New CR report: Buying new versus buying used

If you are trying to save money, you don't buy a new car, Prius or otherwise. As the car guys will tell you, the cheapest way to own a car is to buy a beater and drive it into the ground, then buy another beater and do it all over again. Obviously some cars hold up better than others. You end up sacrificing some reliability for spending less money, and you don't have the satisfaction of having a shiny new car. That is the trade off. The best bet is to buy one that looks bad but is still in decent mechanical shape.

Tom

 

Especially true if you can wrench on your own cars. You can buy a lot of parts for what the average new car payment is.

If you buy a late model used car, you can usually get a lot of miles with a minimum of repairs, yet you will avoid the depreciation hit (the first owner absorbed that).

The Prius may be the exception to the above because the demand is keeping the used car prices very high.

 

The statement that buying an older vehicle is nearly always the least expensive way to 'buy transportation' is accurate. The only consideration is how far down the price scale one wants to go.

2 y.o. vehicle that saves 20% of a new vehicle
5 y.o. that saves 50% of a new vehicle
4 y.o. vehicle with 100K miles that saves 60% of a new vehicle
9 y.o. creampuff with 50K miles that saves 70%

OR..

Now that they've been out a while why not a ...2 or 3 or 6 y.o. Prius... assuming one can be found. In this way you get a double benefit, lower acquisition price and lower fuel cost.

 

A two or three-year old Prius still under drivetrain and hybrid system warranty might be OK, assuming a reasonable acquisition price.

A six-year old Prius will not be under drivetrain warranty but may be under hybrid system warranty for a couple of years (depending upon odometer reading.) It is certainly possible for a 2002 to suffer an electric steering gear, catalytic converter, or transaxle failure that will be quite costly - not to mention the DTC P3191 engine start problem associated with a downrev engine ECU.

One problem with purchasing a used car is that a portion of used cars offered for sale have a significant problem which motivates the sale. Hence, a buyer who cannot identify the problem will be at a big disadvantage. This is particularly a concern with Prius, since it behaves differently than a normal vehicle and post-warranty repairs can be extremely expensive (since competent independent repair shops are not available in most parts of the country.)

 

we've owned a whole lot of used cars, but only once a new car.

if you get the right kind of used car and have some mechanical ability, you can get away with ownership cost <$1000/year. we used to buy, fix, drive and sell old camrys and had essentially no cost of ownership once all was said and done. it really is great to be free and clear of any kind of car payment.

our 1985 mercedes is on track to pay for itself and all repairs and related costs by the end of the year. because we bought the right one!

but yes, used cars can get expensive if you buy the WRONG one. we're still bitter about the 1994 saturn. we stuck so much into that car, only for it to fail again and again.

the thing is, you can buy a whole bunch of used cars and fix them up for $25000. sure, you can offset by keeping the car for 10 years or so but between the two of us, we still haven't spent that much on used cars in the past 10 years.

oh, and i looked at a civic coupe the other day with an otd price of 21800 (before negotiation, not incl taxes) for a friend. i found myself thinking that's not much less than what my car cost!

 

Until the Prius I only bought used vehicles unless it was a company purchase. I agree with galaxee that for me the potential savings with used vehicles outweighs the risks of getting an occasional bad one. Sticking with Toyotas and Hondas has proven a safe bet.

Now that the Prius is reaching 8 yrs of ownership I wouldn't hesitate to buy a used one ... if the price was right. A 2003 Gen 1 at $9-10000 and miles in the 60000 to 90000 range I'd feel would be a safe bet.

 

All of our car purchases have been new until this year where we bought a 2007 G35 Coupe.

2007 G Coupe, 10,900 miles-$28,000 out the door

2008 G Coupe- Starting at $34,900

Granted the 2008's now have 330 hp vs. 275. It still feels fast and can corner well enough for everyday driving

 

I bought used cars for years - 2 reasons; 1)I couldn't afford new, and 2)I could work on them and fix most anything on them. My first new car was purchased in 1985 -- since then almost everything has been new with the exception of a pick-up that used to belong to my father - it had 160,000 miles on it when I got it, but I knew that it had been meticulously cared for.

Cars are certainly more complicated, require more tools, a better knowledge of electronics, and more sophisticated diagnostic equipment. I perform my own routine maintenance, but when it comes to something more I rely on the dealer / independent mechanic. On average I keep a car for seven years -- my oldest is turning 19 (purchased new in 1989 with 3 miles on the odo) and , knock-on-wood, has only needed a major repair once ($900 in 1999 money).

When it comes to the Prius -- everything I've seen tells me that new is cheaper than "barely used". Not many cars hold their value like the Prius.

 

I think everyone tries to make this same decision, to buy new or used. If you know what car you want and meets your requirements, it is just a matter of price. I would look until I was happy with the car and deal. If it doesn't just pass it by and keep looking. It will be a matter of timing or being at the right place. I hate buyers remorse!

 

In my area you probably do better buying new than used, at least when it comes to the Prius. I was wandering around my dealer's lot waiting for my oil change to complete and I saw them selling a 2007 sans navigation. Asking price? $27,888. Yow. Now, there's probably loads of room in there for negotiation, but still. (That number is close to my out-the-door price for my 2007 with nav!)

 

In 1998, I bought a used Lexus SC400 with 60K miles on it for $26K. The dealer window sticker which was still with the car says $58K, so I got it for less than half after 3 years.

10 years later, I still own the car. It now has 280K miles on it. Nothing has ever broken down it. It still drives like new. No creaks or rattles. Steering is as tight as the day I bought it. I did replace the interior 3 years ago for a cost of about $1100. A local shop quoted me $15K to do what I did myself. Interior was disassembled down to the metal. Various damaged pieces were replaced as was all of the leather. Steering wheel sent out to be redone.

I've changed the oil every 10K miles and drained and filled the transmission at the same time.

I think there's a used sweet spot and it's not a 10 year old beater but rather something that is 2 or 3 years old that is going to be reliable for many many years to come.

 

I have never bought a used car, though I've considered it many times. Your analysis is the perfect example why I've always bought new. If you assume that a new car will last 10 years, and plan to drive it until it dies (which is what I have always done), saving 20% on a 2 year old car, or 50% on a 5 year old car results in NO SAVINGS over the total amortized life. The risk you take is having little or no warranty, and not knowing what problems hide under the hood. With a new car you don't have that risk (if you buy models known to be reliable) because you're the only owner and you have the warranty period.

The only reason I can see to buy used is if you lack the cash to cover the up-front cost of a new car. I guess there are a lot of people in that situation.

sorka gives a good counterexample which may apply better to luxury cars that are engineered for 200,000+ miles. I've always been more of a mid-range buyer. Although I've gotten close to 200K miles with my cars, I would not bet on it with any mid-range car.

 

The CR article presumes that the car will be replaced after 5 years, even though that means the used car is 8 years old, and the new car is 5 years old. If the new car buyer waits another 3 years before buying again, the finance calcs come out quite a bit different. I sent CR a letter pointing this out.

 

I have only ever bought one new car myself.. (the prius belongs to DH) The new one I bought was a 98 CR-V. One point I'd like to make is that I see just about everyone calling a ten year old car a "beater"... Cars, if taken care of properly, can last a lifetime.. YES, a lifetime.

Right now.. I own two very used cars.. 94 Miata (runs flawlessly - looks nice) and a 65 Rambler (has MINOR quirks, but runs like a champ and look amazing for its age)..

Now granted since I work from home and DH rides the bus to work.. we don't use ANY of these vehicles for very many miles a year.... but I wouldn't hestitate to jump in any of the three to drive cross country today... I know they are cared for, not abused and reliable.

Many people buy cars that are 15 or 20 years old every day and use them for daily drivers... Unless it's a lemon (certainly some makers are better than others) or horribly abused, cars will run for many many miles and last for a very long time.

ok.. one edit: I once bought a 94 Pontiac GTP since it was immaculate inside and out and I really liked it.. It was a complete NIGHTMARE mechanically.... 4k in repairs in 1.5 years.. I will NEVER buy another GM product (and yes, I've owned more than one)

 

My sister and brother-in-law who are quite successful in life, swear by buying used cars about 2 or 3 years old with low miles. They use a broker in the Boulder, CO area to find cars they want. They strongly advised me not to buy a brand new car.

I looked at many used Prius', mainly on Craigslist, but had zero motivation to go check any of them out. This is my first new car ever. I'm glad I kept my pickup which is running well. I can be choosey about where I go and where I park the new car.

 

I've never bought a used car. But I have a colleague that just got a great deal on a 2003 Lexus LS430 with 67k miles, $21k...vehicle was $74k new.

After riding and driving in it...I'm wondering why anyone WOULDN'T buy one of these vehicles used? It is absolutely perfect. I paid $36,000 for my ES300 in 2003 (Sticker was like $42k) and I'm planning on buying something new to replace it next spring. I could spend $40k (45k sticker) on a new ES350...or I could spend $30k on a loaded 2006 LS430 with 35k miles or so. These are such great cars, 35k miles is nothing. Even if it isn't certified pre-owned, $1600 buys a factory warranty until 100k, and you have until 49,999 miles to buy it.

I don't see how it DOESN't make sense to do that, and in 3 years the ES350 would be worth $18k or so while the LS should still be in the mid 20s.

 

For me... buying new is not a good option. I drive 40K + a year for my job. My current vehicle is a 97 Accord V6 which I purchased with 48K on it. Now I have 200K on it and it will go to my daughter when she moves to Boston. I hope that she can get another 100K out of it. General maintenance (timing belt, water pump, belts, hoses, breaks, and tires, oil changes) and it has been a great car.

I am taking the big plunge with my next purchase a 2005 Prius of the recycled nature. Mileage is a little high, but I have a 100K guarantee. I have no real concerns that I will be able to get 200K out of this vehicle. I could pay double and get a 1 owners used, but recycled (when done right) is almost like new. I have another daughter in 4 years who could use a decent car.

 

How do you know that the repairs were done right?

I hope that any triggered airbags were correctly replaced - how do you know that resistors were not installed instead?

 

Good point! Don't buy a vehicle like this unless you are comfortable.

I will have a certified Toyota mechanic go over the vehicle especially the areas that were repaired.

As with any mechanic or repair shop you need to be comfortable with who you are dealing with. I am comfortable with the person I am buying from. He sells 100+ of these recycled Prius annually. He is relatively close by. He has been in business recycling Prius for a few years. In addition he gives a 100K guarantee on all vehicles he recycles. I'll be sure and keep you up to date. It could turn out to be a huge flop. But, if it is, I would think it would be in first 100K.

As for airbags he only uses new for replacement.