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It's more about what you think you can afford.... Posted by Mike Lynch [Email]  (#81) [Profile/Gallery]
(more from Mike Lynch) on Wed, 16 Nov 2005 21:38:47
In Reply to: New car/used car debate, -993-, Tue, 15 Nov 2005 23:25:54 Members do not see ads below this line. - Help Keep This Site Online - Signup |
It's less about new or used and more about what you think you can afford, or what you have permission to spend. Often a car purchase is a combined effort and you make comprimises. If you want a particular car and your partner says you can only spend so much than often a used car is the only alternative.
Affordability comes in many differing styles. For some it's a cash amount for others it's a monthly payment. For some that cash amount and the desired vehicle defines new or used all by itself. For others it's not the price but the payment and these folks represent the majority of car buyers. No rhyme or reason for cash buyers, no rights or wrongs, stictly personal choices.
But for the monthly payment folks, which is the majority of us, then let me suggest some things. You could get into a whole different set of values and parameters if you consider other cars than a Saab. Used Saab vs less expensive new car totally twists the situation, so let me speak only to someone buying a Saab.
A new Saab will lease for 24 or 36 months for about the same payment as a 3 year old CPO Saab financed for 60 months. It's an argument without much validity for many, who aren't buying strictly on the monthly payment, but instead setting a price range and not really considering the monthly payment, but if we scrape away that prejudice, than a lease for a new car has many advantages for the same payment.
If you by that $20k CPO for a minimum down payment and 60 months financing you've got a $400ish payment. For roughly the same $400ish lease payment and minimum intitial investment you can lease a $30k ish new Saab. Pay 3 years on that 5 year used car loan and go to trade it in at the 36 month mark and you're likely in a zero or negative equity situation. A 36 month lease for example on a new Saab on the otherhand is specifically designed to put you at the zero equity point after the three years. So why go used? In other words do you want to pay a similar payment for the 1st three years (years 1 - 3) of ownership or the 2nd three years (years 4 - 6) of ownership?
The corollary to support this involves the fact that the first 3 years of depreciation isn't more expensive than the second three years. Folks just assume that a new car goes in the toilet, depreciation wise, as soon as you drive it off the lot. Well I've got news, the second three years doesn't stop that depreciation slide, the first 3 years depreciation is very similar in actual dollars to the second 3 years. One of the major reasons is that a 3 year old car is very desireable, and a 6 year old car isn't so much.
As good a warranty as a Saab CPO has, you still can't beat the free maintenance and all new wear items that come with new Saabs. Plus that same $400 payment comes with a NEW car, a car that can be more easily selected to your tastes and a car with the latest safety, comfort and performance improvements.
Unfortunately this logic is way to rational for a car purchase, which by nature is a very emotional thing, although being overly analytical isn't necessarily such a bad thing with Saab buyers.
, Wed, 16 Nov 2005 21:38:47 <-- Viewing This Message, Wed, 16 Nov 2005 18:14:10, Wed, 16 Nov 2005 14:49:34
, Wed, 16 Nov 2005 09:16:15
, Wed, 16 Nov 2005 06:20:47, Wed, 16 Nov 2005 06:16:19
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