Somewhere between 1 and 2 is usually the most sensible approach, though I haven’t run any numbers as I don’t follow used car prices closely. I’d suggest a car of around 5 years and 75,000 miles. Cars in that bracket are typically still reliable, though they may start needing bits and pieces replaced that are essentially maintenance, not repairs, as they are parts that eventually wear out in almost all cars. Brakes, sensors, fuel pumps, etc. Any individual car won’t need everything, but likely need some. If the car is a good one, it may nFor one of the increasingly rare cars with a timing belt, that may require changing. If you are driving average miles per year, after 3 years you’d have a car with maybe 125,000 miles, which isn’t especially high for a modern car and should still have quite a bit of life in it and decent resale value. Or you can keep it. With limited driving in a city you could have such a car for years more. I live in San Francisco and we only put about 6,000 miles per year on our car, and most of that is trips out of town.
As for what I’d get, I’d be looking for something with really good reliability to keep potential repair;maintenance costs low, because the difference between purchase price and sale price should be lower than the cost of keeping the car going. Cars in that age range have already done a lot of their depreciating. A quality car will cost more to buy, but also hold its value, so the loss of value won’t be much greater than for a lower quality car. By quality, I mean reliability, not status, as most European luxury brands have the appearance of quality, but aren’t very reliable and are expensive to maintain and repair. I’d be looking for an Asian model or one of a very few domestic models with similar quality. Smaller will be cheaper to buy, insure, fuel, etc, but not necessarily very much so over one of the better mid-sized models, and those can be more comfortable to drive if your commute will be long. Toyotas and Hondas tend to cost more used, but you can also sell them for more when you’re done, and the best of them are highly reliable. Mazdas are also quite good, with the other Asian brands slightly less consistent. Subarus also command a premium because of their very good AWD systems. If you’ll be doing a lot of bad weather driving, especially onoorer roads, that premium can make sense, otherwise, not so much.
Cars I would look at if I were in your shoes? Ford Fusion, with the four, preferably. The current one has a few issues, but the previous one was based on the highly reliable Mazda6 (another good choice). The Fusion was popular so there are lots of them available, they have reliability similar to good Japanese cars with reasonable prices. It is also comfortable and roomy, so nice for commuting. The Mazda3 has been one of my favorites for years, with better driving manners than most competitors and few problems. I also like that it comes in a hatchback or sedan. The Scion xB (the current generation, not the tiny first gen car) has excellent Toyota reliability, and surprising room and utility, but isn’t as popular as the related Corolla. The Toyota Matrix and its near twin, the Pontiac Vibe, are also cousins of a Corolla under another name. As a Pontiac it could be a very good value. Ugly dashboard, but just look at the road. If you aren’t driving as many miles, the Honda Fit is a good car. It would also make a great city car if you decided to keep it, but it’s not as small as it first looks and is OK for commuting, if not as relaxing as a bigger car. It’s still bigger and quicjer than a Honda Civic from the nineties, and people didn’t think anything of commuting in those. There are plenty of others, of course. The Consumer Reports guide is a good resource for getting a sense of the likely suitability of unfamiliar cars. And anything you are interested in buying as should be checked out by a mechanic. If you’re buying an older car expect there to be some items that will need work soon, just not too many. And stay away from rust (beyond the superficial kind). That never gets better.
Good luck finding something you like. Because that’s the most important thing, that it be something you like and feel comfortable in.
