In the market for a car? There isn’t much debate when it comes to the question of whether you should buy a new or used one. Most advice you can find says go used. But that is too broad. There is little reference to the cost of the remaining life of the car when discussing the merits of used cars over new ones. This can be a critical miss.
New cars depreciate the moment they are driven off the lot. In the first year the value of the car drops by nearly 30 percent, according to Edmunds. By the time the car is five years old it will have lost half its value. But does that necessarily make buying a car after it has depreciated a better deal?
Even with the depreciated value, used cars valued on a price per remaining mile may not compare well. In a very unscientific survey of local used cars, most actually did not.
The following chart shows 4 cylinder Honda Accords, model years 2014 to 2017, available in the Portland Metro area and listed on UsedCars.com. These are compared to a brand new 4 cylinder Honda Accord based on an on-line quote from a local dealer.
Of the used cars currently on the market 70 percent were priced at a higher per remaining mile level than the new car. If you want to own your car for fewer miles, the comparison is even worse. The following chart shows the price per mile if you assume you only want to drive the car until it hits 100,000 miles. Only one of the used cars was a better deal than the new car on this basis.
Cars have become very reliable. Most can be expected to last for 200,000 miles or more with recommended maintenance. The average driver could easily own a car for 15 years. Whether you plan to own your car until it dies, or you tend to sell your cars when they hit a mileage milestone, what you are paying for the remaining life is an important consideration.
The conventional wisdom to buy a used car instead of a new one may not always be good advice. While you will pay less in absolute dollars, you may not get a better value. Comparing the value given the miles you will be able to drive the car may very well lead you to buy new instead.
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