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I did this math when I was buying my last car. The things I did different I kept the end point constant at 10 years. So it was: * Option 1: Buy a new car, kee

I did this math when I was buying my last car. The things I did different I kept the end point constant at 10 years. So it was: * Option 1: Buy a new car, keep 10, and sell * Option 2: Buy a 3 year old car, keep 7, and sell * Option 3: Buy a 5 year old car, keep 5, and sell * Option 4: Buy a 7 year old car, keep 3, and sell At the time I was shopping, the car I wanted had really high resale. So option 1 was coming out CHEAPER per year than option 2. (new price / 10 compared to used_price / 7). Options 3 and 4 were cheaper, but not by a ton. But then the thing I thought about was: * With option 1, the car I am driving is an average of 5 years old * with option 3, the car I am driving is an average of 7.5 years old * With option 4, the car I am driving is an average of 8.5 years old So that pushed me to go for option 1. No regrets so far, my car just passed his 7th birthday. Not 100% sure I will sell at 10, but a strong possibility. I think the simple math of "new car = always bad unless you are rich" is wrong. "new car every 3 years trading in = always bad", sure. But throw in dealer incentives and financing, and the new vs used debate can be less black and white.

Consultant32452 9y ago
I bet it's a different story if you calculated opportunity cost and risk. Are you paying cash for the car in all cases? Or are you getting a loan? Increased positive cash flow has a real economic value. A loan has real economic risk. Are you investing the cost difference between option 3 and option 1 to get a return on that money?
- brianwawok 9y ago
  The funny thing is, options 1 I got 0 APR loan. Option 2 was 5% APR loan. Options 3 and 4 were cash. So cash in my pocket, option 1 was the "best". I had no initial outlay, the car dealer loaned me the money for free. So yes that is even 1 more reason why option 1 worked out best for MY case. But who knows when I next get a car what will be true.
  - Consultant32452 9y ago
    Car dealers do not loan you money for free. Interest rates are low, but it costs them money to service that loan. What they did, since the dealership owns the bank, is they shoved their profit into the principle instead of getting it back in interest. In other words, they simply charged you more for the car. And even a 0% loan is a risk from a personal finance standpoint. Options 3 and 4 carried no risk, lower cash in hand, but higher positive monthly cash flow (because no monthly bill). This freed up your additional monthly cash flow which would have been spent on a car payment to be invested and earn a return.,
    - kasey_junk 9y ago
      From the point of view of these calculations it doesn't matter that the principle included loan servicing or sales commissions or what have you. The cash flow calculations vs the cash on hand - risk costs are where the math happens but it is perfectly possible to walk away with the decision to buy new to work out better on certain models of car.
      - Consultant32452 9y ago
        What model of car?
        kasey_junk 9y ago
        I saw this with inexpensive manual Japanese imports the last time I shopped ~4 years ago. In particular lowend civics & Subaru imprezas were holding their value such & the dealer incentives & financing made the calculation essentially even. I have friends that said the same thing about certain diesel sedans (pre mpg scandal) but never calculated it myself.
        brianwawok 9y ago
        In my case above it was for the wife, so it was a Honda CRV. Small Japanese SUVs had a very very high value retention for the first 4-5 years. Something like maybe the sticker price new is 25k, but what you really pay is closer to 21k new. A 3 year old would be going for 17-18k. After the maths above, it ended up costing more per year to buy used.
skolsuper 9y ago
As written, Option 4 you only have a car for 3 years. I'm pretty sure that's not what you meant, but fixing it makes the math below also wrong: if you keep a car that is 7 years old for 10 years, it's an average of 12 years old in that time period. edit: my mistake, I guess you want to have 3.333 cars in 10 years for Option 4. Carry on...
- brianwawok 9y ago
  My math could be wrong-ish, I don't think 8.5 is exact... not sure what 3.333 cars means

Consultant32452 9y ago

I bet it's a different story if you calculated opportunity cost and risk. Are you paying cash for the car in all cases? Or are you getting a loan? Increased positive cash flow has a real economic value. A loan has real economic risk. Are you investing the cost difference between option 3 and option 1 to get a return on that money?

brianwawok 9y ago
The funny thing is, options 1 I got 0 APR loan. Option 2 was 5% APR loan. Options 3 and 4 were cash. So cash in my pocket, option 1 was the "best". I had no initial outlay, the car dealer loaned me the money for free. So yes that is even 1 more reason why option 1 worked out best for MY case. But who knows when I next get a car what will be true.
- Consultant32452 9y ago
  Car dealers do not loan you money for free. Interest rates are low, but it costs them money to service that loan. What they did, since the dealership owns the bank, is they shoved their profit into the principle instead of getting it back in interest. In other words, they simply charged you more for the car. And even a 0% loan is a risk from a personal finance standpoint. Options 3 and 4 carried no risk, lower cash in hand, but higher positive monthly cash flow (because no monthly bill). This freed up your additional monthly cash flow which would have been spent on a car payment to be invested and earn a return.,
  - kasey_junk 9y ago
    From the point of view of these calculations it doesn't matter that the principle included loan servicing or sales commissions or what have you. The cash flow calculations vs the cash on hand - risk costs are where the math happens but it is perfectly possible to walk away with the decision to buy new to work out better on certain models of car.
    - Consultant32452 9y ago
      What model of car?
      - kasey_junk 9y ago
        I saw this with inexpensive manual Japanese imports the last time I shopped ~4 years ago. In particular lowend civics & Subaru imprezas were holding their value such & the dealer incentives & financing made the calculation essentially even. I have friends that said the same thing about certain diesel sedans (pre mpg scandal) but never calculated it myself.
      - brianwawok 9y ago
        In my case above it was for the wife, so it was a Honda CRV. Small Japanese SUVs had a very very high value retention for the first 4-5 years. Something like maybe the sticker price new is 25k, but what you really pay is closer to 21k new. A 3 year old would be going for 17-18k. After the maths above, it ended up costing more per year to buy used.

skolsuper 9y ago

As written, Option 4 you only have a car for 3 years. I'm pretty sure that's not what you meant, but fixing it makes the math below also wrong: if you keep a car that is 7 years old for 10 years, it's an average of 12 years old in that time period. edit: my mistake, I guess you want to have 3.333 cars in 10 years for Option 4. Carry on...

brianwawok 9y ago
My math could be wrong-ish, I don't think 8.5 is exact... not sure what 3.333 cars means