New car same price as 1 year old

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schuyler74
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New car same price as 1 year old

Post by schuyler74 »

This past January, I bought a one year old used 2020 sedan with 12k miles for (roughly) the book value, according to cargurus.com. Last month, my Dad bought a new 2021 car of a similar style and size, though a different but comparable manufacturer. Including fees and taxes, we paid the same price for our cars.

Since his is brand new, he was able to select exactly the options he wanted, whereas mine is what it is. However, mine has a lot more safety features and connectivity options, hence the reason they cost the same.

Is there an official Boglehead stance on which of these is the better route, or maybe neither? Some say don't buy any car less than 3 years old in order to get the best value. Neither of us are millionaires, so we can't just buy whatever we want.


Photo for illustrative purposes only (nothing like the actual cars in question, unfortunately):

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oldfatguy
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Re: New car same price as 1 year old

Post by oldfatguy »

schuyler74 wrote: Fri Apr 16, 2021 2:20 pm This past January, I bought a one year old used 2020 sedan with 12k miles for (roughly) the book value, according to cargurus.com. Last month, my Dad bought a new 2021 car of a similar style and size, though a different but comparable manufacturer. Including fees and taxes, we paid the same price for our cars.

Since his is brand new, he was able to select exactly the options he wanted, whereas mine is what it is. However, mine has a lot more safety features and connectivity options, hence the reason they cost the same.
This is why I have ended up buying new vehicles the last 3 times I needed another car. I looked at 2-3 year old ones that were the same price or higher than what I could get brand new, because they had lots of extras/options on them that I didn't want or care about.
livesoft
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Re: New car same price as 1 year old

Post by livesoft »

I'm laughing about the "one year old" vehicle price. Dealers have these old used cars on their lots priced at about new prices to make people contrast them to new prices and then go, "Hmmm, I can get a new car at the same price or lower than an old car, so I will just buy a new car." Those 1-year-old cars are not meant to be sold at a lower price.

You gotta go read some books are marketing and also behavioral finance traps such as price anchoring. Example:
https://www.priceintelligently.com/blog ... g-strategy

Eventually, the dealer unloads the old cars either to a chump or someone who negotiates a decent discounted and realistic price.
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Jack FFR1846
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Re: New car same price as 1 year old

Post by Jack FFR1846 »

Your picture illustrates the phenomenon. The Divo has far more demand than supply. So once owners have the car, new ones become rare or impossible to attain, so used prices go up. King of this in the modern time is the McLaren F1 who's miniscule $1M price tag when new is a sneeze compared to the average $20M going rate for a used one.

Of course this is all very fun. But a similar sedan doesn't mean anything. Some cars actually do go for more used than a new one can be purchased for. Take Honda Civic Si's over their entire history. They are made in limited supply. Once sold out, a buyer finding no new ones available searches the used market, jacking up the price. New car availability sometimes overlaps a used car that was put up for sale when new ones were difficult to find. Heck, when looking for my Wrangler, I had to go more than 2 years old to match the price I ordered mine for. It happens. Not often with the same model/trim sedan as sedans are out of favor and drop like a rock, but with popular models, sure.

And Livesoft makes a good point. A common dealer ploy is to hold over a leftover previous year model when new ones come out. They price it more. There's always people who think they "know" that buying a leftover saves money. They don't check new model year prices and get ripped off.
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IowaFarmBoy
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Re: New car same price as 1 year old

Post by IowaFarmBoy »

I originally read the topic as that the two cars were the same except that one was a year older and had been used but were the same price, However, the two cars are not the same manufacturer, model and have different options so they are different cars.

So the question should really be framed as, "Given that I am going to spend $xxxxx dollars, which car should I buy?" And I think that is really up to you. How much do you value those additional safety features and options? Do you perceive one of the manufacturers/models to be higher quality or more reliable? How do I discount the miles and age?

I would figure out what I really want in a car in terms of features, options, safety, comfort and reliability and then buy the car that is the best value given its age, miles, etc.
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eye.surgeon
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Re: New car same price as 1 year old

Post by eye.surgeon »

I think the actionable message here is that used cars are at historically high prices making the decision to buy a 3 year old car more difficult. The traditional BH car philosophy has always been buy used, and this is still good advice for 6+ eyar old cars. 3 year old cars is more of a toss-up now, I'd buy new for the small delta.
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Leesbro63
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Re: New car same price as 1 year old

Post by Leesbro63 »

eye.surgeon wrote: Fri Apr 16, 2021 3:28 pm I think the actionable message here is that used cars are at historically high prices making the decision to buy a 3 year old car more difficult. The traditional BH car philosophy has always been buy used, and this is still good advice for 6+ eyar old cars. 3 year old cars is more of a toss-up now, I'd buy new for the small delta.
An alternative traditional BH car philosophy has been to buy a brand new car, shopped hard and carefully, in a color and with options that you like, and keep it for a long time. My experience has been that this is at least equal to, if not better than, in the long run, buying a 2-3 year old car with a color and options that you have to settle for.
Last edited by Leesbro63 on Fri Apr 16, 2021 6:25 pm, edited 1 time in total.
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William Million
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Re: New car same price as 1 year old

Post by William Million »

I've seen various markets where 1-2 year old popular cars are same price as new cars. Buyer beware.
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mrspock
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Re: New car same price as 1 year old

Post by mrspock »

livesoft wrote: Fri Apr 16, 2021 2:37 pm I'm laughing about the "one year old" vehicle price. Dealers have these old used cars on their lots priced at about new prices to make people contrast them to new prices and then go, "Hmmm, I can get a new car at the same price or lower than an old car, so I will just buy a new car." Those 1-year-old cars are not meant to be sold at a lower price.

You gotta go read some books are marketing and also behavioral finance traps such as price anchoring. Example:
https://www.priceintelligently.com/blog ... g-strategy

Eventually, the dealer unloads the old cars either to a chump or someone who negotiates a decent discounted and realistic price.
This. They are “anchoring” you. The new car price doesn’t seem as bad etc. You need to use behavioral tricks against them... make an offer, write a check out for the amount, slide it across the table... explain all you need to do is “sign” and the deal is done.

I’ve even heard of folks bringing $10-20k in cash for lower priced used vehicle deals. As a seller, it’s very hard to see a couple stacks of $10k in front of you and not try really hard to make a deal. I don’t care how well trained they are.

Cars are commodities....always treat them as such.
LunarOpal
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Re: New car same price as 1 year old

Post by LunarOpal »

eye.surgeon wrote: Fri Apr 16, 2021 3:28 pm I think the actionable message here is that used cars are at historically high prices making the decision to buy a 3 year old car more difficult. The traditional BH car philosophy has always been buy used, and this is still good advice for 6+ eyar old cars. 3 year old cars is more of a toss-up now, I'd buy new for the small delta.
Not just historically high prices...in the last 20 years it's been hard to find a popular, moderately priced, reasonably reliable (Honda, Toyota, Subaru, Mazda, etc.) 2-3 year old used car offered at a decent discount over a new car - I think the last time I looked I was finding 2 year old cars with 40,000 miles at 20% less than the equivalent new car.

I think there are still deals to be had for sports/luxury cars, though.

AFAICT, the reason is lease returns - that's where the supply for a lot of the 2-3 year old cars comes from...and I don't think that there are a lot of people who lease a Camry for 3 years and then turn it in and buy a new one. (Although I'm sure someone does).
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mmmodem
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Re: New car same price as 1 year old

Post by mmmodem »

So you bought a used 2020 Honda Accord for the same price as your dad's new 2021 Toyota Camry? If not, why not just state exactly what was purchased?

There is no consensus on BH. Some find value in extra luxury and safety options. Others, are content with base trim models or used beaters.
adamthesmythe
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Re: New car same price as 1 year old

Post by adamthesmythe »

You should feel OK with the fact that your year old car had "more" of something than the new one.

There is no consensus around here, just as there is no consensus about the owning/ renting a house. There IS considerable value in hearing the discussion and determining yourself how the various factors map into your personal situation.

For example for me. I buy new cars (not very often) because I don't HAVE to buy used for financial reasons. Because I plan to keep the car a while and because I value reliability. Because I don't enjoy the shopping required to find the lightly used unicorn. Because, for the cars I buy, the net difference in cost is small enough not to matter.
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Re: New car same price as 1 year old

Post by JBTX »

schuyler74 wrote: Fri Apr 16, 2021 2:20 pm This past January, I bought a one year old used 2020 sedan with 12k miles for (roughly) the book value, according to cargurus.com. Last month, my Dad bought a new 2021 car of a similar style and size, though a different but comparable manufacturer. Including fees and taxes, we paid the same price for our cars.

Since his is brand new, he was able to select exactly the options he wanted, whereas mine is what it is. However, mine has a lot more safety features and connectivity options, hence the reason they cost the same.

Is there an official Boglehead stance on which of these is the better route, or maybe neither? Some say don't buy any car less than 3 years old in order to get the best value. Neither of us are millionaires, so we can't just buy whatever we want.


Photo for illustrative purposes only (nothing like the actual cars in question, unfortunately):

Image
There are times you can a new one for almost the same as a very low mileage used. I was looking at low mileage Ford taurus in 2013. The one year with 10k miles were around 22k, and I couldn't get them off that, and others were test driving it. Ended up buying a new at $24k, with several thousand of factory incentives. The fact that there was an abundance of them sitting at various dealers helped.
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Re: New car same price as 1 year old

Post by bwalling »

livesoft wrote: Fri Apr 16, 2021 2:37 pm I'm laughing about the "one year old" vehicle price. Dealers have these old used cars on their lots priced at about new prices to make people contrast them to new prices and then go, "Hmmm, I can get a new car at the same price or lower than an old car, so I will just buy a new car." Those 1-year-old cars are not meant to be sold at a lower price.

You gotta go read some books are marketing and also behavioral finance traps such as price anchoring. Example:
https://www.priceintelligently.com/blog ... g-strategy

Eventually, the dealer unloads the old cars either to a chump or someone who negotiates a decent discounted and realistic price.
Some of the large dealer chains around here are now refusing to negotiate at all on price. They state they are doing you a favor by just offering a "fair" price up front. Of course, they're more expensive than what you'll pay at a place that will actually negotiate. I've never purchased from these places, but I did have an amusing experience with one.

I was looking to buy a used car, and found one of these dealers had the exact combination of features I was seeking. I contacted them and made an offer (it was a reasonable offer, based on numbers from TrueCar, looking around, etc). They replied with their "we don't negotiate; the price is the price" nonsense. I told them my offer was firm, and I'd buy one for that price. I reminded them the car had been on their lot for 3 months in part because their price was too high. They held, and followed up repeatedly with the manager, etc trying to get me to pay their price. Every few weeks, they would lower the price of their car a bit, which seems to be simply algorithmic on their end. I bought a car from another dealer. Eventually, they dropped their price down below what I had offered. That was the point at which I finally called the manager back to tell him what a fool he was. They wound up selling it for around $800 less than what I offered them (based on the last posted price before it was no longer listed on their website).
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Re: New car same price as 1 year old

Post by weirdsong1 »

I was raised on the logic of buying "new" used cars, since the depreciation is greatest the second the cars drives off the lot. However, my experience has been the same as the OP. Since I very much value not having to worry about car reliability, new cars are surprisingly the most efficient purchase for me. Or potentially one with low miles, but at least 2-3 model years old. However, as others have pointed out, I think this effect is most prevalent in highly desirable models like Camrys, Accords, Cr-vs, Rav-4s, etc, but less so in luxury brands. My father's last car purchase was a 2-year old BMW at almost 40% the cost of new.
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illumination
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Re: New car same price as 1 year old

Post by illumination »

I "want" to buy 1-2 year old cars, but the math just never seems to work out. I'd rather just pay a little more and get a new car, and when you look at the extra warranty coverage and depreciation curve, new can definitely make more financial sense. It seems even more lopsided when you are talking about SUVs and Trucks.

About the only benefit is in my state, private party car sales don't have a sales tax. On something like a $40k car, this can be huge, but usually a private seller then jacks up the price. I've found the person that sells a 1-2 year old cars tends to somehow think they can get 98% of the full retail price of a new one.

Sedans do seem to depreciate a lot more quickly, they're just not as much in demand. The sweet spot where you can get a good deal on something newer but the car has a lot of life in in is that 4+ year mark.
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Re: New car same price as 1 year old

Post by Shallowpockets »

Another anomaly on buying a used car that is certified is that the warranty will often be better than a new car.
As in new car 5yr/60,00 miles verses certified preowned with 7yr/100,000 miles.
MarkBarb
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Re: New car same price as 1 year old

Post by MarkBarb »

I've bought new and used cars. There is no rule. It's a personal value decision.
Leesbro63
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Re: New car same price as 1 year old

Post by Leesbro63 »

Another factor favoring the new car vs 1,2 or 3 year old one: maintenance. The slightly used car will soon need tires and brakes. Not an enormous cost, but enough to often tip the equation away from used. Also, the factory warranty on slightly used probably needs to be extended. Again, often tips the equation against slightly used.
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Re: New car same price as 1 year old

Post by ballons »

The only vehicles that hold the value like the OP are trucks, specifically Tacoma, or something in very high demand.
Shallowpockets wrote: Sat Apr 17, 2021 9:42 am Another anomaly on buying a used car that is certified is that the warranty will often be better than a new car.
As in new car 5yr/60,00 miles verses certified preowned with 7yr/100,000 miles.
Pre-pandemic you could find a few deals on CPO Honda and Toyota i.e. lease returns and people that just "upgrade" every 3 years.

CPO/certain used also allows you to add Honda/Toyota Care (not third party) to negotiate price or dealer shop it. (I know toyota clamped down hard on Toyota care online/phone sales). You have to more or less not care what you drive to get a deal or just be very lucky.
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Re: New car same price as 1 year old

Post by NHRATA01 »

I don't believe 1 year old cars are really a superior value at this point - as noted the old adage about a car losing 50% it's value when it's driven off the lot (or whatever absurdly high number that often gets cited) really is not true. Dealers aren't dropping the price much for a 1 year old vs new with potential sales incentives. You then have the maintenance, wear and tear, loss of about 1/3 of the B2B warranty period, potential abuse (if the person never intended to hold it more than a year) or nagging issues that led to the quick turn in. For a small premium I'd rather have new.

Particularly with the impact of the lockdowns plus plant shutdowns due to the chip shortage there's a dearth of new car inventory, so used cars have actually gone up a lot in value, especially trucks. I have a 2 model year old Colorado with 12k miles that is worth slightly more even as trade in then I paid for it new.

Now Covid aside, generally my opinion is the 3-4 year mark (or just off-lease) is about the sweet spot for catching a good amount of depreciation without a huge amount of wear and tear (and potentially retaining some of the powertrain warranty) from a financially beneficial standpoint.
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Re: New car same price as 1 year old

Post by DoubleComma »

We have found similarly when looking at used cars that are 1-2 years old, but not as much in the 3+ years old.

Additionally I have a company car that is managed by one of the large fleet companies. My company car is rotated every 13 months, not because my company wants me to always have a new car but because the fleet company knows that is where they get the best value out of them.

Another thing, I don’t value a lot of bells and whistles that it seems most people want. Leather seats is a deal killer, I don’t like them and will never own them again. I also put absolutely no value is heated/cooled seats or steering wheels. I think dual zone AC in a sedan is silly. My fleet cars come with all of these features. When I look to buy a used car personally I can’t find 1-2 year old cars without them, hence they are being priced higher because of these options. I now know that is because of how fleet companies configure their vehicles and it’s these same vehicles that find there way on dealers lots at a year or two old with <30k miles.

Once you get to 3+ years you start seeing cars turned in by individual buyers which can be configure more to my liking or have enough age between them and new that they are actually priced the way I believe used cars should be priced.
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Re: New car same price as 1 year old

Post by Katietsu »

In the new cars that I have considered purchasing in the last 5 years, the extra safety creatures and connectivity options were $2000-$4000 more than the trim level below. We wanted the safety features. It ended up being cheaper to purchase the “luxury” mid trim level to get those features compared to the upper level trim of the non-luxury equivalent.

So, the high used car prices aside, were those safety features and connectivity features important to you or did you just take them, and pay for them, because they were there?
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schuyler74
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Re: New car same price as 1 year old

Post by schuyler74 »

Katietsu wrote: Sat Apr 17, 2021 3:15 pm So, the high used car prices aside, were those safety features and connectivity features important to you or did you just take them, and pay for them, because they were there?
I really wanted the ability to connect with my phone via Android Auto or Apple CarPlay. I know you can buy aftermarket audio systems that claim to integrate with the car but I wanted the original equipment. The extra features I'm referring to are some of the newer things you'd expect: Backup Camera, Lane Assist, Forward Collision Avoidance, Smart-Braking Cruise Control, etc.

My Dad's car doesn't have any of these things, but he was able to choose an unusual color & trim combo which was evidently more important to him. We're both happy with what we have, so I guess that's all that matters. (At least, for car purchases!)
Katietsu
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Re: New car same price as 1 year old

Post by Katietsu »

schuyler74 wrote: Sat Apr 17, 2021 3:26 pm
Katietsu wrote: Sat Apr 17, 2021 3:15 pm So, the high used car prices aside, were those safety features and connectivity features important to you or did you just take them, and pay for them, because they were there?
We're both happy with what we have, so I guess that's all that matters. (At least, for car purchases!)

True. I hope your Dad remains happy. Some of those safety features, I strongly recommend to everyone that I know, especially people over 50!
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