Depreciation Among New & Used Cars

New Cars

One of the biggest rules when shopping for new cars is to consider how the value of the vehicle will depreciate over time.  There are all kinds of factors that go into determining the depreciation, and, sadly, many of them are variables that are out of your control until after you have purchased the car.

The first few thousand miles that you put on a brand new car will depreciate the value more than anything else you do to the vehicle, short of a crash.  Many cars will lose 20-30% of their value the second you drive them off the lot.  Therefore this is something that you are going to want to research prior to even considering a purchase.

What kind of car?Credit:

Some automobiles are well known for holding their values far better than others.  Generally, your reliable family sedans such as Toyota, Honda, and Subaru will remain a valuable asset for years (and miles) to come.  If you are looking at something a little more high end or exciting than a Civic, such as an Audi, BMW, or Mercedes, than suddenly this devaluation becomes a much more prevalent issue.  It's not just limited to luxury German cars either: a new Cadillac, Jaguar, or Lexus will suffer the same fate.  Unfortunately it is the price one must pay if they want to be the first one to sit down in that comfy leather seat.

Used Cars

Used cars will, almost any circumstance, depreciate less.  In fact, you may even be so lucky as to have a car that does not depreciate at all, and you can sell it back at what you paid for.  If you buy a 2010 Honda Civic with 60,000 miles, and drive it for a year to 70,000 miles, you'll probably be able to get 95% or even closer to what you paid for it!

Used Cars = More Selection For Less Money

Chances are, you would like to have an Acura TL as opposed to a Honda Accord.  Both are reliable, somewhat spacious, and built by the reputable Honda Motor Company, but one is clearly better (as far as entertainment/looks/luxury goes) than the other.  The Accord starts $21,680 new.  The TL starts at $35,095 new.  A price difference of $13,415.

A quick 5 minute search of eBay Motors unearthed a used 2010 Acura TL, with less than 25,000 miles, for under $21,000.

Obviously one car is brand spanking new, while the other one has had an owner, and has 25,000 miles on it.  But it's important to consider, in this day and age, is 25,000 miles even that much?  The bare minimum standard expected out of modern engines is 200,000 miles, and when you're talking about Honda engines, they have been known to make far beyond (one owner has even taken his car to more than 1,000,000 miles.)

This isn't the choice for everyone, but for many, the option of driving an Acura for 175,000 miles sounds a lot more tempting than a Honda for 200,000.  Of course, there is one more important factor to consider...

Used Cars- Reliable or Not?

Unreliable New Cars

There seems to be a common misconception that used cars in general are unreliable, and that it's always better to buy a new car so that you don't end up paying a lot more money in repairs down the line.

The truth is, it's really impossible to tell whether or not a car will be reliable until quite a few years down the line.  Chances are, there are cars being rolled off the showroom right now that, 20 years from now, we are going to look at as ever-broken scrap boxes.  On the other hand, there are new cars being sold right now that will go down as some of the most consistent machines of their day.  You really just can't tell.  Some companies are more known for building reliable vehicles, your Hondas and Toyotas.  But they have had their fair share of lemons too, and both have recalled hundreds of thousands of cars in the past decade.

Unreliable Used Cars

One of the common arguments you hear against buying used cars is "You don't know what you're getting."  While that is true, the same could really be said of new cars too.  Perhaps 7 years after you have made your purchase you will know if that Chevy Cruze holds up down the line.  But just because you made it the first 50,000 miles pretty unscathed doesn't mean that a 3-year old Corolla wouldn't have done the same job from 20,000-70,000.

In a lot of ways, used cars give you a better idea of what you are buying.  Sure, you may not personally know the previous owner of the vehicle, and how he treated it while driving everyday.  But you are likely to have maintenance records, long-term test consumer reports, and perhaps even a certified pre-owned warranty.

Who knows, the guy who pulls up next to you in his brand new Dodge Dart could have the next great car that never stops running.  Or he could have a piece of junk that's past its prime before we consider it broken in.  There's no way to tell... but used cars will often give you a better idea.

So... Which is Better?

It's impossible to give one answer that fits everybody across the board.  

new or usedCredit:

Really, the most important thing that you can do when you are car shopping is identifying what your needs are, and doing your research beforehand.  And that's whether you are buying new or used.  Doing that alone puts you ahead of the majority of the customers out there.  There are certain tips that still apply whether you buy new or used.  Never be afraid to haggle, get a discount, or have a mechanically inclined individual check things out and give their opinion.  It could have a major impact on your finances down the line.  Buying an automobile is a major purchase, so don't make a brash decision to take the new or used route just because it means you'll be the first one on the block with a flashy set of new wheels.

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