New vs Used Car

October 13, 2004 10:50 AM

Our second car went belly up this weekend, and we are now looking for a replacement. I'd like to get some advice on the new vs. old dilemma [More Inside]

My old beater car has kicked the bucket and we are looking at purchasing a minivan to suit the needs of our growing family. We are leaning towards the base model of the Toyota Sienna (CE 7 passengers), and have generally been looking for 2004 models. I've used Auto Trader and the local papers to build up a list of available vans in my area and have found that the vehicles seem to fall within a $3000 range. But last night I priced out a new 2005 model from Toyota's website. To my surpise, the new van was not much more expensive than the used models (between $3400 and $6000 more expensive).

Mileage vs. Price difference from new model:
10000km to 30000km: approx $3400 less then new model
30000km to 40000km: approx $4300 less then new model
40000km + : approx $6000 less than new model

My questions are as follows: would the new model make more sense than a used model? What would be a good choice with price point vs mileage in the used car field? Is the full warranty worth of a new model worth the extra cash put in? Anything else I should be considering?

Any advice would be great.

Note: all prices are in Canadian dollars

posted by smcniven to travel & transportation (7 comments total)

Are you going to finance? You might be able to get better financing on the new car.
posted by mr_roboto at 1:12 PM on October 13, 2004

Assuming that you get the same mfg's warranty in Canada as here in the States, I say go for the 10K - 30K. It's only $1600 more than the 40k+ car, but still has some warranty left on it.
posted by Juicylicious at 1:24 PM on October 13, 2004

A new car almost never makes sense. You pay a premium for the privilege of being the first person to own it. Unless you derive substantial value from that -- certainly I don't -- the value/price ratio on a brand new car is awful.
posted by majick at 1:57 PM on October 13, 2004

A new car almost never makes sense. You pay a premium for the privilege of being the first person to own it. Unless you derive substantial value from that -- certainly I don't -- the value/price ratio on a brand new car is awful.

I know this is the conventional wisdom, and it makes sense. However, I wonder if the incentives war post-9/11 among all the automakers has changed this.

For example, if you have good credit, it's easy to buy a car now both at a near-invoice price and with 0% financing rate for 5+ years. Only the dealer lenders will make that offer, and only because they want to move cars. Outside financing on a used car has no hope of matching that deal, and the high interest rate can make a big difference over the life of the loan.

Does it make up for the massive depreciation a new car suffers over the first three years? I don't know. Someone would have to run the numbers and see. But I have a hunch that a person with good-to-excellent credit and good bargaining skills (or good research skills) can get themselves a good deal on a new car. Plus they get a warranty and new-car smell.
posted by tirade at 4:13 PM on October 13, 2004

Also, if you don't care about appearances, I've read that the best deal of all comes from owning a relative junker. If you're driving a $4k car with only liability insurance coverage, you've got a lot of room to pay for occasional repairs - even major ones - before your car costs as much as a newer car with full coverage.
posted by tirade at 4:17 PM on October 13, 2004

The new-car financing deals can indeed be very attractive. If you buy a $15,000 used car at, say, 8%, over five years you will pay $3,000 in interest, so you could have bought a $18,000 new car at 0% and had it in warranty the whole time. At that point I'd say anything up to $20K would be worth it just to have the new-car warranty and peace of mind. If the vehicle is more expensive, of course, the benefit of the free financing increases even further.

Toyotas are very reliable and thus hold their value well, so it might make sense to go with the new vehicle if you can get a good deal on financing.
posted by kindall at 5:23 PM on October 13, 2004

Another place it can make sense to buy a new car is if you intend to keep the thing until it wears out. Iff you value the time you spend looking and consider it wasted one new car verses two older cars could make sense.

A buddy of mine bought a new Maxi Van in 1984. He's put ~750,000 kms on it now and it's still ticking so he may have saved one shopping trip. The price per km he would have saved new vs used is vanishingly small and he wouldn't have known the history/maintence record.
posted by Mitheral at 3:01 PM on October 14, 2004