Heres’ the latest reader question, along with my reply!
Kasey asks: You’ve written several columns about questionable new car features but I’m wondering whether one stands out above the rest – and why. Your thoughts appreciated!
My reply: This one’s tough – like choosing between Hitler and Stalin! My first choice would be to avoid a new car, period. Not so much because they come with insufferably nannyish “assistance” systems or absurdly complex drivetrains (e.g., twin fuel injection systems, transmissions with three or even four too many gears – or no gears at all) but because of the financial wallop you’ll take by driving home in one.
Depreciation averages 25-30 percent of the purchase price over the first two years alone. Put in plain language, this is not much different than paying a sum equivalent to that in addition to what you paid at the time of purchase.
It is far wiser to let someone else pay that – by waiting to buy the car. Let a couple of years go by – and then shop for it. By this time, it will have depreciated by 25-30 percent (or more) and you will therefore pay that much less for it.
And more.
Because it will depreciate less from that point onward.
The car will continue to lose value, of course – but not at the same rate, which can be a huge savings. Instead of 25-30 percent every 24 months, maybe 5 percent every 12 – and that sum will also be less because it will be a percentage of the already depreciated value of the car at the time of (your) purchase.
Keep in mind that the durability and reliability of late model cars is at least twice that of what was typical a generation ago – but many people are still operating on the (faulty) premise that a two-or-three-year-old car (or even a five-or-six-year-old car) only has three or four years of reliable life left in it. This is a fiction the car companies want to maintain because it is in their interest to keep you fearful of used cars, in order to sell you new ones.
Assuming you exercise reasonable caution – as by having any car you’re considering inspected by someone qualified to do so, checking service records and so on – the odds of you ending up with a car any less reliable than a brand-new one are very slim.
But doing so will save you a fortune, literally.
. . .
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Very well written and explained column, as always, from you Eric. What would make it clearer to a ignorant or casual reader would be a concrete example. A 2017 Tahoe runs $24K, with 35K miles, compared to a new 2020 Tahoe, same model/features, that is $52K. Mentioning that extended warranties are available, maintenance plans, etc, depreciation is less, and your very valid points become crystal clear to the most ignorant. Keep up the great work.