New car value vs 2nd hand

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Shapenz

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#222462 12-Aug-2017 19:38

So long story -

Coming up 6 years ago I purchased a 2002 Subaru Forester with 90,000k from Winger for $10k.

It's been a great car in terms of reliability and maintenance but a little loud on the road and a bit gutless (it's the straight 2.0)

It's also getting up there a bit with ks 170,000 and at 15 years old I decided it's time for an upgrade.

The plan was to find another similar Subi around 2008-10ish with under 100,000k's.

However I've been looking on TradeMe for a couple of weeks and there are slim pickings with lowish k's around the 10-12k mark.

It's making a new Forester at 0% interest or the Suzuki Vitara with their 3.9% seem like a decent deal. Okay it's 30-40k so a decent chunk all up but over 4-5 years relatively cheap on a yearly basis & if I look at the prices on TradeMe now I could potentially get a decent chuck of that back in 5 years. Plus I get all the benefits of a new car eg safety features, Apple Carplay etc

So - Have second hand cars become comparatively more expensive or did I just get a decent deal at the time?

TL:DR

Are second hand cars comparatively more expensive than 5 years years ago? Has cheap money made new car offers more attractive?

tdgeek

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#1845654 12-Aug-2017 20:38

Ive not owned a brand new car, but have had 3 brand new motorcycles

Car wise, closest we got was a 2007 Accord Euro in 2008, 18kms, 8 months old, older rural owner. Still have it.

If you buy a second hand car from a car sales, you lose. A new car, you lose once you drive around the block. But if you plan to keep it for some time, its great. The history is your history, unlike a second hand car. No lemons.

tdgeek

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#1845657 12-Aug-2017 20:49

The other thing is if you pay it off, a second hand car wont be 3.9%, thats huge. Ive had mates buy not cheap cars over 5 years and my god, how much it costs. 3.9% is IMHO no interest. Add your service history when you sell/trade it. If you like the brand and go back you will get either a really good trade at list price with extras, or an ok trade in with a discount, as your their customer.

Jase2985

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#1845660 12-Aug-2017 20:57

get a demonstrator model or an ex lease one that someone has traded in or just a strait trade in that low k's, would be significantly cheaper than new, still have the warranty and still have the service history.

Aredwood

3885 posts

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#1845661 12-Aug-2017 20:59

Add up how much you would pay in total over say 5 years, for buying another 9 year or so old car. Vs buying a brand new one. Include everything from finance costs to fuel economy to rego costs. Although a big factor is whether you will be paying cash for a $10K car, or if you would need finance for it. As the extra cost of brand new gets offset by not having to pay high used car finance rates.

Also consider buying a brand new ute. As they hold their value better. And if electric cars do become really popular in a few years time like how some people claim. A ute won't loose anywhere as much value as a petrol car. As no practical electric utes exist today.

Shapenz

518 posts

Ultimate Geek

#1845669 12-Aug-2017 21:45

I guess I'm kinda stuck in the middle. I'd be paying cash for a $10k car but financing a 40k car. Buying ex-demo would save me about $5k but then I'm not going to get the 0% interest rate so defeats the purpose of buying the ex-demo. If I was paying $40k it would be a different story.

I think it is the availability of cheap money that makes buying new vs buying a 10 year old car so attractive.

scuwp

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#1845767 13-Aug-2017 11:00

You seem to be forgetting the most important question...what car do you actually want? Then from there you work out the options and finance. If you are happy with a 10k car then I would go with that, it will cost a lot less in the long run as it won't depreciate as much. Also costs of insurance etc will be less. If in the other hand you want all the bells and whistles and the latest safety and efficiency tech, then go for the later model. I agree the ex-demo is a good option if you can find one.

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smalltrader

174 posts

Master Geek

#1845819 13-Aug-2017 14:50

About 30 years ago, fresh out out of university, second cars is all we could afford and by choice. About 12 years ago, started to come to realisation that if I hold a new car for at least 6 - 7 years, depreciation become a non issue. Plus with a new car, you get the latest safety tech, fuel efficiency and 5 year warranty. And the history is all yours.

IMHO. Provided you are not the kind of people who want to change car every three years, buying new is a great option over buying second-hand economically speaking.

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Ouranos

118 posts

Master Geek

#1845856 13-Aug-2017 15:13

In 2004 Honda published this ad. They were trying to say that you might as well buy a new car, as the depreciation is linear over time.

The trendlines are dubious, and the data is rather old, but interesting nonetheless.

mattwnz

20162 posts

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#1845865 13-Aug-2017 15:37

Aredwood:

Add up how much you would pay in total over say 5 years, for buying another 9 year or so old car. Vs buying a brand new one. Include everything from finance costs to fuel economy to rego costs. Although a big factor is whether you will be paying cash for a $10K car, or if you would need finance for it. As the extra cost of brand new gets offset by not having to pay high used car finance rates.

Also consider buying a brand new ute. As they hold their value better. And if electric cars do become really popular in a few years time like how some people claim. A ute won't loose anywhere as much value as a petrol car. As no practical electric utes exist today.

I agree with the ute thing. I had a new 2003 ute which I got on a field day special for about 30k. Sold it 12 years later for 16k privately, and it had done 120k. But they do use pretty old tech compared to cars, and the back suspension is the old leaf suspension, so the ride quality isn't the best.

Dynamic

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#1845883 13-Aug-2017 15:55

I think you are asking a smart question, particularly with the 1/4 1/4 1/4 1/4 deals currently available.

Use a couple of finance calculators to work out what you'll be paying per month going used vs going new.

If looking at a new Forester, ask yourself seriously how you are going to come up with the initial $10k, and then how you are going to come up with $10k each year for the next three years. If you were financing each $10k then you will have to stump up $250 per week or $1000 per month, every month for the next 12 months, and then borrow and repay the same another three times over.

The Suzuki deal may be more palatable. It's a pretty damn good interest rate, a 5 year term so the weekly payments are less (and the finance is set-and-forget rather that something you have to re-address each year), and you get a 5 year powertrain warranty.

If you go new, the dealer will likely want to do the servicing, so ask about the options for adding a heavily discounted service plan for the life of the finance.

One more thing..... if you see a finance offer at one new car dealership that your preferred option is not currently offering, ask them if they can do it. I considering buying a Dodge instead of my preferred Outback due to the 1/3 13 1/3 deal the Dodge place had at the time. I asked Winger and they came back to me within 20 minutes to say they could do the same 1/3 deal. (I wish I had seen the 1/4 deals now!)

Final points:

Just over 2 years ago I ended up going from an imported 3L Legacy wagon to a new 2.5L Outback wagon. I looked at the new 3.6L versions but the extra cost was just too much for me to justify. Occasionally I wish I had gone secondhand and got the gruntier motor.
I didn't like the way I felt when dings appeared in my brand new paintwork. With that in mind, I made a mental note to reconsider buying brand new vs 2-3 years old when next upgrading (in another 5+ years time)

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smalltrader

174 posts

Master Geek

#1845886 13-Aug-2017 16:04

Ouranos:

In 2004 Honda published this ad. They were trying to say that you might as well buy a new car, as the depreciation is linear over time.

The trendlines are dubious, and the data is rather old, but interesting nonetheless.

Have to give Honda some credit for starting the no discountign game many years ago by equalising the consumer vs commercial price of a cars. However, most manufacturers have more or less caught up with the game with the exception of Toyota which still has outrageous RRP. Toyota is a bit like Kathmandu, you are real dumb to pay RRP.

Car depreciation is definitely not linear. It is very much depending on brand. My own research (not scientific) indicated that they pretty much stabalise after 6 - 7 years of ownership. Hence I would buy new if intention is to hold at least 7 years.

alasta

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#1845923 13-Aug-2017 17:01

When I did the numbers a while ago I worked out that over a five year term a new car will tend to incur depreciation about $2,000 per year higher than a second hand car, depending on the particular vehicle. However you will make up most of that $2,000 through some or all of the following:

- Free or fixed price servicing.

- No warrant of fitness for first three years.

- Up to 5 years roadside assistance.

- Better fuel economy from a newer engine design.

- Lower maintenance costs due to a new vehicle having new battery, tyres, brake pads, etc.

I personally buy new cars because for me the minimal difference in overall TCO justifies the enjoyment of driving a brand new vehicle out of the showroom. However my cost of capital is virtually zero and I keep my cars for five years, so your situation may be different if you need to borrow money or if you are planning to keep the vehicle for a shorter period of time.