Cars… Buying a car is a huge financial decision and one of the most highly debated issues is buying new versus buying used. I’ve already let the cat out of the bag and told you that I bought a new car so let’s get to why I chose buying new despite the common advice to buy used.
Buying A Used Car Is Generally A Better Deal
In general buying a used car is normally a better deal. In general does not mean always or without exception. Normally new cars drop dramatically in value when you drive them off the car lot. You can take advantage of this by buying a late model used car that was brand new just a year or two ago.
Why I Decided to Get a New to Me Car
It was winter 2010 and my trusty 10+ year old Honda Accord had finally started giving me problems. I had bought it a few years earlier as my very first car and it had been great to me. I was able to fix the problems relatively cheaply. The car was at the point where bigger issues were right around the corner. I decided to sell it while I could still get a decent chunk of money for it and that meant I needed a new or used car to replace it.
I researched for over a month to find out what type of car I wanted and had finally decided I wanted a 2006-2010 Honda Civic. I did look into other cars like new and used Toyota Corollas but I just didn’t fit in the car. I was too tall. All of the Honda Civic model years were relatively similar but I wanted to try to save some money and get a used car. I researched extensively to find the used Civic I wanted. The only problem was that most of the late model Civics were only $1,000 to $2,000 less than a brand new Civic and had 50,000 to 75,000 miles on them (common for Washington, DC). Why were these late model used cars so expensive?
Buying a New Car Was a Better Deal For Me
Notice the last two words above “for me”. This isn’t the case for everyone, every type of car or every time you’ll buy a car. So why did I get a new car?
When I bought my new Honda Civic in early 2010 there was a perfect storm brewing for new car buyers. The US economy was in recession and automakers were being taken to cleaners. Car sales were the lowest they had been in a long time and car dealerships couldn’t do enough to get inventory off the lot. They were stuck with a lot of cars they had made in anticipation that cars would still be selling like the had in the past but instead used cars were going at a premium because everyone was looking to save money.
In the end I got the car dealership to sell me a brand new Civic for over $1,300 below invoice. It has less than 10 miles on it and I would have saved only about $500 to $2,000 to acquire a year or two old Civic with a ton of miles on it. I decided that the extra money was worth it. I would know the entire history of the car and it came with a warranty that would protect me against any manufacturing defects in the beginning. I felt much more comfortable knowing this.
The service I used to get my price said at the time it was the second lowest price on Civics in the nation at the time. I was lucky that I lived in the area that allowed me to get a great deal. If I had lived somewhere else maybe a used Civic would have made sense for me. I was lucky that it didn’t and I ended up getting a new car.
Where do you stand on the new vs used car debate? Does it depend on the deal you can get or do you always buy new or always buy used?
Sam says
November 18, 2012 at 9:39 amIn retrospect, 2010 really was the best time to buy a new or used car!
I was looking at a 2007 BMW 335i and they were going for only $27,000 vs $50k new then. I just didn’t pull Ye trigger in 2010 because of moose. I invested the money instead.
Lance says
November 18, 2012 at 10:00 amI knew the car dealerships were begging for sales because the firm I worked for at the time had a ton of dealership clients. Never hurts to know when people need sales 🙂
Nate Fancher says
November 13, 2012 at 9:19 pmI have a 2001 Civic with 160,000 miles on it. Such an economical car! But it is on it’s way out. Thanks for sharing this! It’s an insightful way to look at it.
Lance says
November 14, 2012 at 6:00 pmKeep in mind I bought my car in 2009 in a major recession. I may have bought a used car if I were buying today. Make sure to evaluate for yourself to find your best deal.
Nate Fancher says
November 15, 2012 at 4:39 amRight. The key is to think things completely through. You did that when you got your new car. As you put it you need to ‘evaluate’.
Nicole says
July 24, 2012 at 2:29 amFor me, nothing beats brand new things. But it still depends on the deal you made upon buying that car. If it’s really worth the cost, why not?
Joe Morgan says
July 3, 2012 at 1:31 pmI agree that in general, used is cheaper. But we’re still dealing with the repercussions of the Cash for Clunkers program passed by congress in 2009. That legislation mandated that any car traded in for that rebate program had to be destroyed. The end result is far less used cars in the secondary market, and so the used cars that are out there have gone up in price.
Lance says
July 5, 2012 at 9:55 pmI totally forgot about cash for clunkers! Thanks for the reminder as that definitely had to do with it as well.
Kaylan says
June 22, 2012 at 2:46 pmI’m about to buy a car and I’m constantly in the debate: new or used. I’m leaning towards new, however, as its only a few grand (1-3) more expensive without the 30k+ miles. Plus, the warranty is enticing.
Lance says
June 22, 2012 at 2:52 pmYou have to do your own cost benefit analysis and see which is a better deal for you. If you do go new make sure you have financing lined up in advance is case you don’t get the best terms from the dealer.
Fahad says
June 20, 2012 at 1:20 pmCongrats for the new car 🙂
TM @ My University Money says
June 19, 2012 at 8:47 pmI wrote this exact same post about a year ago Lance. I came to the same conclusion you did for all of the same reasons (great minds must think alike 😉 ). I took a lot of heat from it in some corners, but I have not read or seen anything since then that would make me change my decision. Enjoy the stress-free life that comes with warranty my friend!
Lance says
June 19, 2012 at 8:51 pmUnfortunately I had to drive a lot for work and already have 41,000 miles on my car. Honda only has a 36,000 warranty 🙁
Lance says
June 19, 2012 at 8:11 pm@Daisy – Sounds like a great deal. I’m sure it’ll work out great for you.
@Average Joe – I always try to look at all of the options regardless of the typical advice. Sometimes you can find a great deal
@TB – It seems to be a strong theme on my blog but is so true. You have to do what works best for you. Every situation is different.
@Shopping to Saving – I definitely think it was worth the extra $30 in your case.
@A Blinkin – I have a car payment but only because it is at .9% financing and I used it to build credit. I have the money in the bank to pay it off since day 1. Another post for another day though.
A Blinkin says
June 19, 2012 at 6:19 pmI’ve never actually had a car payment so I don’t know what life would be like with one. Right now I drive a 2001 Jeep which I will drive until it goes busto. When that day comes (which I dread) I’ll likely go with a new car.
From Shopping to Saving says
June 19, 2012 at 4:40 pmYou know same thing happened to me with my laptop that my BF just bought me. I was leaning towards going for a refurbished one, yet when I looked at the new ones – it had all of the same features, and it was around the same price, just $30 more. If you can get something new for just a bit more than a used model, it makes perfect sense. I have a better peace of mind with new items.
Brent Pittman says
June 19, 2012 at 1:31 pmDid you mention the service you used? I have 97 honda that is still chugging along, hopefully we can get 1-2 more years out of it before we’ve have to visit this issue…unless of course we have twins.
Lance says
June 19, 2012 at 1:38 pmI am going to write up a post oon it one day but I used usaa’s car buying service. I think it is called zag if you don’t have access to USAA. They prenegotiate the prices then you just show up and sign the papers.
TB at BlueCollarWorkman says
June 19, 2012 at 7:58 amWe always buy used cars, but like you said, that’s what’s better for us. I’ve noticed that a lot with financial advice. You’ve gotta take what people say and apply it to your particular situation. Soemtimes it’ll work for you, sometimes not. Congrats on the new car, man 🙂
AverageJoe says
June 19, 2012 at 12:35 amWhile I agree with Jason that the math usually works out to buy used cars, when you bought your car the market for used cars might have reached it’s peak. That’s why it’s never a good idea (in my opinion) to blindly follow rules of thumb. By taking the time to actually do the math you’ll find the best deal available that day to you.
Daisy @ Add Vodka says
June 18, 2012 at 10:01 pmI bought used but it’s only four years old and had very little milage on it. So I’m happy with it. It will last me for years to come!
Lance says
June 18, 2012 at 4:54 pm@Jason – Sounds like you investigated both options and picked what worked better for you! Great job.
@Krantcents – As long as you have your reasons it seems like you’re making the best decision for you.
@John – Now that you can see a life without car payments do you think you would have bought used?
@Michelle – It really does depend on the deal. With car dealerships not selling as many cars in the last few years late model used cars demand is (or at least was) less than the supply driving prices up.
@MyMoneyDesign – I thought I would have too but my deal was too good to pass up. I think it was a one time perfect storm and my next car will end up being used, although it’ll be a while.
MyMoneyDesign says
June 18, 2012 at 12:03 pmI usually side with the User Car end of the debate, but that deal you got doesn’t sound too bad! In any deal, you’ve got to weigh the benefits of each option. In your case, you were lucky that the new car worked out to be the front runner!
Michelle says
June 18, 2012 at 11:53 amI think it all depends on the deal. Lately, I keep reading that some used cars have a higher value than their brand new versions. My car has steadily kept it’s value thankfully.
John @ Married (with Debt) says
June 18, 2012 at 11:36 amIt always helps to do our own value assessments. I bought a new car because I had a long commute and it was actually cheaper to buy a used car. That was before I could conceive of life without a car payment. Luckily I live close to work and when my car goes out, I will have more options, including cheap beaters.
krantcents says
June 18, 2012 at 11:11 amI am considering a new car because the car I am thinking of depreciates very little. I am also getting an employee deal. That and the either zero interest or low interest just make the deal. I am still dragging my feet because I hate payments.
Jason says
June 18, 2012 at 10:41 amI think it would depend on the deal you could get on the new car, but for a rule of thumb I certainly say most people should buy used. I recently bought a 2-year old used car with 39,000 miles on it. A new car would have cost about $5-6k more and that wasn’t worth the price to me.
You mentioned that you used a service…care to elaborate on that? Is it anything people in other cities could use?