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I have a problem with this from a strictly financial standpoint. Most people shouldn't ever buy a new car, they should always buy something a couple of years ol

I have a problem with this from a strictly financial standpoint. Most people shouldn't ever buy a new car, they should always buy something a couple of years old. Cars are an expensive depreciating asset, and buying two years old lets someone else take the hit for initial depreciation. This encourages a behavior that is the wrong one for most people. I also cringe at the thought of all of those perfectly good cars being destroyed, when they might still have years of use left in them. Ridiculously wasteful. (Yes, I know that if everyone bought used, there wouldn't be enough new car purchases to provide used cars for people. But we all know that's not going to happen.)

mmt 17y ago
Although I generally tend to advise against buying new (and take that advice myself), I disagree with your initial assertions/assumptions. Cars aren't any more "expensive" a depreciating asset than anything else. For example, I have yet to see any evidence that they depreciate any faster than a major household appliance. I also disagree that there is, necessarily, such a thing a "initial depreciation." The big hits up front are sales taxes and agreeing to a price higher than the value. The former is an issue for used cars, too, as is the latter, though, perhaps, to a lesser extent, considering high-margin add-ons new car dealers try to sell. The spread between price and value may be even more with a used car. Specifically, with a new car, one has at least something of a lower bound for value. With a used car, the value could well be 0, though, with well published price information, one tends to have an upper bound for price. The other important aspect seems to be risk. With a new car, while it is under warranty, one has paid to avoid the risk of a sudden, expensive, mechanical failure. What I like to remind my friends is that, though this may well be the case, one is never compensated for time or inconvenience if there is a failure. With a used car, although the operating costs over the short term may be unpredictable, over the long term, it evens out. More importantly, if one chooses a reliable manufacturer, the overall risk of breakdown can be adjusted very close to zero with adequate preventative measures. All that said, I, too, am against the Clunkers program for basic economic reasons: it encourages the wanton destruction of wealth.

mmt 17y ago

Although I generally tend to advise against buying new (and take that advice myself), I disagree with your initial assertions/assumptions. Cars aren't any more "expensive" a depreciating asset than anything else. For example, I have yet to see any evidence that they depreciate any faster than a major household appliance. I also disagree that there is, necessarily, such a thing a "initial depreciation." The big hits up front are sales taxes and agreeing to a price higher than the value. The former is an issue for used cars, too, as is the latter, though, perhaps, to a lesser extent, considering high-margin add-ons new car dealers try to sell. The spread between price and value may be even more with a used car. Specifically, with a new car, one has at least something of a lower bound for value. With a used car, the value could well be 0, though, with well published price information, one tends to have an upper bound for price. The other important aspect seems to be risk. With a new car, while it is under warranty, one has paid to avoid the risk of a sudden, expensive, mechanical failure. What I like to remind my friends is that, though this may well be the case, one is never compensated for time or inconvenience if there is a failure. With a used car, although the operating costs over the short term may be unpredictable, over the long term, it evens out. More importantly, if one chooses a reliable manufacturer, the overall risk of breakdown can be adjusted very close to zero with adequate preventative measures. All that said, I, too, am against the Clunkers program for basic economic reasons: it encourages the wanton destruction of wealth.