pits200

I have always wondered this, why do people buy a new car right when it comes out? I am not talking about leasing, I understand why people have to buy new for leasing.


But when it comes to financing....
It is a common fact that most cars lose their most value in the first year in terms of depriciation.

Why don't people just wait for one year till the car is discounted by 3-4K and purchase a car with barely any miles on it and still a complete warranty.


I am really in the market for a new car, but can't bring myself to make the move knowing that I am the one taking the hit on the dealer markup.

I am just wondering what some peoples thoughts are on this???
What made you buy your car new if you were financing?

Crazy Bimmer

I bought new because interest rates are cheaper when you buy a new car vs used. That alone COULD save you few thousand over the loan.

Buying used, you never know why the previous owner sold the car. Maybe it was giving him LOTS of issues. You gotta think why someone sold a car after only owning it for a year.

Also depending on the car, you might not even be saving that much. Some cars have really strong resale values and buying slightly used wont be that big of difference than new.

daemonicus

i honestly have no idea what the incentive is to buying new. there are so many cars out there that are still under warranty, with only a couple thousand miles on them, with all the options you could want, and they're so much cheaper than the price at the dealership. once you drive off the dealer's lot, you've already lost a couple thousand dollars and nobody can deny that. if a used car has a good history report and the owner can provide the service records, there is absolutely no reason to go out and spend thousands of dollars more to buy it new.

SRK85

I guess because they are rich and can buy a new car in straight up cash. Next car I get is gonna be an used luxury car. I'm too poor to buy a new luxury car. And yes buying or leasing a new car costs a lot more than used. But it depend on how money the person is making.

Beltfed

Just because a car is new, doesn't mean you can't get it discounted.

I bought mine for around $2,500 off MSRP (give or take), which was like $1k over invoice. Which is a good deal, because there are dealers that still don't really discount the GC SRT that much.

When it comes to a performance vehicle, I really prefer not to go pre-owned.

Granted, when the day comes that I'm going to buy something exotic and can save tons of $ over going new.....I would consider going that route.

But to save $5k over a comparable fresh off the presses model? I'll take the new car.

My crashed Evo that had $12k worth of damage had a clean history report. Some things don't always show up.

Leasing, it usually pays to go new because of the residuals. That is unless the manufacturer has a factory backed program on their certified vehicles.

Personally, if you want to save $......try and get a crazy discount on a leftover vehicle (vs. a used one).

iTimmy

We've got to stop doing that

In addition, some people(like myself) want the newest car available and/or options change from year to year making it more desirable to some folks.

For me personally, I like cars, I make a good living and don't waste money as a rule, I max out retirement accounts and have a few million dollars in business/reality equity. So driving new cars with the latest options is my way of treating myself, I know its not the optimal use of money, but you only live once and its something I enjoy so I don't care if it costs a few thousand dollars extra.

Mokos23

Because like crazy said you never know what the previous owner did to the car and that is the one downside of buying a used car.

I don't think carfax shows if the previous owner overreved their car or did something to the engine.

If I had a choice I would buy new, but either towards the end of the month or end of the year when the car dealerships want to meet sales goals and want to get rid of their inventory for the new model year.

CLpower

I got a pretty hefty discount on my GTO, it was only about 1-2K more then I could have bought a used 05 for. Seemed like a no brainer.



and as crazy mentioned, rates on a new car are usually MUCH MUCH better then on a used. So you end up paying close to the same by the end of the term.

CLpower

Just keep in mind, you've proved many times that you are pretty clueless when it comes to a lot of things. So it's no suprise you don't see the benefit from buying new vs used.

Owner provide the service records Yea, he keeps all the oil changes but "misplaces" the ones about a transmission replacement.

pits200

I am talking about a Non-New vehicle that only has under 20K miles and is still within all manufactured warranties.

I always look at it this way....

Lets say I want to spend 30K on another vehicle....

A.) I can go out and buy a 2007 Maxima with some options
B.) I can go out and buy a 2006 G35 off the lot fully loaded and with not many miles on it. (the ones left on the lot)

Now, if I wanted a brand new 2007 g35, that wouldn't be within my budget. But if I go with the 2006, that is within my means.

This is just an example, and I am not actually interested in these vehicles.

But I do agree with Crazy Sellout, that some car companies offer some very competetive incentives on their new cars and that makes it hard to overlook some newer vehicles.


You can just get so much more bang for your buck if you avoid that initial first year.

daemonicus

that's why you pay full out instead of getting a loan. if you cant afford to pay the full price, you obviously shouldn't be looking for a car that expensive.

pits200

It seems like American car companies are always the ones giving large financing discounts. I barely see any foreign car companies with hefty incentives, despite how hard I look.

daemonicus

clueless because i prefer to save money by not leasing/buying new? of course there's a benefit of buying new; you can get any color combo you want, any options you want, some warranties only cover you if you're the first owner, you're there for every maintenence done...obviously there are incentives to buying new but there's nothing wrong with buying used from a dealer. private party is where the matter gets iffy because anything can happen there. you're right, they can easily throw out the tranny replacement service record which is a risk you take when buying used. but if the dealer is selling for well below the original new sticker price, the car only has a couple thousand miles on it, and is still under factory warranty, it's a great way to save yourself thousands of dollars and set yourself up financially for the future.

daemonicus

good job on the negative e-rep, too. keep it coming

Crazy Bimmer

at you thinking dealers are honest compared to buying from a private party.

daemonicus

if they're willing to give you the factory warranty, it's their problem if something goes wrong, not mine.

Beltfed

Bullshit, why take a 30 year mortgage on a house and pay thousands and thousands of dollars in interest?

Why not pay your house off in 15 years or better yet pay it in full.

And don't talk about houses going up in value (not in this market) and tax implications.

Just like a mortgage, if you can afford the finance payment.....you can afford the vehicle.

The day you start missing payments and get phone calls in regard to payment, then you might start to wonder whether you can afford the home or vehicle.

A car is typically the 2nd biggest purchase for someone.

cob3683

People buy new for a few reasons (like others have said):
1) They want a car with a full warranty
2) Interest rates are better for new cars than used and/or you are able to get a decent amount off the sticker
3) Who knows what the used car has been through
4) The car will be yours and yours alone
5) Because they can
6) Sometimes the difference between a new car (after discounts) vs. used is not that great of a difference

Most foreign companies won't list them. For example, if you wanted a new Boxster or Cayman you could get anywhere from 6-10% off the sticker (depending on options).

teranfon

I agree with Crazy Sellout that many manufacturers currently offer discounts and financing programs that make purchasing new very attractive. I would especially think this true of domestic manufactures. If a vehicle is to be used for business use it may be more advantageous to buy new as well. And then there are the qualities that aren't exactly measurable. Who among doesn't enjoy having a car that no one else has owned. A vehicle that we have the ability to claim that no one else has driven. I certainly think that advertising plays a big part in this. And I think that advertisers often promote their products by playing to the emotions of potential customers. A new car will lead to a promotion, bigger house, raise, and a better spouse.

I know what you mean, however, that for the average consumer it doesn't make a tremendous amount of sense. The depreciation for some vehicles is absolutely huge. I remember reading an article a short time ago discussing wealth among self-made individuals. Almost all agreed that a new car purchase was a complete waste of money. The individuals discussed all had various backgrounds, educations, and sources of income, but one of the most common traits is that most only purchased used cars for their own use and kept them for several years. Of course many had luxury and performance cars as well which they had purchased new, but their "daily" vehicles were purchased used or drawn from their respective companies. Always thought that was kind of interesting.

Terry

daemonicus

nope. you're wrong. they all accumulated their wealth by purchasing brand new cars and never considering buying used. depreciation doesn't happen on new cars, their value actually goes up.

maybe they can afford those luxury and performance cars now because they were financially smart early on in life.

pits200

I think I am questioning people who are considering to purchase a middle of the line cars and are buying new.

My friend for example was going to buy an entry level Mazda 6 for about $24,000 after haggling and incentives. But I questioned his reason behind this purchase and made him look into a used 2005 TSX with only 20K miles on it. (still has the balance of the factory warranty)

I wasn't trying to talk him out of the Mazda, obviously preference of vehicle and personal opinion is one of the main categories in buying a car.

I don't think the New Vs. Used example really works for people who are looking into $80,000 cars. Well to do individuals have the leisure of always purchasing new and not worring about the financial ramifications in the long run.

synth19

After getting my RL for a great price, I told myself "I'll never buy new again." But you can't beat that "new car feeling" nor the urge to get something you reallly want (and just came out).

teranfon

I'm certainly sure you're correct. In fact many mentioned that when they could truly afford to purchase a very expensive car, they were still apprehensive about doing so.

I think pits200 is referring to middle of the road cars, however, targeted to the average consumer. I still think that human desire and advertising plays a tremendous part when deciding to purchasing a new car.

Terry

DAYTA

Sorry, but that's just an extremely naive POV. In many cases, people can come out ahead through financing a vehicle versus paying for it upfront. It all goes back to the idea that a dollar today is worth more than a dollar tomorrow.

Let's say you're looking at a $30k car. A simple person would pay it off all at once in the beginning and be done with it. A smarter person would finance it at 5%, take the $30k and invest it in something conservative like T-bills, mutual funds, or maybe something even more aggressive like equities or options. Even decent mutual funds have an average rate of return of 8-9%, so you'll still end up ahead of where you'd be had you paid for the car upfront.

Crazy Bimmer

Was he going to finance it? For how long?

Figure a used car loan for 36 months is at 6.55%
http://capitalone.com/autoloans/loan...E_C1_03_T_ALNU

Mazda is offering 1.9% for 36 months. (from their website)

Figure a purchase price of $24000 then add interest.

TSX
$26,500 ($736.12 a month)

Mazda
$24,709 ($686.37 a month)

So really you arent spending the same amount of money in the long run.

LuvMyTSX

The average consumer does not have $25k in cash to buy a car, that's what a loan is for. Instead of shelling out all that cash at once, pay a little at a time and invest the remainder, thereby making money.

FWIW, I bought my car used because I didn't want to spend the extra on a new one, but a new one would have been nice, so I knew exactly how it was cared for. I also got 3.9% APR on my used car loan, so it was a pretty good deal. Incidentally, my ING savings account is getting about 4.5% interest....

pits200

If you want to get very technical, you need to include the taxes that you are going to pay on the capital gains. And if you have 30K to pay off your car, that means you are doing pretty good for yourself and will be in a high tax bracket.

Unless you plan on putting it into a tax free municipal bond where there are no taxes on the gain, you are not going to come out ahead by just putting your money into a conservative mutual fund.

I do agree with you though, if the car company offers financing under 3%, then I would keep the money that I was going to use to buy the vehicle and invest it.

pits200

But what is the residual going to be on the Mazda vs the TSX after you pay off the loan??? It can't be more than 54%....

Just because the monthly payment is more for the TSX, I bet you don't lose as much with a used TSX than you do with a new Mazda.

Crazy Bimmer

troo troo.

iTimmy

Investments are taxed as capital gains which is 15%, income is up to 35%. If you can offset your income and invest or take investments as pay you save a fortune in taxes.

Most people who have the means to pay for a car cash(and not just talk about it) have a pretty good idea on how to make money(and preserve wealth), not just an idea.

Ashburner

I always buy new.

For the same reason I don't want stretch marks on my women.

And nothing beats that fresh new car smell.

Plus, I always buy first year cars because I have been waiting for them to hit the market.

KaMLuNg

iTrader: (5)

i think that it also depends on what you plan on doing with the car... every car that i have owned and will own, i plan on driving it to its grave... so is it worth it for me to buy a new car and get hit with depreciation values??? sure it is... aside from factory defects, if i take care of the car from day 1, i know that the car will last me... so i am not losing on the resale value after 1 or 2 years if i was considering trading it in...

my father has your mentality where he stopped buying brand new cars... he just couldn't stand taking the hit... he would look for cars 2-3 years old with low miles... but then he learned his lesson when the MB he bought only a year old was in the shop for major repairs 5 times in the two years we owned it... it was all covered under warranty but it is a hassle having to drop off the car then pick it up later...

hey its all in your preference..

pits200

Well, technically, if you were looking for a woman who was like a new car, you would need to be looking for a virgin.

But for some people thats just not in the cards and its easier to settle for one that has been driven around the block a couple times.

I like your analogy though even if it is disturbing.

pits200

Gees, that does suck. But that sounds like a lemon, the same thing probably would have happened if the car was brand new.

Certain cars are just lemons to begin with, its just a matter of time till the problems rear their ugly head.

Trackruner228

iTrader: (1)

While it is true you can find a car with under 20k on it discounted with all service records but who says how it was driven? Maybe the owner beat the living hell out of it and never once took the car on a nice easy drive. I know this kids car that his parents pay for all the service records and it gets them all on time but the way he drives that thing in about a year or two that car is going to be dead and its only got about 30k or about on it i think (somewhere in that general area.) So I think the new car thing is a piece of mind thing. Now me I have never bought a new car since im 17 and its worked out for me so I can totally understand used.

subinf

At the time the price I paid for my new TL was probably what you could find for a used one.

Costco

Another thing I don't think anyone mentioned was that when the model just comes out you can get just about any interior/exterior combo that's available. My mom really wanted to get the 2G TL-S in WDP/ebony and she got it because she bought it new. To date, I've seen dozens of WDP/parchment but I've only seen 1 other WDP/ebony.

Usually when you buy an '06 model at the end of '06, there's not much left to choose from. Also, though bikes may be different, my friend got a black 2006 Yamaha R1 for ~$13,000 before TTL sometime last year, around August I believe. Now he has a friend who wants to get the last 2006 R1 in the area in blue, and they gave that guy a price of $15,000 before TTL.

If you're ready to buy a new car, and you're going to buy the current model year and the car is in high demand, why wait? Though its rare, supposedly you could save a lot if the car isn't moving off of lots. I know someone who got a MS6 for $24,000 before TTL. No navi, but he got it for more than $3000 under MSRP. Again, that's rare though.

CLpower

Mitsu use to be pretty good on financing. That said, the rates are still significantly better on a new car (say 5% to 12%)

pits200

Let me restate my statement then. No offense towards anyone who has a Mitsubishi.

But I meant, higher end foreign car companies rarely offer good financing. (I.e, Acura, Lexus, Infiniti, BMW, Audi, etc...) I guess it's because the car can sell itself and financing really isn't an issue.

I can get a 5 year used car loan through my credit union for 7.15% on a car that is no older than 3 years.

VS

A 5 year new car loan is about 6% through the same credit union.

I am so close to pulling the trigger on a New(Not used) car but my thriftiness is killing me....

Nicky Pass

My Cobra stickered for almost $40K....after incentives and the fact that it was a 2003 and it was a left over in 2004 when I bought it...the final price, OUT THE DOOR, was $33,515. How could I not buy new with an almost $7K discount.