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I plan on buying a car. I am not sure if it is going to be used or new. I am little scared of used because I always have the feeling that although they are cheaper, thing will eventually go wrong and you probably would have been better off paying for a new one. If I plan on buying a car(used or new), is there a number of years that I should consider keeping the car if it is used or new. For example, if I buy a new car, I would want to keep for as long as possible, but If I bought used, I would probably eventually want to trade it in and get a better vehicle down the road.

10

From a financial point of view, getting a 2-3 year old car with full service history (and obviously in good condition and well looked after) and driving it until it falls apart makes the most sense.

That way, you avoid the steepest part of the depreciation curve (ie, when you drive it off the lot) and you should end up with something that'll last you for a decade or longer if you keep up the maintenance.

Either car - if bought new or used - will go wrong at some point, especially if they're not looked after properly. Regular maintenance is one of the most important, if not the most important factor in keeping a vehicle reliable.

  • If you buy used get a brand with good reliability, I like Toyota and Volkswagen as a rule. I bought a 2003 Toyota Corrola in 2007 and with minimal maintenance it hasn't failed me yet – David Hayes Sep 21 '11 at 13:50
  • To add a modifier to your "2-3 year old car" rule. If a car has low usage such that it reaches obsolescence (maybe 15+ yrs) before "it falls apart", it makes sense to either buy a higher mileage 2-3 year old car or an older car. – chux Jul 12 '16 at 18:03
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I buy new cars and only for prices I feel are reasonable. If I could have gotten it cheaper is immaterial. I do not buy a car as an ivestment. I buy one I want to drive assuming it will fall apart the moment the warrenty expires and basically have scrap value. They never do but I do not feel cheated this way.

The point being you are going to lose money on the car using just its value. So get a car that fits what you want. If you like your car you will feel better about the money you paid for it than if you buy one for resale value that you hate to be in. If you find a car you want for a price you are happy with then enjoy the car for the car.

When negoatiating for the car figure out what your out the door price is. Tell them what you want when they agree on the price make sure it has all the extras you want included already. This is where the dealerships tend to gouge anymore. They quote 25k for a car and then tack on 5-8 in fees and costs. They have already got you feeling good about buying the car and you do not want to let go. That is a sales trick. This is true for both used and new cars.

  • Isn't that kind of like saying "I put money in the slot machine expecting none to come out. I do not feel cheated that way."? It's a sensible way to avoid disappointment, but then mathematically you should not be doing that at all. – Nicole Sep 15 '11 at 19:15
  • I say the above practically. Personally, like you, I feel happier in a car I like. However, I don't think that the math makes sense for that feeling in a generally, but rather only on a person-to-person basis. – Nicole Sep 15 '11 at 19:22
  • @renesis - I think you are right on the money with that analogy. With the exception that there is a chance you can come out ahead after using the slot machine. Unless you buy an investment car you display but never use you are not going to come out ahead on a car. But a slot machine will not get you to work or the grocery store or to your kids soccer games either. – user4127 Sep 16 '11 at 15:45
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It depends. Kelly Blue Book is the bible of used car pricing. My 2007 Toyota Avalon was about $30K new. KBB values it at $15K at 65K miles, but $10K at 130K miles. This pricing curve creates a $$/miles kind of breakdown where you can see that those 65K miles cost me $15K, but if you bought my car and sold it later on, those same 65K miles may cost you just over $5K. Prior to this car, I had a series of cars (no brand named here) that were ready to die after 80K miles. This particular car should be good for 200K miles. So tinker at the Kelly site and decide what's important to you. There are reports available that will tell you if the car had an accident or other major body work.

2

When buying a car, don't think of it as investment but rather as a luxury. You should like being in your car, enjoy driving it, and feel comfortable with it. You're going to spend a lot of time in it.

It's not like you're buying a car to earn money, you will lose money on a car. The question is how much you value your own comfort and joy, that's it.

Some people buy $1K clunkers and feel good with it even if they can afford a brand new Porsche, and some lease a Benz even though they can't afford buying a Toyota, because that's what makes them feel good. It's not a financial decision, you'll lose money either way.

  • But if you were able to buy the cheaper miles, the decision is financial. In this case, the first 50K miles are far costlier than the second 50K. – JoeTaxpayer Sep 15 '11 at 18:23
  • @Joe - you're always able to buy cheaper miles. Yet, some people (myself included) prefer to buy newer cars and enjoy the ride. – littleadv Sep 15 '11 at 18:32
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I plan on buying a car. I am not sure if it is going to be used or new. I am little scared of used because I always have the feeling that although they are cheaper, thing will eventually go wrong and you probably would have been better off paying for a new one.

Not good reasoning. All cars, new or used, eventually "go wrong". However, when that happens is the issue. But you could buy a brand new car, drive it off the lot, have it depreciate severely by the time it is back to your house, and sell it to someone else. It will "die" the same day, but guess who got the far better deal? The point is, as others have said, it is not newness that matters, it's the value of the deal that matters.

If I plan on buying a car(used or new), is there a number of years that I should consider keeping the car if it is used or new.

Very roughly, I'd shoot for about 10 years, but so much depends on what kind of car you bought, what sort of driving you do (highway? in-town?), weather conditions in your area (salted roads? Moist? Dry?), how well you maintain it, who your mechanic is, etc.

For example, if I buy a new car, I would want to keep for as long as possible, but If I bought used, I would probably eventually want to trade it in and get a better vehicle down the road.

Why? Why wouldn't you want to keep a used car for as long as possible, too? That doesn't seem logical.

  • As far as driving conditions, I am in Florida. – Xaisoft Sep 16 '11 at 13:44
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    @Xaisoft That you are in FL would tend to favor the car lasting longer than if you were in, say, PA (snow/salt on roads is rough on the body). – Chelonian Sep 19 '11 at 17:53
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Pick an annualized TCO that makes sense to you and buy accordingly. I try to spend about $3,000/year on a car. I do that by buying a 1-2 year car and keeping it for 7-10 years.

The last couple of vehicles that I have purchased have been "certified pre-owned" by the manufacturer. If I have significant service requirements in the first two years, I cut my losses.

  • What exactly does certified pre-owned mean? – Xaisoft Sep 16 '11 at 13:44
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    @Xaisoft: It is a late-model car that you get from the dealer, with a manufacturer's warranty that is often better than the original. Honda, for example, includes a 100,000 mile warranty (new Hondas have 36,000). – duffbeer703 Sep 17 '11 at 21:39

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