Do you buy used cars like a Boglehead actually should?

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MsAndry
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Re: Do you buy used cars like a Boglehead actually should?

Post by MsAndry »

After seeing the state of the used car market, I too went with a new car over a used car (this was late last year). If your budget allows for it, I don’t think there’s anything wrong with the new car.

An additional factor to consider, though, is insurance. The new car is going to cost more to insure. And if you are financing for 3-5 years, the cost of carrying full insurance may be significant.

Also, I think the approach to optimizing your car purchase should differ for buying new vs buying used. Many emphasize that you want a car that has low depreciation (e.g., a Corolla or Civic). However, this conventional wisdom doesn’t seem that applicable to buying a used car. IMO, it seems like you could get a much better value by seeking out a used car that tends to depreciate by a good amount.
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Re: Do you buy used cars like a Boglehead actually should?

Post by nordlead »

jambadoc wrote:We've always driven used cars and have never bought new. We're in the market for a minivan (two young kids and one likely soon to be on the way). What I've found in at least in this sphere is that name makes all the difference. We have been looking at Toyota, Honda, and Chrysler. All retail for around 30k new. We are looking to spend under 20k. I can get a 2014 Chrysler with <30,000 miles for under 20k, but the Toyotas and Hondas in this range are around 24-27k. There's no way I would do that. I'd just buy new. We looked at a Buick Enclave that took a similar large initial depreciation hit.

What I've decided is that if you want to buy used, you sort of need to buy the "unsexy" cars as they seem to take the biggest hit initially (Impala was mentioned above - I got a 3 year old Malibu that I still drive with <10,000 miles on in for under $7K). I've you're set on a Honda or Toyota, you're likely better off buying new.
This is my current problem. I want a Honda minivan and used just doesn't make sense (especially in my area) unless you buy 10-year old, and I don't want to buy a 10-year old minivan at this time (I'd have 2 10-year old cars and I really don't feel like it at the moment). Part of my problem is that I want the EX, and in the used market it is easy to find EX-L or higher and LX. The LX is missing the 3rd seat in the 2nd row and the EX-L and above are too expensive.

So, new it is for me for the minivan, but my next vehicle will probably be a used sedan.
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investorguy1
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Re: Do you buy used cars like a Boglehead actually should?

Post by investorguy1 »

The price of used cars have gone up a lot and there is less of a benefit then there used to be. Also if you have good credit you may be able to get 0% financing on a new car. One point I would make though is regarding opportunity cost. If you buy a used car you could invest the money you save.
leonard
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Re: Do you buy used cars like a Boglehead actually should?

Post by leonard »

lightheir wrote:I was surprised to see how closely the used vehicles were priced relative to new ones if you went to a used-car dealer.
That's your problem right there. Buy from private parties, not used car dealers.
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TechNomads
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Re: Do you buy used cars like a Boglehead actually should?

Post by TechNomads »

I only buy used cars... And actually have sold many of the used cars I've bought for much more than I purchased them for.

Being nomadic, it is somewhat normal for me to land in the US for a 6 month stent, buy a vehicle on the way in, sell it on the way out... So I'm not your average commuter/live-in-one-place'r

I seek out highly desirable vehicles that are 5-8 years old and notorious for longevity (must be able to live to 300k - 400k miles) and then I look for maintenance records and high miles.

Have purchased from individuals, buy here pay here lots and franchise dealers, like Lexus... All have worked, but honestly, the 'joe's cheap cars' buy here pay here lot is the sketchiest and the one I'd be least likely to return to.

But, it usually depends on the vehicle that I'm looking for.
Cindyjrn
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Re: Do you buy used cars like a Boglehead actually should?

Post by Cindyjrn »

We only buy used cars from private parties. Typically higher mileage cars with all maintenance records. Our reasoning, which has worked fairly well over the years, is that people typically trade in cars with maintenance issues. Good quality cars that have been properly maintained are more like to be sold by private parties because those people are unwilling to get screwed by the dealership when they know they have a vehicle worth much more than the dealer's offer.
uclalien
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Re: Re:

Post by uclalien »

Leesbro63 wrote: I disagree that the used car market is inefficient enough to profit from it. If a Honda is underpriced, there is a reason.
But that doesn't mean there is a problem with the car. The last three cars I purchased were all Hondas (2 Civics and a Pilot). All three were purchased well below blue book. The owner of one of the Civics had graduated from college and was moving back to Indonesia in a month. The owner of the Pilot let it slip that he purchased a new Toyota Sequoia and the Pilot had been sitting in his garage for two months. The key is finding motivated sellers.

Honestly, I still find it amazing how much people are willing to spend on new cars. The Pilot we purchased was 9 years old and we paid $11,250. But only 65,000 miles earlier, the car was purchased for $40,000-$45,000.

I echo what others are saying about buying used cars from dealers; it doesn't make sense. Prior to buying the Pilot, I had been in conversations with a car salesman that was a friend of a relative. He offered to cut the price of a one year newer Pilot (but 2 steps lower model) with 75,000 miles on it to $15,500. Even before taxes and fees, that's 38% more than the better car we ended up buying. The issue with buying from a car salesman is that they will always try to get you to spend a little more than you originally intend to.
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Re: Do you buy used cars like a Boglehead actually should?

Post by Pizzasteve510 »

Cindyjrn wrote:We only buy used cars from private parties. Typically higher mileage cars with all maintenance records. Our reasoning, which has worked fairly well over the years, is that people typically trade in cars with maintenance issues. Good quality cars that have been properly maintained are more like to be sold by private parties because those people are unwilling to get screwed by the dealership when they know they have a vehicle worth much more than the dealer's offer.
Agreed. I combine this with a focus on cars with expensive extra "add on" features. For example, when we analyzed the used Prius market (2-3 years old) at first glance it seemed that a new car was a better deal. The problem was, once you got the sunroof, leather, navigation, and other features you really wanted, the car price skyrocketed 5-7k. In the used car market, those extras were steeply discounted, the second the car hit the road. Used lux+low mileage models were only $1-2k higher than used econo versions. So by carefully looking at listings by private owners we identified apparent private owners who had a car with lux features. Some of these people were pricing their car at close to the average for the model and year.

These people can be approached by a solid buyer much like a home seller can. You can share your ability to make the transaction painless for them, and often get cars with over $10k below the new model, once taxes, license and other items came into play. So we bought a 40k almost perfect car, with all the bells from a Google employee. The upgraded Prius at the dealer was $12-15k more. We didn't tell the seller that we could pay cash for a Ferrari if we wanted, we just made her feel good by thanking her for offering us a good, fair deal. We made it easy, paid cash, etc.
investor720
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Re: Do you buy used cars like a Boglehead actually should?

Post by investor720 »

I only buy used cars and with patience and homework you can get a very reliable car with plenty of options and low miles for a nice discount. I also keep all of my service receipts to pass along to any future owners willing to buy it after I ride it into the ground.
BW1985
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Re: Do you buy used cars like a Boglehead actually should?

Post by BW1985 »

No. Bought my first new car a couple years ago and paid cash. With the employee family discount I didn't even consider buying used. I'm also very particular with my vehicles, I'm the guy that parks a mile from the entrance to the store.
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Re: Re:

Post by Leesbro63 »

randomguy wrote:
Fankly this whole topic shows a major misunderstanding of the boglehead philophosy. Nowhere does the boglehead philosphy talk about living cheapily or frugally. If it does, let me know so I can bail out:) It says live below your means. The difference between living below your means and living as cheap a possible is huge.
In my own humble opinion, Boglehead philosophy is about value and utility of wealth. And one man's value is another man's excess! :wink:
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sunny_socal
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Re: Do you buy used cars like a Boglehead actually should?

Post by sunny_socal »

I have bought used and new - I've been a pendulum swinging between "New! I'll drive it forever" (then sell anyway..) and "Used! It's the best deal!"

My mistakes:
- All the new cars I've bought have been excellent. However I have sold them all within 1-3 years of puchase :oops:
- Most of the used cars I've bought have been inexpensive but have turned out to require tons of maintenance

Lessons:
- If you buy new, keep the car
- If you buy used... either get it from a dealer with some warranty (eg. CPO) or take it to a shop to get it checked

In the future:
- I'll buy used if shopping for a luxury car, these seem to be good value and are often available CPO
- I'll buy new if getting a $20k economy car
Leesbro63
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Re: Do you buy used cars like a Boglehead actually should?

Post by Leesbro63 »

sunny_socal wrote: Lessons:
- If you buy new, keep the car
- If you buy used... either get it from a dealer with some warranty (eg. CPO) or take it to a shop to get it checked
My one experience buying CPO (2006 Lexus RX330 bought at exactly 3 years in 2009...off lease) was that in the end, during the first year I had to buy tires and brakes (might be better in the sunbelt...I'm in Pittsburgh). And I felt that I needed to buy an additional warranty beyond the CPO period. Looking back, it's become clear that the overall cost per mile was too high even though I saved absolute dollars upfront. I would have been better off buying brand new, with good negotiating, from the get go.
Last edited by Leesbro63 on Fri Jun 26, 2015 1:35 pm, edited 1 time in total.
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SSSS
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Re: Do you buy used cars like a Boglehead actually should?

Post by SSSS »

Followup question: I'm researching a first-time new car purchase, checking inventory at my local dealer, and there are a few cars that are listed as "new" but with 100-300 miles on them, for maybe $1000 cheaper. Are these likely to be cars that people have bought & returned? Would it make sense to avoid them, or is this actually a good value?
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Re: Do you buy used cars like a Boglehead actually should?

Post by Leesbro63 »

Oops...DELETED. Repost mistake.
uclalien
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Re: Do you buy used cars like a Boglehead actually should?

Post by uclalien »

sunny_socal wrote: Lessons:
- If you buy new, keep the car
- If you buy used... either get it from a dealer with some warranty (eg. CPO) or take it to a shop to get it checked
In my opinion, buying used from a dealer is a poor decision because you pay a significant premium to buy from the dealer under the assumption that it's safer than buying from an individual. But the truth is, there is no guaranty that the dealer's car is any better than what could be purchased from a private party. And if you need to buy a warranty to achieve this level of comfort, the premium paid to the dealer is worthless. In other words, I see buying a warranty as doubling down on a poor decision. In some cases, dealers do include some form of warranty with their cars. But don't think for a second that it isn't included in the hefty premium you pay.

Personally, I would rather take the risk of getting a lemon every once in a while (which hasn't happened to date) and save thousands off of every car purchase. The savings will more than pay for the repairs, loss, or new car purchase if/when I get a lemon.
likegarden
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Re: Do you buy used cars like a Boglehead actually should?

Post by likegarden »

We bought the last used cars in 1993, but since then we only buy new cars with expected low maintenance such as from Buick or Toyota and keep them over 10 years. Our peace is very important, that is no unexplained car problems with costly repairs about which we have to wonder for months.
Cindyjrn
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Re: Do you buy used cars like a Boglehead actually should?

Post by Cindyjrn »

You should NEVER buy a used car without a prepurchase inspection. It is the best ~$200 you'll ever spend. Frankly, I'd even suggest it for a CPO vehicle although personally I would never buy a used car from a dealership. I use a gentleman in SoCal named Dennis at Auto Doc. He's a mobile inspection service. His inspections are extremely thorough and take roughly 2-3 hours with him crawling all over the vehicle. I'm sure there's many such services nationwide. I found him through Yelp where he has nothing but 5 star reviews. With our last purchase, we actually had him inspect two vehicles. He told us to pass on one and the other he said was as good a 9 year old vehicle as he'd ever seen. We purchased that vehicle upon his recommendation and it has been trouble free for two years now with the exception of some routine, required maintenance for a vehicle of it's age with 150k miles.
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sunny_socal
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Re: Do you buy used cars like a Boglehead actually should?

Post by sunny_socal »

uclalien wrote: In my opinion, buying used from a dealer is a poor decision because you pay a significant premium to buy from the dealer under the assumption that it's safer than buying from an individual.
That's your assumption, not mine. My assumptions, which I can verify prior to sale:
- Has been inspected
- Has a fresh set of tires, new battery etc
- Has all the dents & dimples ironed out
- Has a warranty

The dealer car actually does come with some value added, they don't merely wash it and put it on the lot (well, depends on the kind of dealer you shop at :D )
But the truth is, there is no guaranty that the dealer's car is any better than what could be purchased from a private party.
There is a guarantee - the warranty and the dealer's reputation.
And if you need to buy a warranty to achieve this level of comfort, the premium paid to the dealer is worthless. In other words, I see buying a warranty as doubling down on a poor decision. In some cases, dealers do include some form of warranty with their cars. But don't think for a second that it isn't included in the hefty premium you pay.
Yes, that's exactly what the 'dealer premium' entails - all maintenance up to date and a warranty.
Personally, I would rather take the risk of getting a lemon every once in a while (which hasn't happened to date) and save thousands off of every car purchase. The savings will more than pay for the repairs, loss, or new car purchase if/when I get a lemon.
I used to think that way too. I 'saved' thousands and ended up spending enough of repairs to break even vs a dealer purchase of the exact same vehicle (carmax for comparison in this case.) While I'm not out any more $$, I spent a significant amount of time going to the dealer, surfing the web searching for solutions and also time being upset. The car is in great shape now and will no doubt last me a long time.

It really depends on the car as well. If I were buying a $30k vehicle for my wife I'd likely go the dealer route. If getting my son's first car, I'd likely go through Craigslist (figuring he'll crash it within a year, LOL.)
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Re: Do you buy used cars like a Boglehead actually should?

Post by BW1985 »

Cindyjrn wrote:You should NEVER buy a used car without a prepurchase inspection. It is the best ~$200 you'll ever spend. Frankly, I'd even suggest it for a CPO vehicle although personally I would never buy a used car from a dealership. I use a gentleman in SoCal named Dennis at Auto Doc. He's a mobile inspection service. His inspections are extremely thorough and take roughly 2-3 hours with him crawling all over the vehicle. I'm sure there's many such services nationwide. I found him through Yelp where he has nothing but 5 star reviews. With our last purchase, we actually had him inspect two vehicles. He told us to pass on one and the other he said was as good a 9 year old vehicle as he'd ever seen. We purchased that vehicle upon his recommendation and it has been trouble free for two years now with the exception of some routine, required maintenance for a vehicle of it's age with 150k miles.
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Re: Do you buy used cars like a Boglehead actually should?

Post by MnD »

No _ I purchase new highly rated vehicles for quality and reliability and keep them for 12-16 years well maintained, parked in the garage at night and not abused. At sale I get way more than what the price guides indicate.

Late-model low mileage used cars, especially highly rated one seem very overpriced. I think they often are marketed at what peoples loan values are or on the basis of being a little under what new ones cost versus a very significant discount given that the best few years and highest appreciation of the vehicle are behind it.

I'm not interested in buying older used cars to deal with myself although the two I bought for the kids to use in high school and college are great. Only a few thousand in depreciation each over 6 years of use. Give the kids the option to buy them when they left home or I sell them.
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donmichael
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Re: Do you buy used cars like a Boglehead actually should?

Post by donmichael »

No way - I don't want to buy someone else's problems
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Re: Do you buy used cars like a Boglehead actually should?

Post by Drew777 »

I'm planning to drive my car until it dies, but that could be any time. Maybe next month or in 5+ years. When I replace it I am planning on buying a new Toyota Tacoma (Four Door, 4x4). Yes, I actually need 4x4 - not AWD, not a Subaru, etc. I've done a lot of research, and it is practically impossible to find a used model at a decent price. I just did a search and the cheapest I can find within 100 miles 2010 or newer with less than 100k miles is $24,893 (2010, 76k miles). I can get a 2015 for $27,500. Why in the world would I buy a five year old car with 76k miles just to save $2,600. It turns out Tacomas actually have the highest resale value of any vehicle according to KBB. Sure, I guess I could get another vehicle, but vehicles with low resale value usually have low resale value for a reason.
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Re: Do you buy used cars like a Boglehead actually should?

Post by dpusa »

We buy new... however buy with predominately cash and pay off the balance usually in 2-3 years.
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Re: Do you buy used cars like a Boglehead actually should?

Post by sawhorse »

When we were shopping for a car, I was surprised at how little difference there was between new and used cars, at least the ones I was interested in. We ended up buying used because he wanted a stick shift which no dealer had in stock, and more importantly because we found a great deal with someone who unexpectedly had to move out of the country.

I heard that there is a bigger difference these days between buying once used vs twice used than bewteen buying new vs once used. Any truth to this? It would obviously depend on the specific car, but is this true in general for car depreciation rates?
uclalien
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Re: Do you buy used cars like a Boglehead actually should?

Post by uclalien »

sunny_socal wrote: My assumptions, which I can verify prior to sale:
- Has been inspected
- Has a fresh set of tires, new battery etc
- Has all the dents & dimples ironed out
- Has a warranty

The dealer car actually does come with some value added, they don't merely wash it and put it on the lot (well, depends on the kind of dealer you shop at :D )
In my experience, few dealers include any kind of warranty with their used cars. And those that do only offer a very short-term warranty, which doesn't protect you very long.

Also, I suspect that very few dealers do much body work. Fixing something like dings has a negative ROI. And as a buyer, I would rather see the dents. It gives me a better indication of what the car has been through. Do you really want to buy a car that has been beat up but still looks pretty? I would also bet that it's very rare that dealers replace good, but used tires and batteries. In either case, it isn't hard to look at tire tread and lower your offer to a private party accordingly.
I used to think that way too. I 'saved' thousands and ended up spending enough of repairs to break even vs a dealer purchase of the exact same vehicle (carmax for comparison in this case.)
I guess I have just been extraordinarily lucky over my lifetime (or you have been extraordinarily unlucky). Other than a $200-$300 repair every 3-4 years on one of our two cars, I really only pay for general maintenance, all of which would have been necessary with a dealer bought car.

Since this is a Boglehead forum, I feel it's necessary to point out the opportunity cost of buying used from a dealer (vs. private party). Spending an extra 20%-40% on the purchase of each car can have a significant compounding effect (assuming you don't run off and spend the savings). For example, if you buy one car every 10 years for 50 years, saving $3,000 (present value) on the purchase of each of those cars and compound that savings by 5%, the compounded present value savings of that $15,000 is more than $81,000. And the savings increases the more often you buy cars.
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mike143
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Re: Do you buy used cars like a Boglehead actually should?

Post by mike143 »

Buying new after cash for clunkers killed the used car market. Not enough savings for a 2-3 year old vehicle with less than 50k from a reliable make (Honda/Toyota). Plan to drive them (12 Civic and 13 Prius) until needs dictate otherwise. If you fancy highly depreciating vehicles you can save 50% at the 3 year 50k mark. I have had many a high mileage Honda and use to work on them. General repairs and even going as far as engine, transmission, and clutch replacement, even did an engine rebuild. Over the years I would have spent less buying a new reliable make and making payments versus doing repairs myself but I learned a lot. I still do my own oil changes including any fluid changes (transmission, coolant, etc.). The furthest I would go now is a brake job or tire rotation. Long gone are the day when I do engine, transmission or clutch jobs/swaps. Rebuilding a engine was my worst mistake. I thought it would be less money than a low mileage salvage yard engine but after unexpected expense it was more costly.
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Re: Do you buy used cars like a Boglehead actually should?

Post by BW1985 »

A good point raised, if I was knowledgeable enough to replace things like spark plugs, water pumps, alternators, etc then used cars would be more attractive to me. But paying shop labor on top of parts, no thanks.
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Re: Do you buy used cars like a Boglehead actually should?

Post by randomguy »

SSSS wrote:Followup question: I'm researching a first-time new car purchase, checking inventory at my local dealer, and there are a few cars that are listed as "new" but with 100-300 miles on them, for maybe $1000 cheaper. Are these likely to be cars that people have bought & returned? Would it make sense to avoid them, or is this actually a good value?
More likely new cars they couldn't sell but racked up test drive mileage or special events( PGA event where players get a new car for the week) but I have always seen them market as used.

I must admit I always wonder were 1-2 yearold used cars come from. Sure some are dealer courtesy cars but there are a lot of these out there
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Re: Do you buy used cars like a Boglehead actually should?

Post by roflwaffle »

I do, mostly because I'd rather retire early'ish, go on vacation, go back to school, etc... than spend more time working to have a larger/faster/nicer car. Right now I'm at ~12c/mile all in (depreciation, ins, registration, fuel, repairs). To be honest, my wife's new Prius isn't that much more expensive than my old Insight at ~20c/mile (assuming she has it for 10 years), but that ~8c/mile adds up to a real $30k over 15 years.
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Re: Do you buy used cars like a Boglehead actually should?

Post by Cindyjrn »

SSSS wrote:Followup question: I'm researching a first-time new car purchase, checking inventory at my local dealer, and there are a few cars that are listed as "new" but with 100-300 miles on them, for maybe $1000 cheaper. Are these likely to be cars that people have bought & returned? Would it make sense to avoid them, or is this actually a good value?
They cannot list a car that's been titled as new. So if a new owner took it off the lot, it's titled the second they sign the paperwork. Most likely test drives, loaners to special customers, the owner's wife needed to borrow a car for a few days, etc.
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Re: Do you buy used cars like a Boglehead actually should?

Post by LadyGeek »

This thread is now in the Personal Consumer Issues forum (buying a car).
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Re: Do you buy used cars like a Boglehead actually should?

Post by canderson »

We are a one-car family due to me being unable to drive. This dictators our behavior.

We buy new. We do not but extended warranties. We sell at the 75-85j mile mark for $10-12k and then pay cash for a new, new car.

We can't afford car troubles so are OK with paying a bit of a premium to insure against that likelihood.

We but Toyota, RAV4 specifically, fwiw.
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Re: Do you buy used cars like a Boglehead actually should?

Post by Cindyjrn »

Hey somebody has to buy new cars or we wouldn't get all the sweet deals on used cars. :sharebeer
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Re: Do you buy used cars like a Boglehead actually should?

Post by jabberwockOG »

We have purchased 8 used cars (4runner, mustang, accords, mazda3, Highlanders, Lexus), over the last 15 years (3 kids started driving). In every case we saved a huge amount of money buying used. But there is risk buying used so unless you reasonably car savvy and somewhat mechanically inclined its likely better to play it safe and buy new. Saving money buying used requires patience and hard work to find the right car and also requires excellent negotiating skills. The basic rule of thumb is that you can get and drive great cars at great discounts to new but it takes a lot of time and work. The most expensive and easiest way to buy a car is to take the old car to a new car dealer and trade it for a brand new car....super easy and (if you don't kid yourself) super expensive. The hardest, most time consuming and least expensive way is to sell your old car - detail it and advertise your old car to sell it for top dollar privately. Then take the time to hunt for and find a super well maintained low mile cream puff used car...lots of time and work required but this ends up being the lowest cost way to drive really nice cars at low cost. The notion that used cars are just as expensive as new cars is BS, just folks trying to justify buying new. There are great used car bargains on 3 year old cars, especially off lease cars, it juts takes extra time, effort, and basic negotiating skills to get the right car at the right price.
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Re: Do you buy used cars like a Boglehead actually should?

Post by Leesbro63 »

jabberwock wrote:We have purchased 8 used cars (4runner, mustang, accords, mazda3, Highlanders, Lexus), over the last 15 years (3 kids started driving). In every case we saved a huge amount of money buying used. But there is risk buying used so unless you reasonably car savvy and somewhat mechanically inclined its likely better to play it safe and buy new. Saving money buying used requires patience and hard work to find the right car and also requires excellent negotiating skills. The basic rule of thumb is that you can get and drive great cars at great discounts to new but it takes a lot of time and work. The most expensive and easiest way to buy a car is to take the old car to a new car dealer and trade it for a brand new car....super easy and (if you don't kid yourself) super expensive. The hardest, most time consuming and least expensive way is to sell your old car - detail it and advertise your old car to sell it for top dollar privately. Then take the time to hunt for and find a super well maintained low mile cream puff used car...lots of time and work required but this ends up being the lowest cost way to drive really nice cars at low cost. The notion that used cars are just as expensive as new cars is BS, just folks trying to justify buying new. There are great used car bargains on 3 year old cars, especially off lease cars, it juts takes extra time, effort, and basic negotiating skills to get the right car at the right price.
It's not BS in many cases. Particularly with Hondas and Toyotas. By the time you add a warranty or CPO premium...maybe buy tires and brakes within the first year (common in the rust belt) and take the risk that you missed something, new often wins or maybe only loses by a small amount. As to selling a vehicle yourself, I agree you usually can fetch more. But be careful...in many (most?) states you will give up your sales tax credit...perhaps enough that it negates the extra you'll get versus trading in. If you sell a $15,000 used car, in Pennsylvania you'll lose $1050 (7% sales tax) credit on the new car purchase. Can you really get more than that over the dealer offer? Maybe. And how much more, minus that loss of credit, is it worth to let strangers into your life to test drive your car? If you're selling a $5,000 car that the dealer offered $2000 on, then yeah, the sales tax credit loss is not worth worrying about.
Rodc
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Re: Do you buy used cars like a Boglehead actually should?

Post by Rodc »

Cindyjrn wrote:We only buy used cars from private parties. Typically higher mileage cars with all maintenance records. Our reasoning, which has worked fairly well over the years, is that people typically trade in cars with maintenance issues. Good quality cars that have been properly maintained are more like to be sold by private parties because those people are unwilling to get screwed by the dealership when they know they have a vehicle worth much more than the dealer's offer.
Good point. When I have a used car that is shot I trade it in because only a poor person or a young kid would buy the car and I don't want to screw them over. Otherwise, the one time I had a decent used car (daughter could not take it to school and we did not want to insure a third car to sit in the driveway) we sold it as a private sale.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
dbr
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Re: Do you buy used cars like a Boglehead actually should?

Post by dbr »

On the principle that every day you keep an investment is a day you "bought" that "investment" I buy used cars every day.

I don't agree that buying used cars is a BH principle. LBYM is a BH principle and buying used can be a tactic to realize that, or not, depending on one's means and what car one is buying. As above, one can equally well exercise the principle by buying new and keeping for a very long time.

In reality I have obtained cars used in most instances and kept them a long time. My last three car purchases were new, however, and the holding periods of those to date have been 16 years, 12 years, and 3 months.
letsgobobby
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Re: Do you buy used cars like a Boglehead actually should?

Post by letsgobobby »

My first 3 cars were used (77 Corolla in 89; 83 Corolla in 90; 93 Accord in 97). We bought our first new car in 2006 (RAV4) and then a new Prius in 2012.

We switched from used to new because we had more money and less time to shop for used. In addition, in 2006 we bought new because the RAV was the perfect vehicle for us and was new that model year (the previous model was far smaller), it got great reviews, and the price was very modest ($23,500).

In 2012 the used car market had really shifted. Used car prices, especially for a Prius, just weren't cheap enough to justify the higher risk of ownership/costs of maintenance.

We paid $24,500 (plus taxes) for our new 2012 Prius Three. It currently has 70,000 miles.

We recently got a trade in offer from the dealer (unsolicited) for $14,500. That's probably a lowball price* (see below), but using that figure we spent $10,000 in depreciated value to drive 70,000 miles in a Prius.

Say instead we had bought a used 2009 Prius in 2012, and wanted to sell it today. Assume we bought the 2009 with 30,000 miles in 2012, and sold it in 2015 for 100,000 miles. How much would that have cost?

Current 3 year old Prii (2012s) with 30,000 miles are about $19,000. Current 6 year old Prii (2009s) with 100,000 miles are about $12,000. That's a $7000 cost to drive the vehicle 70,000 miles over 3 years (not a direct comparison, different model years, etc). Owning the car from 70,000 to 100,000 miles would have had considerably higher expected costs, of course, including a major 90,000 mile service; every 5000 mile services which are covered by Toyota from 0 to 25,000 miles; and a bumper to bumper warranty coverage from 0 to 36,000 miles. Maybe, what $1000 total? Some luck of the draw involved of course.

So basically, we paid $10k instead of $8k to drive 70,000 miles. That's not a big difference in the scheme of things. It is worth $2000 to me for my wife to be happier driving "her new Prius" instead of "someone else's used Prius."

Furthermore, if we were able to sell our Prius for $16,500* instead of the dealer offered $14,500, there would have been no difference at all in the cost to drive a new Prius vs used.

*I recently did an AutoTrader search for our Prius in the surrounding 500 miles. Most of the vehicles are listed higher than the $14,500 we were offered, between $17,000 and $21,000, but most have fewer miles - around 50,000-60,000 at the high end - and some have a sunroof or solar panel (about the only option available), and some are certified. However, none are listed as low as even $15,000 and the great majority of comparable vehicles are $17,000-$18,000.
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JonnyDVM
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Re: Do you buy used cars like a Boglehead actually should?

Post by JonnyDVM »

Both vehicles we have were purchased new but we had a relative working for Toyota and got a nice discount. Next time I need a car I'll decide what I want then compare cost between new and lightly used and make the decision based on which makes the most sense. I'll be paying cash too. I'm not crazy about cars but I won't be driving some old beater. Reliability and safety are worth something.
I’d trade it all for a little more | -C Montgomery Burns
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steve roy
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Re: Do you buy used cars like a Boglehead actually should?

Post by steve roy »

We buy used cars exclusively. We look for deals. Picked up a Saturn Vue ten years ago with 12,000 miles on it, and we got it cheap because sticks in Southern California are not popular. Then we got a Volvo S60 for $19k; the car was a stick (of course!) with 3000 miles on the odometer.

Most recently we purchased another Saturn Vue with a Honda 6 cylinder engine for $5400.

We keep cars for ten-plus years and have had excellent results with this strategy. A close friend derides all the Saturn Vues we own (currently three) as "orphan cars." I tell him tough noogies. It works for us.
dbr
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Re: Do you buy used cars like a Boglehead actually should?

Post by dbr »

I do agree there can be points in time where safety improvements are not to be ignored. It is possible the last ten years plus or minus a couple of years is one such. I am not so sure the next ten years will be similar.
Cindyjrn
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Re: Do you buy used cars like a Boglehead actually should?

Post by Cindyjrn »

Leesbro63 wrote:
jabberwock wrote:We have purchased 8 used cars (4runner, mustang, accords, mazda3, Highlanders, Lexus), over the last 15 years (3 kids started driving). In every case we saved a huge amount of money buying used. But there is risk buying used so unless you reasonably car savvy and somewhat mechanically inclined its likely better to play it safe and buy new. Saving money buying used requires patience and hard work to find the right car and also requires excellent negotiating skills. The basic rule of thumb is that you can get and drive great cars at great discounts to new but it takes a lot of time and work. The most expensive and easiest way to buy a car is to take the old car to a new car dealer and trade it for a brand new car....super easy and (if you don't kid yourself) super expensive. The hardest, most time consuming and least expensive way is to sell your old car - detail it and advertise your old car to sell it for top dollar privately. Then take the time to hunt for and find a super well maintained low mile cream puff used car...lots of time and work required but this ends up being the lowest cost way to drive really nice cars at low cost. The notion that used cars are just as expensive as new cars is BS, just folks trying to justify buying new. There are great used car bargains on 3 year old cars, especially off lease cars, it juts takes extra time, effort, and basic negotiating skills to get the right car at the right price.
It's not BS in many cases. Particularly with Hondas and Toyotas. By the time you add a warranty or CPO premium...maybe buy tires and brakes within the first year (common in the rust belt) and take the risk that you missed something, new often wins or maybe only loses by a small amount. As to selling a vehicle yourself, I agree you usually can fetch more. But be careful...in many (most?) states you will give up your sales tax credit...perhaps enough that it negates the extra you'll get versus trading in. If you sell a $15,000 used car, in Pennsylvania you'll lose $1050 (7% sales tax) credit on the new car purchase. Can you really get more than that over the dealer offer? Maybe. And how much more, minus that loss of credit, is it worth to let strangers into your life to test drive your car? If you're selling a $5,000 car that the dealer offered $2000 on, then yeah, the sales tax credit loss is not worth worrying about.
If you're buying used cars that end up costing you more than new cars, you're doing it wrong. Plain and simple.
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htdrag11
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Re: Do you buy used cars like a Boglehead actually should?

Post by htdrag11 »

I had bought both new and used cars for many, many years.

My latest is a 2012 Lexus CPO with only 20k miles wiht no issues at all. Previously, I bought 2 new Mazdas (reliable), and a used Passat (mistake - too many electronic gramlins).
Traveler
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Re: Do you buy used cars like a Boglehead actually should?

Post by Traveler »

The last three cars I've had, I bought new. After the second one I swore I'd never buy a new one again but last year when I decided to get rid of my 12 year old 200K+ mile Accord, I ended up with a new Maxima. It was barely more than a 2-3 year old one and I get full use of the warranty and know its history. I bet I could get almost what I paid for it last August, now with 6000 miles on it. The used car market is very overinflated on prices.
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Re: Do you buy used cars like a Boglehead actually should?

Post by DTalos »

I've read this entire thread and to the posters advocating buying a new car because the used car market is overpriced (which I whole heartedly agree), would you please mathematically detail the financial advantage in buying a new car vs a used car? How is buying a 2015 model XYZ for $35,000 new better financially than buying a 2009 model XYZ car with only 20k miles for $18,000 (and let's assume that is over book value since most cars I see for sale are priced over book value)? I only drive 6,0000 to 7,000 miles per year. On other forums, people actually advocate leasing a car at $169 per month for 24 or 36 months. I don't know how this makes any financial sense because that's money down the drain, which you can't deduct or anything. Others contend to buy car when a dealer has a 0% interest for 60 months, but with ultra low interest rates even on money market accounts, I don't know how this makes financial sense either. Throughout my life, I've read that it's wise to buy a 10} year old car with low miles because it's been fully depreciated. In online classifieds, a 13 year old model XYZ with 60k miles that has a book value of $5500 would have a firm price of $7500. It seems like Cash for Clunkers has drastically changed the used car market and some number crunching (using one model car as an example) and cold hard facts would be helpful.
FireProof
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Re: Do you buy used cars like a Boglehead actually should?

Post by FireProof »

Note that the price of used cars has gone up for a reason - the quality has too. Even American cars run for 200,000 miles now.
Leesbro63
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Re: Do you buy used cars like a Boglehead actually should?

Post by Leesbro63 »

DTalos wrote:I've read this entire thread and to the posters advocating buying a new car because the used car market is overpriced (which I whole heartedly agree), would you please mathematically detail the financial advantage in buying a new car vs a used car? How is buying a 2015 model XYZ for $35,000 new better financially than buying a 2009 model XYZ car with only 20k miles for $18,000 (and let's assume that is over book value since most cars I see for sale are priced over book value)? I only drive 6,0000 to 7,000 miles per year. On other forums, people actually advocate leasing a car at $169 per month for 24 or 36 months. I don't know how this makes any financial sense because that's money down the drain, which you can't deduct or anything. Others contend to buy car when a dealer has a 0% interest for 60 months, but with ultra low interest rates even on money market accounts, I don't know how this makes financial sense either. Throughout my life, I've read that it's wise to buy a 10} year old car with low miles because it's been fully depreciated. In online classifieds, a 13 year old model XYZ with 60k miles that has a book value of $5500 would have a firm price of $7500. It seems like Cash for Clunkers has drastically changed the used car market and some number crunching (using one model car as an example) and cold hard facts would be helpful.
Here's at least part of what you are missing: you obviously do not live in the rust belt. 2009 cars are now pushing 7 years. Even with low miles, the car is going to have some serious wear and tear up here. In general, the discussion is about buying "nearly new" (up to 3 years old) verses really new. It's not about hunting that rare 7year old cream puff versus new. Most of us would agree that older cars CAN be a great value; but most would also agree that it's an apples vs oranges comparison versus buying new or nearly new.
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Toons
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Re: Do you buy used cars like a Boglehead actually should?

Post by Toons »

I used to but ,now that retired and having saved and invested for decades I buy New :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Do you buy used cars like a Boglehead actually should?

Post by randomguy »

DTalos wrote:I've read this entire thread and to the posters advocating buying a new car because the used car market is overpriced (which I whole heartedly agree), would you please mathematically detail the financial advantage in buying a new car vs a used car? How is buying a 2015 model XYZ for $35,000 new better financially than buying a 2009 model XYZ car with only 20k miles for $18,000 (and let's assume that is over book value since most cars I see for sale are priced over book value)? I only drive 6,0000 to 7,000 miles per year. On other forums, people actually advocate leasing a car at $169 per month for 24 or 36 months. I don't know how this makes any financial sense because that's money down the drain, which you can't deduct or anything. Others contend to buy car when a dealer has a 0% interest for 60 months, but with ultra low interest rates even on money market accounts, I don't know how this makes financial sense either. Throughout my life, I've read that it's wise to buy a 10} year old car with low miles because it's been fully depreciated. In online classifieds, a 13 year old model XYZ with 60k miles that has a book value of $5500 would have a firm price of $7500. It seems like Cash for Clunkers has drastically changed the used car market and some number crunching (using one model car as an example) and cold hard facts would be helpful.
There are not a lot of 6-7 year old cars that were only driven 3k/miles per year that I want to drive:). You end up saving ~300/yr on depreciation at the cost of some amount of added repair (even if you don't drive the car, aging still isn't good for a car).

When you start buying 10+ year old cars you don't pay much in deprecation. You pay in repair costs. Unfortunately those are much harder to estimate.

For fun run the math using something like a honda odyssey. When I was looking at them some years back the new model was 33k. The 3 year old one (with 30k+ miles) was 29k. And no that wasn't the highest price. That was what everyone under the sun was asking even on craigslist. Maybe the private seller would have taken the 25k or so that I would need to make the math work out, but I doubt it.

Frankly I think this title is wrong. Bogleheads don't buy used. The beleive in the efficient market hypothsis and believe all cars are fairly priced so that it doesn't matter what you buy:)
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