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Long Term Cost Analysis of New versus Used

Hi, I am a 20 year old who has the fortune of having enough money on hand to buy any car I want with cash. My question, because I cannot ascertain a clear answer, is whether it is more cost efficient over a ten to fifteen year period to buy a new car. So, if I buy a new 2013 fusion or camry this fall, instead of a used 2009 model (both scenarios paying in full upfront), will I have saved money by the year 2025? I understand that the front end and five year costs are clearly in the used car’s favour, but if I plan on being intelligent in the eyes of Benjamin Graham and owning it for a long time, am I wise to buy new?

Thank you!

Jim

Obviously, there will be less depreciation buying the used vehicle. Even over a long period of time, you’ll never make that up. However, I’m skeptical whether you’ll want to keep the car for that long. In 12 years, as your career and financial situation progresses, you’ll undoubtedly want something else. So I would still vote for the used car, and put the extra into retirement savings.

I’d go with buying new for 10+ years, that way you get the new car warranty, and over 10 years the difference with buying a used car is minimal.

How do you plan to use the car? Around town use or highway travel? Will you be commuting to work and how far is your commute? Do you live in an area where the roads are salted in the winter which causes vehicles to rust?

I’ve purchased everything from a $75 Pontiac back in 1961 to better used cars to new cars. The $75 Pontiac was purchased to get me to graduate school 350 miles away from home. There weren’t many interstates in those days and I held the speed to about 55 mph. It got me and my possessions to my destination and got me around town. For travel back home, I used public transportation.
The great used cars owned were a 1993 Oldsmobile 88 purchased in December of 1995 for $14,200. The car had 15,000 miles at the time and was a GM executive car. Another good purchase was a 1988 Ford Taurus purchased in the fall of 1988 that had come from a rental fleet. It carried the balance of the warranty and had 7500 miles on it at the time. A better comparison would be a 2006 Chevrolet Uplander that I purchased from the Chevrolet dealer that was a “program” car with 15,000 miles. I drove it to 65,000 miles and then we sold it to our son who has driven it to 110,000 miles with no problems. I replaced it with a 2011 Toyota Sienna which I purchased new in March of 2010. I didn’t have to replace the tires on the Uplander until the vehicle had gone 60,000 miles. The tires on the Sienna purchased new were worn out at 36,000 miles. I put about 18,000 miles a year on each vehicle. The Sienna cost almost twice as much as I paid for the Uplander. I think my cost per mile of the Uplander was a lot less–I didn’t expect to have to replace the tires on the Sienna as soon as I did.
My suggestion is to assess your needs and go from there. In recent years, a new car can be had for not much more than a late model used car and the new car comes with new tires, battery, wiper blades, etc. The Fusion and Camry you mentioned are good choices. I’ve had good experience with Toyota products (a 2011 Sienna and a 2003 4Runner), but have not driven a Camry. I did drive a Ford Fusion from my institution’s fleet to a conference-- a trip of over 200 miles and was impressed with the car.

If you buy a new car, you will always know how well it was maintained. If you buy used, you probably won’t know.

If you buy a new Fusion SE with the luxury equipment group, it will cost about $25,500 including a $1500 rebate. If you buy an “equivalently” equipped 2009 SE, it will cost around $13,600. But the 2009 will have around 60,000 miles on it. If you drive 1000 miles per month, that’s 5 years of mileage. And the warranty will be expired. You will have almost no repairs with a new Fusion over the first 5 years. Expect to pay about $2000 more for repairs with a 2009 over the first 5 years. It could be a lot more, depending on how it was maintained. In 10 years, the 2009 will be 14 years old. Will it make it? If you plan to keep it for 5 to 8 years, the used car makes more sense than if you plan to keep it for 10+ years, IMO.

If you buy new, you get a few things for your depreciation money that easily make it worth the money in my view. You get a mileage and time warranty that can’t be avoided with weasel wording in the contract. Warranty work, if needed, gets done at your brand’s car dealership anywhere that you happen to be. You get the reliability of a new car that likely will not need repairs. You will know exactly how the car was maintained and driven during it’s entire lifespan. You will know with no doubt that the car has not been in an accident that you might not be aware of. You get the pride of being a new car owner for a year or so.

There is a negative for new car ownership for me, however. I have owned a CAN OBDII code reader for several years now that I have not yet had a chance to use; hasn’t been needed.

We travel a lot and so I like GM or Ford brands for a variety of reasons including that they have many more dealers than the import brands.

Some say that a car from a rental company, ~20k miles, 3-12mnnths old is a very good deal because you are still in warrenty, much of the new car depreciation is gone, and the rental car company wants to have good reputation for future resales to you and your friends.

We normally buy new and hold until maintenance and safety issues become too onerous, The one car that we bought used has been a small headache but still runs OK after 13 years. The car that son uses, used to be us parent’s and it is still running very strong at 250K miles, 16 years. Son uses his car (Camry) as a personnel carrier and beater to ski areas-he bikes to work. I suspect that he will need a newer car within 3 years, and a new car if he ever finds a girlfriend.

For that period of time, new is the best way to go. At one point I looked at the marginal cost of each car and really not much difference in cost for the first couple hundred thousand miles. That’s a long time to keep a car though.

Well as in buying something that minght be 3-6yrs old. Have a carfax done on it. From whom your buying it from. At least this will give you more info on if it has been in a wreck or not. Also if or how many ppl have had this car or if it was a car dealership loner or lease car. I was also in the same boat as for being able to have the cash during the time of buying my 08 Ford Exscape Hybrid 4x4(awd) New. I also bought the 7yr/50K wrty. they didn’t offer the 10yrs/100K wrty. that’s Crap. After i bought it, I found out Y they don’t do the 10yr on it. From what I’ve read, ppl say the hybrid btty goes after 9-10yrs. The dealership doesn’t want to cover that huge $$,$$$ bill! So, Just really do your research on what type you would like & you’ll find out a lot from reading ppl’s complaints. Some stuff just funny humor than really a problem. Like me, I test drove mine, B4 I bought it. The only thing the dealer forgot to tell me was the Hybrid is smaller inside than the statnderd ford escape. So, that’s 1 thing you really need to ck.

If you have cash and plan to keep the car 10+ years, I’d buy new. Then you get the car you want and know the maintenance history because you are maintaining it. Today I’d buy a new '13 Honda Accord. I’d expect 15 good years out of a new Accord.

I bought a new '03 Civic, maintain it properly, and at 127K miles it is going strong. I expect to keep it at least 5 more years. I live in an area that treats winter roads and use the car in the winter so undercarriage and frame rust will become the issue. So far the body panels are rust free and the car looks great.

Shop Low Miles (Under 10,000), Almost New (Less Than 2 Years)
Manufacturers’ Certified Pre-Owned Cars.

Many come with excellent bumper-to-bumper and drivetrain warranty coverage through the manufacturer. GM adds extended time/miles to the remaining new car warranty. It’s possible to save 1/3 the cost of a similar new vehicle and you’ll even get the “new car smell.”

Don’t buy one that has had any collision damage repaired. Also, original warranty coverage begins with the car’s original “in-service” date. Also, I like to find cars built late in their model-year run.

I’ve done this many times and will do it again. I drive cars “forever” (250,000 + miles) and this is the most bang for your buck if you’re planning to hang onto the vehicle and save.

CSA

Generally a good used car is the better buy. Buying a NEW car and keeping it only 10-12 years is not economical, unless you do a lot of driving. A new car purchased and kept for 15+ years or until it is used up is economical.

As others say, in your case, I’d buy a good used car and after 8 years or so you will be able to affords something better. Then buy what you want.

I did just what common sense answer says 6 years ago.
A 1 y.o. Toyota with 8100 miles, paid with cash.
I bargained a Toyota extended warranty down to what seemed a reasonable price (1/2 the initial offer), considering I got 7 years of roadside assistance.

While it’s hard to neglect a car in just one year I found out the clutch had been overheated and needed to be replaced at 32k miles.

Here are a couple more advantages with a new car: If you buy new you can easily get the exact features that you want. From a GM or Ford dealer it is possible to have a custom made car if you care to tolerate the waiting time or else a dealer can use his computer network to find exactly or almost exactly what you want. My last new car was trailered in from a dealer located 140 miles away and was exactly as I wanted it to be. There was no extra charge for trailering.

Buying new means that you don’t need to spend time searching for a satisfactory used car that will fit your needs and wants. You will need to spend not only time but also gasoline to chase after used cars to check each one out with a visual inspection, a test drive if indicated and a possibly a mechanic’s inspection if you want some external judgment applied. Some might enjoy this search.

BTW,
That “new car smell” is the lingering and residual smell of the assemblers’ chili.

The initial depreciation loss will never be recovered if you own the car for a few years unless you have a really good buyer lined up. If you own the car for a long time, you still lose that amount of money. It can’t be made up. I could be wrong. Most of my post was based on CW from years ago.

I never buy new vehicles any more but I never keep any vehicle over 5 years. If you really are serious about keeping the vehicle for 10-15 years then new is the only way to go.

@longprime That “new car smell” in my case, a Toyota Corolla, was more like dog poop. It’s the plastic that is used in the interior trim and floor mats. We put the car in the garage with the windows down for the first few months.

What do you prefer. We each make decisions to suit our taste and pocket books. I’m one of those people who has bought both new and use and in most cases the used were, in the end, the best deal. But if I had the cash when I was 20 I would likely have bought an XK-E.

That new car smell is a carcinogen and also messes the interior of the windshield.

I have only bought new once. Always used otherwise. Cost of ownership has been low. The best combination seems to be a one owner, low mileage 2-3 year old CPO at 60-70% of the original price. It used to be much better with much depreciation in the first 3 years.