When It Comes to Cars, Don't Buy New
by Gary North
When you buy used, you buy from someone
who has made mistakes. He does not know how to buy used, or why. So, he bought
new. Big mistake.
There are three factors with new cars
that most people forget to consider in their budgeting: (1) property taxes, (2)
collision insurance costs, (3) new car digital complexity. Eric Peters, a car
guru, talks about these factors here.
People get in over their heads. Then
they get into financial troubles. They lose their cars to repossession. This
clogs the supply line with late-model used cars.
There is a fourth factor: the
likelihood of a recession over the next two years. Recessions always push down
used car prices. People who lose their jobs have their recent model cars
repossessed. Also, people need cash. Finally, people put off buying a car. They
fix their existing cars. New car dealerships face bankruptcy. They have to move
trade-in used cars off the lot, fast. They are ready to make deals.
I don't think we will see another
version of cash-for-clunkers next time. That ridiculous federal program has
kept used car prices high.
Peters makes a good point: it's better
to lease than to buy new with a car loan. That is because the leased car stays
under warranty. The high cost of digital repairs is borne by the auto company.
Because most buyers take six-year loans, they buy again after six years. This
is really leasing.
The advantage of buying a used leased
car is that the dealer has kept it in repair.
If you buy used, use the Consumer
Reports assessment for car repairs. You can see which brands and models do
well here. This changes from time to time. Toyotas are always high. But Subaru
has moved way up in recent years.
You need negotiating techniques if you
do not buy from Carmax. I discuss these here.
