Cash For Clunkers "Used Car Prices Skyrocket"

[Joes Place]

Your error in this statement is that you are assuming the used car is not also financed. I've got news for you, if someone needs to finance a $35000 new car, they also need to finance the $25000 used one.

This is absolutely a consideration, and I pointed it out earlier in the thread. You CAN get 0% or 1% financing on new cars, which, compared to buying used, may end up a 'push' on your overall costs (depending on what your used car loan rate is, probably at least 4% or more).

So, it does make sense to run those numbers, because if you're going to hang onto the car (new or used) for 5 yrs or more, that loan interest difference could end up being about the same as the depreciation difference (or close enough that you don't care). Run the numbers for your case specifically, so you can make an informed financial decision and not just a 'Wow! 0% interest is awesome!' decision.

On a 5 yr, $25k loan at 4%, you pay about $2800 in interest, so that's the number to compare to your expected depreciation difference and repair costs difference. Thus, if you were looking at a new Subaru at $30k vs 2-3 yr old used at $25k (probably more like $21-25k, which makes the loan interest $2200-2800), you can look at the depreciation differences over the 5 years to make a good guess as to what you'd actually save. If you use 3 or 4 yr loans, the interest amounts are even less.

 

[Joes Place]

Your error in this statement is that you are assuming the used car is not also financed. I've got news for you, if someone needs to finance a $35000 new car, they also need to finance the $25000 used one.

You think you have the magic formula for buying cars but it is just the strategy that works for you. Congrats on getting a good deal on a used Mini and also having a Ducati. For some, owning a brand new Silverado would be far more enjoyable and practical then a sub compact and a bike. It doesn't mean they are wrong.

It's not 'the strategy that works for me', it's actually running numbers to evaluate what I'm actually paying out. It's understanding where my money is going, rather than just accepting an 'affordable monthly payment'. Too many people are stuck with the concept that monthly payments for cars are a fact of life; that is absolutely true when you are starting out - I had car payments for years thru school and years after. But instead of continuing to buy new, I saved up my money so I don't finance vehicles anymore now. And that means an extra $5000-7000 per year in cash flow that is not going to car payments.

The 'practical vehicle' is a Jeep, which is the winter and 'dogs' vehicle....the Mini is not dog friendly because he doesn't have a seatbelt for all the sharp cornering and stops/starts....

 

[tstalker4]

It's not 'the strategy that works for me', it's actually running numbers to evaluate what I'm actually paying out. It's understanding where my money is going, rather than just accepting an 'affordable monthly payment'. Too many people are stuck with the concept that monthly payments for cars are a fact of life; that is absolutely true when you are starting out - I had car payments for years thru school and years after. But instead of continuing to buy new, I saved up my money so I don't finance vehicles anymore now. And that means an extra $5000-7000 per year in cash flow that is not going to car payments.

The 'practical vehicle' is a Jeep, which is the winter and 'dogs' vehicle....the Mini is not dog friendly because he doesn't have a seatbelt for all the sharp cornering and stops/starts....

The reason I said this strategy works for you is because you assign no value to buying a new/unused vehicle. Many people value, and not just monetarily, being able to purchase a brand new vehicle. You are assured of no previous problems or abuse, you get full warranty, better financing, sometimes a free maintenance plan, etc. Your strategy is to buy used and save money. It is a sound strategy, especially financially. If I had a choice of the Forester that been used as an example, I would value a new Forester for 30k more than I would a 2 year old vehicle for 25k. That's my preference. It's not any more wrong then the person that would rather have a 2 year old car and save 5 grand. this is assuming a cash purchase for both.