Not sure about the pricing though – if you want 50% off a new car I think 4 or 5 years old is more realistic? I can’t imagine anyone selling a 1 or 2 year old car for 50% of the new price.

Interesting article. Cars are one of the big 4 places that people waste the most money needlessly. So many people buy cars for image reasons, instead of for the best driving experience or best value.

Having seen the finances of thousands of families, we can tell you there is no correlation at all between vehicles and wealth (except for very expensive vehicles). People 2 paycheques from bankruptcy often own expensive cars and millionaires often drive old, inexpensive cars.

If you can afford a car you like and have your long term financial goals looked after, then by all means buy what you want. But most people can easily save thousands with their cars by focusing on saving money.

Here are our suggestions for saving money on cars:
1. Evaluate cars as a cost/year, especially with depreciation. Figure out what you can afford and stick to it. For example, if you can afford $2,000/year for depreciation, then you should keep a $20,000 vehicle for 10 years.
2. Buy used and target 1/2 the price of a new car. That usually means 1-2 years old for American cars and 2-4 years for Honda/Toyota.
3. Consider cars that do NOT hold their value. If you are buying used, these are the cars that will give you the best discount.
4. Find a good, honest mechanic (get a referral) and try to avoid dealerships, except for free warranty work. Dealerships tend to be far more expensive than a good mechanic. With our mechanic, in 30 years of owning used cars, the largest repair bill ever was $700. We talked to people all the time with relatively new cars that had a repair bill over $1,000 – usually at a dealer.
5. Place little value on the warranty. If you are trying to avoid dealerships, then the warranty is worth much less than most people think.
6. To save money, buy used and drive your car into the ground eg. buy 2-years old and keep for 8 years. The biggest savings are in the last years, when you can have no loan or lease payments.
7. People we know that buy cross-border say that in general, buying in the US becomes worthwhile when the Canadian dollar exchange rate is above about $.85-.90. Generally, more expensive cars provide better cross-border value.
8. In general, buy instead of leasing. Leasing is just another form of financing, but is generally only available on new cars. You need to be clear of all the fees, actually purchase price and interest rates with leases. It is very easy to hide costs in a lease, often just by making the lease a year or 2 longer, since people using leases often make the mistake of focusing on the monthly payment. The biggest savings with cars are the years after the loan/lease is done, so try to keep your car longer.
9. Remember that depreciation is the big number and repairs are a small number. In general, the amount you lose when you drive a new car off the lot (20-30% of value) is roughly equal to the first 10 years repairs and maintenance. We always find it funny when someone trades in an old car when they get a large repair quote (over $1,000) because “it is cheaper to buy a new car”. Then they buy a new car for $30,000 and have $6,000 depreciation in the first 5 minutes of ownership.

Ed

Till then,

Jean

That’s another solid article. I would look forward to reading your post on importing a car from the US for use in Canada. Some acquantances of mine have managed to export a car from the US into Europe, and still managed to turn a profit in the process. How they manage to do that is beyond my level of comprehension however ;-)

FYI, my brother bought a new Subaru Forester from a dealership in Portland, ME and saved ~30% after all the travel/exchange/duty/etc. Not bad on a ~$30K car. He also checked it out with Subaru Canada ahead of time and had them certify in writing that they would honour the warranty (though I think they might have spelled it honor…). He timed it well and bought it when our dollar was at par, but there should still be substantial savings to be had. He also only had to travel from NB.

I’m living in ON now, and have been considering an AWD replacement for my golf when it finally quits; you can get a surprisingly good deal on an Audi A4 with awd around these parts, and in the Montreal area, FYI…provided you don’t mind driving a standard.

Good luck!

I’ve bought new and used (a Toyota Matrix and an Acura MDX, respectively). I think both methods can work out well if you do the research and can get the right price. It also depends on the model and its depreciation rate – for example, I’m not sure I would have ever shelled out the $ for a new MDX, whereas the Matrix depreciates more slowly and so was better value as a new vehicle.

For new, I used dealfinder.ca and was thrilled. They took care of all the negotiation (several thousand off of MSRP) for a modest fee; I just had to pick up the care from a nearby dealership. I would highly recommend them if you decide to go new!

For used, I think vmrcanada.com is a great source for used vehicle values – they are even adjusted by province.

Richard

What happens is the euphoria is high in the beginning, out surpassing the cost of the monthly loan. After about one yr, the euphoria fades and the pain of the monthly loan is still the same!

If you’re making 231K/yr, go for your 23K car (1/10th) otherwise, buy something you can pay cash with :)

Rgds,

RB

Rich By 30, Retire By 40

I would like to add my “‘nugget” if the decision comes to a new vehicle –

http://www.dealfinder.org run by Bob Prest.

For $159 pus GST he guarantees the best deal you’ll find in Canada.

I used this service when buying my Subaru Outback – dealfinder saved me almost $3500 on the price – there were no super duper deals at that time

The Outback – a great vehicle IMO :-) – has run like clockwork with only regular maintenance for over 9 years and still looks like new after 200,000 kms.

Also it was totally hassle free -you tell dealfinder what car you want with all the options etc. – he responds with a detailed price breakdown – base price, option costs, markup and taxes – if you go ahead he sets up a 3-way call with the dealer, goes through the deal again so everyone is on the same page, you make a deposit by credit card and then go an pickup the car -no having to deal with the sales malarkey.

I will definitely use dealfinder again..

.

Thanks for pointing out that site. I remember coming across that months ago when I was looking but had forgotten about it.

As far as I can tell, it won’t necessarily apply value for certified series vehicles which many of the luxury marques as well as GM offer on their used brands.

http://delorean.com/

Haha !

I’m getting a car this weekend. The Nissan Altima 2.5 S – features include moon roof, touch start, auto seat moving thingy, and radio control on steering wheel! Got quoted for 21K and 23.5k out the door.

I have an auto loan approved by my credit union already for $35,000 for 4.5% – I just have to pick up my check on Saturday morning :).

I’m super excited!

Ohh and I noticed you’re going for SUV? You should definitely consider the Nissan Altima since it’s very roomie, smooth ride, and extremely reliable.