[...] but not that great a deal if you’re a cash buyer.  If we do go new, we hope to drive the vehicle for at least 10 years.  In addition to “factory incentives”, the dealership themselves should have some [...]

[...] New Car every 10 years or Used Car every 5? | Million Dollar Journey (tags: frugal-living) [...]

[...] If you need a car, buy a used car. [...]

The purchase price of my old car is $4500. My average annual repair + maintenance cost such as oil change is $600. The expense is each year is not even, one year could be $1500 (such as change tires/brakes), next year could be only $300.

So the total cost of 6-year ownership is about $8000 excluding insurance. Not mention there are still some residual value.

Things I want to point out about the post is,

1. New car in warranty also has maintenance cost (such as oil change or some other consumable parts)

2. New car’s insurance cost will be significantly higher. A low value used car does not need to buy full-coverage insurance, which usually save a lot money per year.

3. People who buy really old car, don’t really spend huge money for repairing, why? They don’t go to expensive dealership. They usually use cheaper mechanics.

4. Many people buy used cars from owner directly, that usually saves a few hundred dollars or even $1000+.

5. Above points are all about money. But for many people, driving a new car is definitely worthwhile – enjoyable nice car, less headache for car repair, etc.

6. Depends on if you are lucky. Used car could cost a lot as I mention earlier. Some people buy a $3000 old car, but have to donate it after a few months because it the repair cost is too high.

Lets say you want to buy a compact 2008 for 15K if you take off the 10-15% that means you can get a 2007 for 12,750 – 13,500. Now we have to account for the sale of the car. Lets say these two people who bought the 2008 and 2007 decide to sell the car 5 years later (same date because they bought both cars at the same time)….this number would be a little harder to figure out exactly (so many variables) and Im no soothsayer…..but I would say all other things being equal….a 2008 will sell for more than a 2007. So that closer the gap even further.

To me there is something to be said knowing that YOU had total control of that car from day 1. If someone traded in a car after 1 year that has to be something going on that they know about that the mechanic didnt catch in that 30 minutes to one hour that he had to check it out on the day of the trade in.

These are just my views, Good post, keep up the great work!

Anyway, last time I bought my car, I looked through local newspapers, dealers website, etc, and use a model that had 10 years of published data as a reference and plot the asking prices and trade-in prices. So these are actual market data. See this chart:

http://w3.spancity.com/_temp/cars2_depr_price.pdf

FT, if you think this is useful, you might want to download and save it for your blog. This link is only temporary.

New Car every 10 years or Used Car every 5? | Million Dollar Journey

An article that evaluates the benefits of purchasing a new car every 10 years, or buying a used car every 5 years. Which do you think would cost less at the end of 10 years?

I buy new Hondas only when I can get them at or below invoice, combined with low interest financing that AHFC occasionally offers. Most Honda models have a far flatter depreciation curve than domestics — meaning a car that is half worn out generally sells for half of purchase price new.

I bought a 2003 Civic in Sept 03 for $2000 under MSRP plus 2.9% financing. It cost $15,400. I recently have been in the market for a small (used) car for my daughter, and have found that used Civics of this vintage command about $10,000. That works out to $1,000 per year in depreciation.

Your numbers seem a little high on the repair work. I have spend less then $4000 on my truck for all maintence over it’s 13 year life. Gas on the other hand is too astronomical to even type.

Overall it just comes down to personal preference. My wife has had her car for 8 years and she really wants a new one. Some people just need a change more often then others.

* 10 years Cost Per Year For New Car = Cost /10
= $22,335.97/10
= $ 2,233.59 Per Year Cost To You

* 5 Years Cost Per Year For Two Year Used Car = Total Cost/5
= $19,360.26 /5
= $ 3,872.05 Per Year Cost To You

SO, Used Car will Cost you WHOPPING 73% MORE Per Year Than New Car.

I don’t understand why you forgot this simple math???

Are there really even a lot of two year old cars on the market? Most people take out 3-5 year loans to pay for their cars. They typically want to pay off the car before moving on (logical or not). The rule about a new car losing 40% of its value in the first two years is also very well known, so who would want to sell their car unless they had to or they didn’t care about the money?

And honestly, I think that may explain the depreciation in the first two years. Who really wants to sell their two-year old car? The only people who would regularly sell a two-year old car are likely the people who really need to get rid of the car (say for debt issues) or people who drive fleet vehicles (which are seriously depreciated).

If I bought a new car tomorrow for 20k, I wouldn’t turn around and sell it for 12k in 2010 unless I really needed a different vehicle (family van?) or I’d really wrecked that car. If the new car was worth 20k to me, then whatever I have in 2010 is likely worth more than 12k.

Fun note: ran a few quick searches on AutoTrader. The # of 2005-2006s for sale was about twice as much as the # of 2007-2008s. Maybe it’s just bad data, but it looks like the supply of 2-year old cars is quite a bit lower.

However, notwithstanding my prior practice, I really don’t think you can buy a two year old car for only 60% or the original cost. Not from a dealer and not from an owner. Therefore, if I’m right, your calculations won’t hold up.