Cars depreciate so much after leaving the lot, I just can't fully wrap my head around why people walk into dealerships and buy new cars? With transferrable warranty and swerving huge initial depreciation, it makes no sense to me why so many people buy new and cop the huge initial loss.
Am I missing something, or is this an example of consumer ignorance?
FYI, I bought a new car during covid as it was the same price as used, so I do see some of the value.
Sense makes sense. Sense.
you can buy scents for cents
Makes scents.
Haha didn’t notice that
Yeah, new was actually cheaper in my case (it included rego and a year of free servicing). I was lucky to find one of the few new models in the country at the time. Older models (Corolla Hatch Ascent) with 80K on the clock were selling for a similar price.
✋peers' cheers on friday afternoon beer✋
People often say a new car loses 20 to 30% of its value as soon as it leaves the lot. Has anyone ever tried this? Bought a new car and actually sold it an hour later? I bet you would get near the new car price, unless the owner was silly enough to hand the vehicle back to a dealer. Obviously a dealer takes a chunk of every car's sale price for themselves.
I kept my last two cars for 11.5 and 8 years respectively. I keep my cars for so long that honestly I don't care about the resale value. My last car was purchased brand new for $23k, and sold for $8k 8 years and 218k km later. That's less than $2000 per year, less than I spent on fuel every year. I sold it when it started to develop problems. Expensive problems. Even changing the clutch was 30% of the car's value. And that's only one component. Air conditioner compressor fails and the system needs to be rebuilt? $2k. If the transmission fails it basically writes off the entire car.
I know that for 5 to 7 years of the new car's warranty I can have peace of mind. I'm the only owner, I know how I drive. I don't have to worry that someone thrashed the car before me.
Two to four year old well priced used cars are very rare. Theoretically they might be about 30% cheaper than new, but practically that's difficult to achieve. Unless it's an EV. MG dumped the price of the base model MG4 by almost 25% overnight. That did wonders for the resale value of people who already had one.
That sounds more like you paid a convenience tax and the dealer was fully aware of your desire to offload it combined with the fact that a $ loss isn't felt as acutely when you didn't pay for the car.
The key words are "traded it in". You would have got more if you sold it privately, everyone knows that.
The key words are "traded it in". You would have got more if you sold it privately, everyone knows that.
Think you missed this
Although joke is on dealership … We often drove past - and that V8 (that we won/traded) - was sitting in their sellers lot out the front for well over 3 months
Back then I bought a $20k 2016 Hyundai i30 Manual brand new albeit on clearance (end of 2016) and was able to sell 5 months later for $18500 but it was an interstate buyer who said they couldn't find anything similar below $20k.
Stamp duty is a thing so you lose at least that.
And the dealer has to charge GST.
There is a reason why a car should lose a lot of value as soon as it is driven off the lot - it's because, unlike a new car, in a sale of a near-new car the buyer cannot know the reason it is being sold - and one possible reason is because it's a dud, or perhaps its ownership is not what it seems. Its vulnerable to the question "if you are so keen to sell it why should I buy it?". IOW the buyer is running more risk than buying a new car and the price reflects that.
There is a famous argument about this ( https://en.wikipedia.org/wiki/The_Market_for_Lemons ) which has been very influential for modern economic theory, because this insight can be generalised and extended to many other markets.
Less of a concern if the car is still under warranty though.
Is warranty transferable?
I won the car in a raffle
There was some dude here that had some spec'ed up Corolla worth $43k give or take that was ridden off and he got like high $30k. It was insured for market value and only had a few hundred kms on it.
Maybe 10-15% is more accurate. But there is a reason why these myths are still around today, probably some truth in it.
I think this may have been true once. My Dad always swore by buying cars around one year old rather than new. But I don't think it applies any more.
We bought a Kia Cerato for $22k (which was a very good deal, advertised as ex demo quoting about 2,000km, but only had like 10km on it) 4 years ago. Recently replaced it and got $20k, car had about 35,000km on it when we sold. Possibly the fact that new ones have gone up in price influenced this.
Trade in values of course a different story because of the dealer profit margin, costs to detail and display the cars etc and the convenience of driving one car in and another one home. Relatively new cars in good condition will still sell well privately (although you'll have to deal with the usual idiot low ballers).
I sold it when it started to develop problems. Expensive problems. Even changing the clutch was 30% of the car's value. And that's only one component. Air conditioner compressor fails and the system needs to be rebuilt? $2k. If the transmission fails it basically writes off the entire car.
This is one of the reasons why I try not to buy used cars.
In fact this is exactly the point of the "Markets for Lemons" idea above. If everyone sells when it starts to develop problems that means the cars on the market are likely to be the ones with problems - the good ones are being held on to. Its a case of Gresham's Law - "bad money drives out good money" (Gresham, BTW, worked this out over 400 years ago).
The simple fact that someone is selling it is then a signal that there is possibly a problem with it. This is why ads for secondhand goods including cars often protest that they have "genuine reason for sale" etc.
As far as I can tell the whole massive depreciation after leaving the lot thing is an urban myth, presumably spread by used car dealers.
Frankly, I'd be happy to buy a three month old car, if such a thing existed in the used car market, particularly if I could get it for 20-30% off.
It's not like we can't actually test this theory. Demo models driven for several thousand kms by dozens of randoms still typically only attract a $3-4k discount, and these are effectively last year's models by the time the dealer is running them out.
What it comes down to is that a brand new car from a dealer comes with the normal guarantees under consumer law, but also has some degree of trust because the dealership has a reputation to maintain. Instantly reselling it strips the latter away, and I would find it very suspicious if someone was selling a new car privately. I would probably pass over their listing assuming it was a scam, or that the buyer had discovered some fault they weren't disclosing.
Anyone buying a new car in the first place has made a big commitment - that they're trying to get out of it for any reason is a big red flag, and that impacts pricing.
I absolutely agree. Handing over big money for something in a scenario where you can't actually test drive the car for long enough to see what is wrong with it is risky - especially when modern cars need such specialist care.
My last car had some gremlins before it croaked it (and could have killed me in different conditions), but every mechanic I took it to was positive that it was fine and would likely have concluded it was mechanically healthy.
What I fail to understand more than anything is how people on FB Marketplace list Lamborghinis and the like. Who has enough clean cash to gamble on a used supercar?
Cars depreciate so much after leaving the lot, I just can't fully wrap my head around why people walk into dealerships and buy new cars?
If you have a source of these near brand new cars that are significantly cheaper, with no strings attached and I can find the model I want then let me know.
Change of ownership == too.
See my post above
Bought a new car because my old one was over a decade old and the plan was to buy a new one in 2025, but it got T-Boned in 2022 …
My plan is to upgrade every 10-15 years
That's my only real worry when it comes to new cars, so many idiot drivers out there and very often there's nothing you can do.
I'm buying my next car to get the most value out of it and don't care what the resale value is. Current car is 22 years old and still runs fine, just a bit too thirsty at 12.5L/100km and I'll guess safety rating is not as good as anything more recent.
Number 1 for me, with a new EV, is safety
That’s why it’s important to have comprehensive insurance when buying a new car :) I’ve seen quite a few cases where people’s new cars have been damaged and they don’t have comp insurance - yikessssss
I have comprehensive on my car (only worth about $4k), because it was basically the same price as just 3rd party.
So many people driving around these days with no insurance at all. Their justification is they say they don't have any money so can't be sued/pursued.
I've heard so many stories where people admit blame, then later blame the other party involved. My $30 dashcam works beautifully, and luckily have not had to rely on it.
Insurance will often offer new for old replacement if anything happens in the first few years.
Sorry to hear you got T-Boned
Everyone alright?
Buying new or used has its place, each for a variety of reasons. Any supposed depreciation shouldn't really be a driving factor - you can either afford it or you cant, you either need it or you dont.
As an example, cursory look at the market for my RAV4 (Hybrid Cruiser AWD 2022) has it around the $50k mark. Considering I coughed up $55k including extras and I think new they're almost $60k now, that resale is pretty solid. $5k 'down' in 3 years is nothing.
You’ve got an outlier there with one of the most popular brands and car in Australia.
Many other cars and brands won’t hold up so well.
No one is paying $50k for a 2022 RAV4 Cruiser.
Plenty of people trying to sell it for $50k though.
I would say sweet spot is buying at 3 years old when the warranty runs out.
For example I bought a 2014 Cayman S in 2017 - original price ~$150k - I bought it for $105k which was a good 30% discount after 3 years - today, 10 years on from the original manufacture, I could still sell it for $75k which is half its new price. Total depreciation in my 7 years of ownership is max 4% per year. It's been incredibly cheap to run too.
No you just got lucky because the cars all went up in value past covid years.
I sold a 7year old car more than I bought it but I wouldnt call that 2% appreciation per year.
I sold a 2006 Elantra in 2016 for $4k and last year i checked they were selling for $7k 😅
Yep, this
Why buy new?
- choice of options, color, trim.
- full warranty
- assurance it hasn’t been flogged or mistreated
- removes risk of fraud/dodgy seller
- possibly low finance costs
- low hassle, no need to chase lots of sellers
- for some, the prestige of a new vehicle
I have owned two brand new cars, and many, many cheap bombs. I can see that there are plenty of people for whom paying an extra few thousand dollars a year in depreciation is worth it for minimal hassle, as they have plenty of money.
For normal people, a used car made sense before COVID, and presumably is starting to make sense again.
assurance it hasn’t been flogged or mistreated
This is honestly the biggest reason
So many people treat a car as just a tool and it shows. They don't wash it properly and abuse it.
I thought about buying a one year old i30n recently and then thought "the only time I see them they are getting absolutely belted by the idiot driving them"
Why buy an i30N if you're not going to belt it though?
I thought about buying a one year old i30n recently and then thought "the only time I see them they are getting absolutely belted by the idiot driving them"
Are the idiots the ones "belting" the car as performance cars are designed to be driven, or the ones buying a performance car to drive it like a grandma?
Let's be frank - the i30N is not going to become a cult classic worth millions in 30 years. If you're buying an i30N without any intention of taking it to the track or learning how to actually drive, you might as well buy an i30 and save your money.
I doubt we'll even be able to drive ICE cars in 30 years, tbh.
I doubt we'll even be able to drive ICE cars in 30 years, tbh.
What makes you think that?
People still ride horses today.
@p1 ama: I'm not suggesting that it will be outlawed or anything, but I am just not sure petrol will be as readily available as it is now to the average enthusiast. It might be more akin to how cars of a certain vintage can only be driven on Sunday.
the i30N is not going to become a cult classic worth millions in 30 years.
Might not be worth millions in 30 years (not many cars reach that feat), but it is THE car that has started Hyundai's enthusiast car brand (N), and they have been winning many TCR championships around the world with this car… So, I definitely see some classic potential, especially in South Korea, and probably in New Zealand (Rhys Millen)
(Over in SK, there is lots of love for old Hyundai classics, mainly due to nostalgia, and probably the sense of "look at where we started, and where we are today with Genesis, we have built this country to become wealthy" etc.)
I’d also say there are “car people” who want a nice car, and will get the nicest they can afford, and there are people who just want transport.
If your budget stretches to a 3yro European sports car, but you just want transport, then buying a new versus used Corolla is kind of academic, both options are substantially below your budget ceiling.
But a car person will spend time and effort to get the best they can, and to them buying a Corolla at all if you can afford a nicer car seems silly.
Luxury car drivers buy nice cars, then proudly display them with paint transfer, bumper scuffs, and full circumference rim rash on all 4 tyres.
stop being poor, buy new
If you consider rebirthing as brand new, I only buy brand new cars
It’s all about the new car smell
I buy new car smell car scent
That makes scents. Cheers
i bought a half used car scent.
yes I want to know that the farts in the driver seat are all my farts.
Mmmm chemicals.
Depends on the car.
A used Toyota LandCruiser series 70 costs more than a new one.
I was looking at Audi RS3s. They cost the same used as new.
Buy a car that a lot of people want, and is in short supply, and the price doesn't go down on the way out the showroom door.
If the value does go down a lot, question your judgement that you bought that model.
I have a Hyundai I20N, which is an enthusiasts car that's hard to get new. I paid just over $40k a year ago and I was lucky to get it. At the time one year old used models were going for well over $40k and are still high-$30k. Same kind of deal for the Jimny.
It will drop soon as the updated 2024/25 will be sold new again.
Probably. Apparently on sale (for ordering anyway) next month.
@R4: One good thing for you is that the new model only has minor changes unlike say the i30 N sedan.
@JimB: Interestingly, as the ICE N range has been discontinued in Europe, it looks we're the only country (and probably New Zealand) that's getting the facelift I20N - especially as Hyundai were bring in way less than a 1000 a year of the original model. This facelift will probably be the end of the line for the I20N unfortunately.
I think the LandCruiser cost on the used market is due to limited supply and massive wait times for a new one. According to a dealer I spoke to, it isn't uncommon for people to offer more than asking price.
paying $10K+++ for a 9 year old i30 (which should only be worth $3K) etc, is for suckers
Hard to argue with this. We'd be having a different conversation if this were 10 years ago, but things are just stupid these days.
The only used cars I can find now that cost what I paid for my last car (circa $15k) are older, in worse condition, with fewer features and sky high mileage. There is too much potential for the cost to blow out beyond the initial purchase price, especially when the seller could either be withholding information or simply lack the insight to provide honest information (or to even have carried out basic maintenance while they owned it).
Ahh the old, why doesn't everyone just buy used.
That will pressure the manufacturers into making brand new used cars for everyone to buy.
LOL the 5% of people putting more than 10 seconds of thought into what car to buy, and how, aren't making a dent in the new car market, mate 😂
do you buy new or used, phone, TV, PC, fridge, lounge?
Good example. I buy a new phone every 4 years. I buy used ex-lease laptops because the savings are very substantial. I bought a new TV but have also had secondhand/hand me downs. I have a new fridge, but a second hand chest freezer. If you can arrange transport the savings are substantial. I bought a new lounge most recently, but not when I first left home.
I don't understand the point of this. Nothing wrong with buying 2nd hand and of those…
…..the argument isn't about buying second hand, but rather brand new.
Have you noticed how womens used underwear is really expensive .
@Jimothy Wongingtons - is this true?
Can’t say for sure, as the ones I get are bundled into the monthly onlyfans premium subs I’m on
Particularly in Japan where they have vending machines that sell used school girl undies.
Why new:
To flex on those stalking your socials (even if it means you will never financially recover from this transaction)
For authentic new car warranty
For new car smell
The thrill of victory when you finally wear down the sales person after 69 visits and 420 hours of negotiations to get that free tank of fuel thrown in.
You don’t get floor mats thrown in? Chump!
I'm convinced they do that for everyone
And they make out the mats are worth like $350 lol.
Not forgetting fighting off the paint protection salesman and resisting the $1,200 dashcam exclusive offer.
taking into account stamp duty on newish cars and the new price isn't much different
I buy 5-year-old cars. That’s where you generally get the best price-to-value ratio in my opinion. <60,000 km, logbook with full servicing history (at official/registered dealerships), RACQ check, no accident history, model with a reputation for reliability. I’ve had 12 hassle-free years of motoring with my current car, which was 5 years old when I bought it.
However, this strategy may no longer be relevant in this era where we are currently transitioning to EVs and hybrids. The price of petrol has been unstable and is likely to go up in future. More recent models may be better value nowadays taking into consideration the future of motoring.
My FIL is a veteran. He doesnt pay sales tax/stamp duty. So he buys a new car every 2 years, and usually trades in the "old" one for equal or sometimes more than he paid. He doesnt put huge kms on them either, and they are always garages , so they are in near new condition.
His current car is a lexus. He negotiated like a mad person for it and was happy with the price, then the sales person said " that's inclusive of stamp duty" which meant he got it even cheaper than the negotiated prive that he was stoked with.
I bought my second last car from a dealer who had a deal with a charity. The charity would buy a new car (they are exempt from stamp duty, etc). After 6 months or 14,000(?) Kms (which ever hits first) the dealer buys the car back. I forget the intricacies of it all but I ended up buying a 6 month old /12,000km 2014 outlander aspire DID for ~$13,000 less than the brand new models sitting in the show room. I'm still driving it. (Just had the first major repair required for it - clean out of the intake manifold and egr)
So I can support our struggling new car salesman, the true Aussie battler.
A lot of people buy new cars these days for "work", i.e. Uber, and write it off when filing their tax return. Unless you're wealthy, or you can claim some of the costs of that new car back in some way, I don't see the point of buying a new car for most financially struggling people. Not worth it.
Only people that should be buying new cars are:
Buying a car new outside of this is financial suicide imho.
Buying a car new outside of this is financial suicide imho.
Hyperbole much?
For most "average" cars, the brand new price is probably around 10-20% higher than a new-ish used example.
How is paying $40k instead of $32k for a new Camry instead of a used one is "financial suicide"?
The new vehicle would also have brand new tyres ($1k), new battery ($500), free rego/transfer/etc ($2k), potentially a tank of a fuel ($100), a little extra warranty (insert cost of replacing whatever patient component goes bang a day after warranty expires) and so on. The gap between $32k and $40k is considerably smaller when you consider this.
Indeed. Last time I traded in a car it had only a few days rego/green slip left, needed 4 new tyres and had a dent that would have cost maybe $2k to fix (dealer had it fixed and on the lot within a week). Those likely costs of retaining it to sell privately plus the time/hassle involved made the trade in a decent offer. New car as noted above had full year rego, everything new, full tank of fuel.
You have more money than sense ($250k+)
But that’s a standard ozbargain salary…. or, for those on whirlpool, you’re dirt poor
That makes sense. Cheers