutely a better deal, if I can get it for MSRP (pretty big if these days).
So if I can get more than half of the useful life for significantly less than half of MSRP, used makes a ton of sense. But that’s not really a thing today. Had I bought new when I bought my car, I could probably get $20k+ for it today. I didn’t, so I can only really get $5k or so, but that’s still a great deal given that I put on nearly 100k miles over ~10 years.
I plan to drive my car until it dies, so I’m basically saving $15k or so buying used. If I bought today though, I’d buy new because used doesn’t make financial sense to me.
Toyotas and Hondas have pretty huge markups right now. A new Prius for example (in Texas at least) costs 39k (with taxes and everything) for the base trim.
I’m seeing advertisements for MSRP for both Prius and Civic, so ~$30k for 2023 model years for base trim. This is before taxes, just advertised price, so maybe $35k out the door after taxes, registration, fees, etc.
That said, I haven’t requested a quote from any local dealers, so those advertised prices could be unrealistic. But advertised prices are down from last year.
I went in person last month to two dealerships in my area, and they both had over 5k markups.
They also stated ~30k on their website.
Lame. It’s at least better than a year ago when everything was marked up >$10k.
Good point, I know you can find metrics on the average mileage cost of a car, including gas, maintenance, insurance, depreciation, etc. But I would be curious to see how those numbers fluctuate throughout the life of the vehicle. That is, what is the marginal cost of a mile, based on the already existing mileage. Based on the vehicle, you could plot the marginal mile cost structure, similar to how you would plot a yield curve.
I can tell by your writing that you’re a rational person and you’ve obviously thought about things. But…I’m not sure we’re arguing about the same thing.
The point is that you would previously be able to buy a new car for say $20k or a used one for $5k. The used one might drive nearly as well as the new one, if properly maintained. So you were “saving” $15k.
The idea that brand new items can lose value to their “steady-state” value (imagine a graph that sharply descends in the first year) isn’t an absurd one.
That said, I understand that some people might value that “new feeling” and want to pay that $15k difference. Or might value their time and troubles in potentially dealing with the issues of a used car.
Of course, people are raising the issue that the market might have changed recently. I don’t really follow the pricing of new cars. I remember a few years ago hearing that the car industry was in trouble because essentially cars were lasting longer and longer and so they were unable to keep on selling the new models to suckers.
I don’t know how long ago, if ever, a $20k new car was comparable to a $5k used car.
My first car purchase was in 2009: I got a 2005 Cavalier with ~40k miles for $8k. Cars cheaper than $7k were basically a couple months away from the scrap yard (unless you’re able to fix up a project car yourself, but I think that’s outside of the scope of this conversation). And even then: a $20k car in 2009 was a completely different class of car. A comparable car, the Cobalt, had a sticker price of about $16k. So, anecdotally, that’s a 50% discount in exchange for a car being 4 years old with 40k miles. Even that cavalier was a pretty terrible car that was both a bad experience to drive and costly to repair and operate.
I don’t think today you are ever seeing a $20k car being even remotely comparable to a $5k car. It’s not a $15k difference.
If the % was the same: of the choice was between a $20k new car and a comparable $10k used car, I think thats a close decision. The problem is that comparable used car is costing $17k or more. I think the conventional wisdom of buying used has swung too far and driven up the demand for used cars. I think the average buyer does not adequately factor in both the diminishing driving experience over time/miles and the increased repair costs into purchasing decisions. I also think that resale value is overvalued.
Of course, there’s other economic factors. Some people don’t have the luxury of choosing $20k vs $17k: they’ll take the $17k every time. I’m just talking about the decision making process for those who can make it.
*adddages