SAIYAJIN

I keep hearing that purchasing a brand new car is the worst investment decision anyone can make. I'm wondering now if this is just an old wives tale passed on through the generations...

Case 1:

I purchased my 2000 S2000 April 2003 when it was 3 1/4 years old for $33,500 WITH 66k KMS on it. I believe this was a fair market price at the time as I looked quite extensively. 14k KMS and 1 year later, I figure I could have gotten $28,500 for it.

So, the original owner bought it for $48,000 January 2000 and in just over 3 years suffered $14,500 in depreciation. I suffered $5000 in depreciation over just 1 year and proportionately less mileage. Granted, he had to pay freight/pdi and tax on a larger amount but he also got a brand new car.

Case 2:

My brother bought his 1999 Passat August 1999 for ~$40k OTD. 4 years and 50k KMS later, I gave him $20K for it. Now, I figure I can sell it for $14K or so. So, he suffered $5K in depreciation per year and I take a $6K hit.

Again, he got a brand new car and I got a used one.

There are more examples but these are the ones closest to mind.

Now, I know Nimesh will say I'm getting ripped off not paying wholesale auction prices for my used cars but I think it's fair to compare RETAIL market value of new cars versus RETAIL market value of used cars.

What are your experiences? Am I wrong or is it better to buy a new car?

s2ksimon

i personally never buy brand new because of depreciation

Mindcore

Well in case #2, in another 3 years will the Passat be worth 0? probably not, so your averaged losses won't be as high as you have said.

Now it goes with out saying, paying the lowest possible price helps, and also making the right choice in cars helps too. A Passat will hold its value alot better ( at any time in its life ) then say a sunfire

s2kdarren

slightly used is a good way to go the biggest hit in depretiation is in the first couple years.

however if i wasnt planning on modding a car or driving it soooo many km.. i would elase, no ifs and or buts

SAIYAJIN

Darren,

Why lease instead of bank finance? You can bank finance a new car over 7 years and the rate is substantially lower. By leasing, you do get a guaranteed residual but is trade in value ever less than lease residual?

Mike,

The Passat in 3 years probably won't be zero but it probably won't be more than 6-7K. That would put the 2nd 4 years of depreciation at $3-4K per year. Not much less than what my brother suffered in the first 4 years of ownership. Last year, I did benchmark the prices of similar Passats. $20K, again, seemed fair at retail prices.

Anyway, I'm not saying buying used is not cheaper; it just does not appear to be all that much cheaper unless you're buying a fully depreciated car. At this point, however, who wants it?

PLYRS 3

in both cases, you overpaid for the vehicles

mas

Yes! We are talking about this on the New England forum. Some of us are at the end of their leases and it turns out the S has not held it's value as predicted. So, the buy out for my (an others) S is $2,000 to $3,000 more than it's market value right now. i.e. I can give give the car back and buy the same MY S with similar miles (maybe a new color?) and save a few thousand $$$.

SAIYAJIN

Nimesh,

Unfortunately, I paid what the market would allow me to pay. If I could have gotten them for less, I would have.

In the case of the Passat, it actually worked out to be less than $20K because I didn't have to pay any tax on the car.

In the case of the S2000, trust me, I looked. If you remember, I tried offering you $31K for yours and you didn't accept.

wing

Well I paid $4000 for my impreza last year and I could get $4000 today I'm sure. Sooooo.......

Biggest depreciation is early though, it seems like you just got hit with bad choices. If you bought a 2000 S2000 today it would only depreciate a few thousand over the next couple of years.

As far as residuals on a lease it really depends if they guessed right. With 1 year left on my tiburon lease I could have bought a newer car for less than my residual 1 year down the road. It was pathethic. On my S2000 my residual is $25k I don't think I can find one for $25k.

SAIYAJIN

mas,

That is interesting...Does that include the tax credit you would get if you traded in? What I mean is, if the lease resdiual is 20,000 and the trade in market value is 18,000, you are still better off (in Canada at least) to have bought and traded in. The reason for this is that you would be able to avoid paying taxes on 18,000 of your next vehicle. Tax here is 15% so it makes a big difference.

Not sure if things work out the same way down where you are.