Re: Used cars and depreciation - NBC

This is kind of a philosophical question. I want to buy a practical used car for my wife in the next 6 months, I have no idea what except that I'd like to spend around $25k.

$25k (or higher) for a used car is a lot of money. Usually only enthusiasts or financially shrewd people consider such a thing, hence the high "drive it off the lot" penalty the market imposes. So how good can good get? It got me thinking that there are a couple opposite approaches, assuming that “practical” is the major consideration as opposed to wanting a specific make/model.

Assume exactly the same purchase price for:

1. A car the market loves, with a high resale value and good reliability. This could either be a late model of a cheap car, or an older midrange car.

2. A car the market hates, with terrible depreciation and spotty reliability. But you get much higher end car for the same price, even budgeting for additional (and regular) repairs.

Interesting topic? Any practical experiences?

Quote
Charlie (Sacramento CA)
This is kind of a philosophical question. I want to buy a practical used car for my wife in the next 6 months, I have no idea what except that I'd like to spend around $25k.

$25k (or higher) for a used car is a lot of money. Usually only enthusiasts or financially shrewd people consider such a thing, hence the high "drive it off the lot" penalty the market imposes. So how good can good get? It got me thinking that there are a couple opposite approaches, assuming that “practical” is the major consideration as opposed to wanting a specific make/model.

Assume exactly the same purchase price for:

1. A car the market loves, with a high resale value and good reliability. This could either be a late model of a cheap car, or an older midrange car.

2. A car the market hates, with terrible depreciation and spotty reliability. But you get much higher end car for the same price, even budgeting for additional (and regular) repairs.

Interesting topic? Any practical experiences?

Not stripper cars either but optioned just about right is my recollection. The local dealer had 64 of them on his front lot and back lot. More than a few were in laser blue, too, a rather nice color. At that time the dealer was offering 0.9% financing though that stopped at the end of May. But low cost financing comes and goes and the dealer if approached by a savvy buyer might find the dealer has some factory incentives he's holding on to for a rainy day. Show up on a rainy day.

The thing about a new car is it comes with a nice warranty and no worries driving for in the case of the MINI 3 years or 36K miles (IIRC). In some cases the dealer will toss in free scheduled maintenance but if I went that route I'd still have the servicing (oil/filter natch) done more often paying for the out of schedule services out of my own pocket or more likely doing them myself.

If you buy a used car that the market loves you'll pay a premium. This can quickly go away when (if) the economy turns around and people once again turn to new cars. This floods the market with newer used car and really drops the price for used cars. And the used car you own then will only be more used, older, and maybe out of favor.

I do not like # 2 at all. No way I'd put a loved one in a car with spotty reliability.

Hate is a relative term. I like to buy cars that are out of favor (like the MINI recently (though I didn't buy this car only considered it), the Cayman S (back in early 09 they were discounted like crazy -- I got $12K off sticker), the 06 GTO back in 07 that was discounted from over $32K to $26K, the VW Golf TDi in 02 that I bought for hundreds of dollars under MSRP (when everyone on the VW boards told me no way could I buy such a 'popular' car for under MSRP - turns out my research found they were not so popular and dealers had an oversupply of them), and even the Boxster in 02 that I bought for around $5K under MSRP.

Hated cars? Probably not. Out of favor cars? Oh yeah!

Sincerely,

MarcW.

If all you are looking for is a reliable, practical car, for $25K and some sharp bargaining you can have a brand-new Camry, Accord, or Sonata with almost every option, full warranty, and reliable, and it will always be a used car in high demand. Of course, such a car is boring as mud, but if you want reliable and practical, they've got it in spades. I personally would rather drive one of these "new" and and do all my own maintenance and just keep it a loooong time. If you keep the car long enough, the depreciation becomes irrelevant. And, after you drive an automotive appliance to work all week, take your Porsche out for the weekend and you feel like you have just launched your own personal rocket sled.

Charlie,

I would take option #2.....

If we were to get a newer (used) vehicle in the next couple years, I would look at the Korean stuff. Kia / Hyundai have enough of a stigma associated with them, probably from their 80's and early 90's vehicle, but I think they have come a long way. I think u get better value than similiar used offerings from Honda/Toyota. I would place Mazda somewhere in the middle.

We have a 2003 Honda CRV bought 18months used. It was my 1st used vehicle purchase, had 30,000km on it (<20K miles). Got it for about $5-6,000 less than a comparable '04. Running fine except for the AC which blew up 2 yrs ago (fixed for an arm and a leg). 232,000km right now (145K miles). Plan to keep it to about 300,000km or we grow out of it... Wife is pushing for a vehicle with a part-time 3rd row, not minivan.

P

They have improved their product dramatically in the last few years, and you can't beat a 10 year/100,000 warranty.

I got a Kia Soul a couple of years ago for a daily driver and couldn't be happier. It has all the technology of cars costing twice as much or more for less than $20k. If you want more of a sedan look at the Optima.

Drove a Kia 7 passenger SUV for a week in Colorado (rented from Enterprise) was very happy with it.

P

Get a new Ford

They are particularly attractive to me, and

I know that the car is not all bad.

In general, the market over-reacts to bad news and rumour. Watch Wall Street. its a pendulum.

Cars are in some cases worse, since most people know little about them.

Now, some cars have bad depreciation despite being "attractive" because they are so costly to maintain. For example, older Jags. I think those may be OVER priced, because people will put up with a lot for (an older) Jag. Or a hot model. Same logic.

A great example is the VW Phaeton. Is it really THAT bad? A $80k car that can be had for nothing?

I expect they are ok. Usual Audi/VW reliability - maybe better. Ok for a 6,000 pound beast that is. Incidentally its the same platform as the Bentley Continental - rap star issue.

On the other hand not long ago used Prii (plural of Prius?) were going for MORE than new ones, due to lack of availability. I leave that conclusion to you.

Grant

I enjoyed reading the responses on this topic. For the me the brand-new option isn't too appealing unless it is something special. If it is more like a Camry, I'd rather get a used Lexus for example.

A couple cars that interest me, strong "#2" options - the Mercedes R class, and the Volvo V70R. The market seems to hate these cars, and I have a fondness for them. I should just get a Honda Odyssey, and maybe I will, but it is interesting to see what class of car you can get for the same money.

Quote
Charlie (Sacramento CA)
I enjoyed reading the responses on this topic. For the me the brand-new option isn't too appealing unless it is something special. If it is more like a Camry, I'd rather get a used Lexus for example.

A couple cars that interest me, strong "#2" options - the Mercedes R class, and the Volvo V70R. The market seems to hate these cars, and I have a fondness for them. I should just get a Honda Odyssey, and maybe I will, but it is interesting to see what class of car you can get for the same money.

Charlie, if you're thinking Volvo. You might look into their factory delivery. Not sure if this also applies to the US, but friends of ours here in Ontario, who have a Boxster, just purchased a Volvo, which the wife had been wanting, with factory delivery. They ordered it in January. The price was lower than it would have been if they had purchased and picked up the car from a Canadian dealer. Volvo paid for a return flight, first night accommodation and they had a factory tour for both of them. Our friends ended up turning it into a 3 week European holiday, driving their new car and saved. Only downside is that after coming back, they have to wait about 6 weeks for their car to get here.

Might be worth investigating.

But if the market hates them now, what will it be like to sell them. You buy a hated car to run it into the ground. That way you benefit from the low selling price when buying and get the utility out when using but don't suffer when selling.

My assumptions include that she wants a sedan, otherwise this is not valid.
A well cared for used Mercedes C class is a good, practical and safe car for the wife. Maybe a little older, lower mileage E class even better since it is larger and rides more luxuriously.
Mercedes look contemporary for many years, are built strong, have many safety features, ride nice and come with all the latest technological advantages and comforts.
If she likes sporty, the 3 series BMWs are great cars too especially the coupes and convertibles.
Like any German car they will cost more to service than a Japanese car.

[patrick] thanks for pointing out the BMW 328i, 335i, 528i, MB C300, E Class, I will also add Audi A4, BMW 750i or Li, Cayenne, or most 2008 or older used vehicles.

OP: It would be easier if you had provided a bit more information on the use of the car and whats important other than price. i.e. Gas milage because its driven 50 miles / day, must carry 4 adults or 3 adults and one child that thinks they are an adult.

Trent

How important is sportiness? Visual appeal?

For the next 6 months implies the winter, what kind of weather will you be driving in? Need winter tires? 4WD?

Are you planning on selling at the end of 6 months? Thought of the transaction tax/costs?

Can you see a older well cared for car with records like I just sold for maybe $4k? Cars are sold for lots of reasons and my wife was just tired of it...had I any use for it I'd have kept it for another 75k miles. The point being here that you can get a good looking reliable car for lots less than 25k even in todays used car market.

Right now she has a 2001 BMW 330i which has been great but repair costs are starting to rise. This time we need a bigger vehicle, either a wagon or minivan. Baby coming in about 6 months!

I wasn't going to dig too much into my details because I think it is a topic of more general interest...a strategy for a decent and hopefully slightly interesting daily driver to suplement the Boxster. I have a friend PPBB who swore on getting 2-year old Oldsmobiles...left him enough budget to afford a Boxster and a 356 replica.

you also get a manufacturers warranty to protect you from a lemon (in most cases). And since modern sedans are good for 150k miles or more, you have some real mileage to use if the car is maintained.

A car out of favor because of styling is the Acura...if thought of as a value purchase it could be a good buy if you plan to run it for a long time. If she doesn't like that but wants a plus-mobile, a used Avalon of the 2011 year is available now at just about what you want to spend (wife pleased with hers..27MPG on regular with more HP than my Porsches ever had) and the styling isn't changing in 2012.

[www.alg.com]

The Boxster is in the fat middle of this, and the one-star and five-star have a few surprises to me.

how much % difference there is between a 4 star and a 2 star for example or over how long a period the depreciation is figured...1, 2, 5 years? What is "the lifetime of ownership" they say they used?