When starting the auto buying process, many people struggle with whether to buy new or pre-owned. If I had to guess what question I’m asked the most, that would probaly be the one.
In the past, before the recession and the tsunami in Japan (that halted the production of some of the Japanese brands), my short answer would have been pre-owned without hesitation. However, when the recession resulted in people driving their vehicles longer, combined with lack of new car inventory due to the tsunami, pre-owned vehicles were not going back into the market as soon as in years past. If we know anything about economics, most of us understand “supply and demand”. While there are those that strictly purchase pre-owned because of the “perceived” savings, when the supply wasn’t abundant and the demand stayed the same, bidding wars started for this now “hot” commodity. When dealer’s pay more at the auctions, the consumer pays more on the lot.
In a recent article in Automotive News, Lindsay Chappell noted that “Right now, the price for the average used 2007 to 2011 model car is about $800 higher than the average used car from 2006 to 2010 last February.” She cautioned that this trend will continue in to 2014, “that’s when we’ll see the total volume create enough used inventory to ease the demand and supply situation.”
In a similar article in Automotive News, Arlena Sawyer quoted Tom Webb, Manheim Chief Economist as saying, “A strictly monthly payment-driven buyer finds it very easy to get into a new vehicle for a lower monthly payment than a used one,” which was echoed by our guest on todays show, Erikka Tiffany, Sales Manager at Jim Ellis Audi in Marietta, Georgia.
In today’s economic climate, if you are a “payment-driven” buyer, (and you’ve done your homework) it is possible to own a new automobile for the same or less in monthly payments. While that won’t change the total outlay of money you ultimately pay for the car, it can have a positive effect on your monthly expenses to purchase new instead of a 1-2 year old pre-owned.
If you are a “bottom-line” price buyer, you can spare yourself the, up to 40% depreciation, that goes along with that new vehicle by opting for one 4-5 years old. Just be mindful that maintenace and repair costs are imminent, sooner rather that later, with the older vehicle–and there’s always an expense involved.
Here are some helpful links for your research:
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