4 ms·

This is something I've never understood. Considering that a new car loses a huge chunk of its "value" the second you drive it out of the car dealer's, if you'r

This is something I've never understood. Considering that a new car loses a huge chunk of its "value" the second you drive it out of the car dealer's, if you're buying new the only sensible strategy is to drive it nearly into the ground. If you have to pay a wrecker to take it away, I agree, you may have taken it too far. But unless there are obscure tax reasons, I can't see any benefit to flipping cars regularly.

danssig 15y ago
The warranty. Every time I've tried to follow your intuitive logic here I've ended up spending more per month to keep the car usable. Personally I view cars as a tax that I just have to pay, so I get the (long term) cheapest I can that uses as little gas as possible.
jerrya 15y ago
You're probably right, if you're buying new. I once read about a strategy that made a great deal of sense to me, and that was to buy a 2-3 year old used car from a new car dealer, and sell it after 2-3 years to a private party. There were all sorts of good reasons for that, some of which may no longer be valid, but some of the reasons were that a 2-3 year old car still had a lot of value but was at the end of it's steep price depreciation curve, and that the new car dealer didn't actually know how much the car was worth, they just knew that every day it sat there was another day of insurance they had to pay for, and sort of more proof to them that the car was not worth much. Also, by buying from a new car dealer, the car was probably in pretty good shape, the worse cars they had gotten rid of, the rest they had fixed up and cleaned up at rates that you or I couldn't get. Because of that, with good negotiation, you could, in a sense, capture much of the profit the dealer had just made by giving the former owner of the used car a terribly low resale price followed by selling them a high priced new car. They just made 20,000 by cheating the former owner on both ends of his deal. They don't know how much the used car is worth, but they are scared of it sitting there, and if you know how to price it, value it, and negotiate for it, you can get them to go very low on the price just so they can move it off the lot. You could in fact buy it for far below market rate. That was the theory then. And my own used car purchases showed that to be reasonable. The claim was that by buying so cheaply a good used car from a dealer, you could sell it in 2-3 years to a private party at a good market rate, but probably very close to what you had paid for the used car 2-3 years earlier. So... This strategy has actually worked out very well for me. And kept me in some very fun, relatively high end convertibles, starting with a Saab Turbo 900. Buying used cars from new car dealers seems to be a winning strategy. But you have to remember to flip them. And that's been hard for me to do, in part because like an idiot, I drive too many miles to work, and have no time for selling cars to private parties. But if you're going to put a lot of miles on cars, I think you do need to either flip them or drive them to death, which is one reason I recently bought a low end econobox.
- randallsquared 15y ago
  the new car dealer didn't actually know how much the car was worth This statement confuses me. When I talk to car dealers, I notice that they always refer to the NADA guide to determine the worth -- even if you think that the blue book is too high, the sales guy certainly knows exactly what the car is worth, and would rather lose the sale than drop significantly below that price. I conclude that insurance and lot space must not be major costs per car.
  - zcid 15y ago
    Dealers make far more profit on used cars than they do new. Because of that, they are often much more willing to negotiate down if it's a tough-to-sell car that has been on their lot for an extended period of time.
nradov 15y ago
There have been some amazing improvements in car safety and crash worthiness just in the past few years (at least at the higher end of the market). This has been driven by stricter government standards and widespread publication of safety data. The thing is, it's really hard to quantify how much that extra safety is actually worth in terms of reduced risk of injury or death for a typical driver. If a QALY is worth, let's say $200K to me, then how many QALYs am I theoretically saving by trading in a 10 year old car for a new one? I would love to see a web application for this.

danssig 15y ago

The warranty. Every time I've tried to follow your intuitive logic here I've ended up spending more per month to keep the car usable. Personally I view cars as a tax that I just have to pay, so I get the (long term) cheapest I can that uses as little gas as possible.

jerrya 15y ago

You're probably right, if you're buying new. I once read about a strategy that made a great deal of sense to me, and that was to buy a 2-3 year old used car from a new car dealer, and sell it after 2-3 years to a private party. There were all sorts of good reasons for that, some of which may no longer be valid, but some of the reasons were that a 2-3 year old car still had a lot of value but was at the end of it's steep price depreciation curve, and that the new car dealer didn't actually know how much the car was worth, they just knew that every day it sat there was another day of insurance they had to pay for, and sort of more proof to them that the car was not worth much. Also, by buying from a new car dealer, the car was probably in pretty good shape, the worse cars they had gotten rid of, the rest they had fixed up and cleaned up at rates that you or I couldn't get. Because of that, with good negotiation, you could, in a sense, capture much of the profit the dealer had just made by giving the former owner of the used car a terribly low resale price followed by selling them a high priced new car. They just made 20,000 by cheating the former owner on both ends of his deal. They don't know how much the used car is worth, but they are scared of it sitting there, and if you know how to price it, value it, and negotiate for it, you can get them to go very low on the price just so they can move it off the lot. You could in fact buy it for far below market rate. That was the theory then. And my own used car purchases showed that to be reasonable. The claim was that by buying so cheaply a good used car from a dealer, you could sell it in 2-3 years to a private party at a good market rate, but probably very close to what you had paid for the used car 2-3 years earlier. So... This strategy has actually worked out very well for me. And kept me in some very fun, relatively high end convertibles, starting with a Saab Turbo 900. Buying used cars from new car dealers seems to be a winning strategy. But you have to remember to flip them. And that's been hard for me to do, in part because like an idiot, I drive too many miles to work, and have no time for selling cars to private parties. But if you're going to put a lot of miles on cars, I think you do need to either flip them or drive them to death, which is one reason I recently bought a low end econobox.

randallsquared 15y ago
the new car dealer didn't actually know how much the car was worth This statement confuses me. When I talk to car dealers, I notice that they always refer to the NADA guide to determine the worth -- even if you think that the blue book is too high, the sales guy certainly knows exactly what the car is worth, and would rather lose the sale than drop significantly below that price. I conclude that insurance and lot space must not be major costs per car.
- zcid 15y ago
  Dealers make far more profit on used cars than they do new. Because of that, they are often much more willing to negotiate down if it's a tough-to-sell car that has been on their lot for an extended period of time.

nradov 15y ago

There have been some amazing improvements in car safety and crash worthiness just in the past few years (at least at the higher end of the market). This has been driven by stricter government standards and widespread publication of safety data. The thing is, it's really hard to quantify how much that extra safety is actually worth in terms of reduced risk of injury or death for a typical driver. If a QALY is worth, let's say $200K to me, then how many QALYs am I theoretically saving by trading in a 10 year old car for a new one? I would love to see a web application for this.