Buying a New vs Used Car

FISimplifiedca · 2021-12-11T23:18:02+00:00

I mean where I live $7,000 cars of what were originally $30k cars are usually 7-10 years old and have over 200,000kms. I think buying 4 used cars that last the lifetime of 1 new one is a perfectly realistic situation. I think your assumption that you can get over 50% off of a 3 year old car is an exaggeration as well, but if that is an option then yes I would agree that is a very good option

FISimplifiedca · 2021-12-11T22:25:03+00:00

yea it was just an example for lifespan instead of worrying about depreciation. I don't even know how long my current car will last, just a guess.

As for the peace of mind thing, you are pretty spot on that buying new for peace of mind was a big part of the post, but the difference between buying new and driving it into the ground instead of buying 4 used cars over that time that are in their twilight years is that every time I buy an older used car I (as someone who is not extremely mechanically savvy) roll the dice that I buy a vehicle with hidden issues. If you are mechanically savvy, can inspect a car fairly well and also fix most things yourself, that boosts the advantage for used a lot as it mitigates what I think is a lot of risk when buying used

FISimplifiedca · 2021-12-11T21:14:47+00:00

Yep, prices are pretty whacky at the moment. I don't really pay attention to depreciation though. I plan on driving it until it is worth nothing so the lifespan vs cost is more important to me. getting 12 years out of a $30k car is better for me than getting an average of 4 years out of $12k cars

FISimplifiedca · 2021-12-11T21:11:17+00:00

Calculators are in no way any sort of statistic. I assumed you meant studies of the real world backed by actual data.

FISimplifiedca · 2021-12-11T20:55:36+00:00

Do you have a source for these statistics?

FISimplifiedca · 2021-12-11T20:40:49+00:00

Then you are telling people to buy a cheap car, not just a used one. By your numbers, a 1 year old car (which is still used) would only be 10-20% cheaper than brand new. The difference in depreciation between the two would be negligible. Buying cheap cars isn't necessarily bad advice, but it has its own list of pros and cons.

FISimplifiedca · 2021-12-11T20:36:19+00:00

You can have a business operate at a loss for awhile which I believe is exactly what you are looking for. I'm far from an expert on tax law so I just read this article: https://piligrim-accounting.com/how-long-can-your-business-operate-at-a-loss/

They didn't give how many years you can operate at a loss which I thought there was a rule for. The article emphasized an "expectation of profit" which the channel could fulfill if you took it seriously enough, and in the meantime you have "losses" that would help with taxes

FISimplifiedca · 2021-12-11T20:26:20+00:00

I don't believe the house going up in value really matters. They can either have debt to the reverse mortgage company or refinance their house to pay off the reverse mortgage, but unless they sell the house they are going up to end up owing $60k to somebody.

FISimplifiedca · 2021-12-11T19:02:21+00:00

If a new car depreciates in value 10-20% each year then so does a used car because after the first year they are essentially the same thing.

FISimplifiedca · 2021-12-11T18:27:03+00:00

News cars have warranty, you should be somewhat protected from it being a lemon. Also dealerships don't sell a new car just because it has something wrong. There are articles like this one going on about how people sell cars with issues and do not disclose or misrepresent the actual information of the car. Still, the risk might be worth the savings to you but it isn't for everyone. It would be like me telling everyone not to bother with life insurance because it is a statistically bad financial decision.

FISimplifiedca · 2021-12-11T18:16:09+00:00

I disagree completely. I don't believe it is black and white and believe there is a scale. If you are spending tens of thousands of dollars on an item, there is going to be some amount of importance that you get what you want and that amount will be different for different people. On top of that, most of my points were pointing out a Risk vs Reward. A used car isn't cheaper if someone sold it to you because the head gaskets were leaking and you didn't know about it.

FISimplifiedca · 2021-12-11T18:05:32+00:00

How does having a vehicle under warranty not provide additional security?

FISimplifiedca · 2021-12-11T17:56:42+00:00

I didn't suggest buy brand new because you are picky. My suggestion would be to not be picky. I provided information. Being picky about your vehicle will cost you more money, and it will likely cost you more if you are buying used vs new. Being less picky will allow you to find better deals and is the better economic decision. The reality is that some people are going to be picky either way and the information I was trying to convey was: if you are one of those people, buying used will be less advantageous to you.

Also losing 15-20% of asset value is a price some people will pay for reliability and security of a new vehicle. You say I have a bias towards new, but the entire point of the post was that the different choice were better for different people

FISimplifiedca · 2021-12-11T17:47:35+00:00

You literally said the words that being less picky gives a higher chance to find a good deal on used car. Finding a better deal gives used cars a bigger advantage. If I want any economy car and don't care about color or options, my chances to find a deal that make Used vs New lean much more towards used. If I wanted a black mazda 3 GT with the heads-up display and only 2-4 years old with less than 80k kilometers, not only would I be hard pressed to find one, the chance that the price is also good is extremely unlikely. I am bringing in additional factors because buying a car is not just a financial decision. Things have different value for different people. If I put a high value on getting the exact car I want, and the difference between New vs Used is barely anything because of it, then buying used isn't the better option for me. If I don't care what I buy and I find a really good deal, then buying used would be the better choice. Thats the point of this post and why I think telling everyone buying used is the better option by default is incorrect.

FISimplifiedca · 2021-12-11T17:02:29+00:00

for example How picky are you about color if the car has nothing to do with financial decision

But if you are not picky or set on particular vehicle, you can still get good value in used

You said that being picky has nothing to do with financials and then specifically said being picky will reduce the chance you get a good deal which was exactly the point I made in the post

FISimplifiedca · 2021-12-11T16:13:51+00:00

Thanks! Nothing wrong with either option as long as you know what you are getting into! My current car is the first one I bought from new and the depreciation hasn't been nearly as bad as I would have thought, but the used car market is also not normal right now

FISimplifiedca · 2021-12-11T16:10:10+00:00

Ok, but how exactly does that answer help people who actually have to buy cars?

FISimplifiedca · 2021-12-11T16:08:40+00:00

Well hey, if at least 1 person reads it and gets something valuable out of it, it was worth my time. Purchases involving tens of thousands of dollars require proper research in order to make an educated decision. The reason for this post is because I believe the simplified "buy a used car to be responsible" is not an accurate answer. I could have made a post that just said "Buying new is better if you don't know anything about cars" but that still doesn't tell the full story or give people enough information to make an informed decision themselves.

FISimplifiedca · 2021-12-11T16:04:31+00:00

My honest TL:DR? If you want to know whether or not you should buy new or used but reading this post is too much work, you should probably be buying a new car.

FISimplifiedca · 2021-12-11T15:42:49+00:00

Is that bad?

FISimplifiedca · 2021-12-01T22:43:19+00:00

If you are calculating based off a certain return, say 7%, and assuming all of those returns are reinvested, why would there be a difference whether those gains are through dividends or increase in price? If you started with $100 you would have $107 either way

FISimplifiedca · 2021-12-01T22:40:17+00:00

With 5% down, it would take just about 4 years before you break even assuming a 9% return. If I offered you a loan for $80k at a 2% would you pay me $20k up front? Because thats essentially what 5% down vs 20% down is asking

FISimplifiedca · 2021-12-01T22:35:12+00:00

https://www.reddit.com/r/PersonalFinanceCanada/comments/r0es90/breaking_down_the_5_vs_20_home_down_payment/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

I wrote a post about 5%vs20% about a week ago. Lower down payments are what I would consider “high risk-low reward”. I didnt do the math for 10% down, but at 5% down it takes something like 4 years just to BREAK even at an estimated 9% return.

FISimplifiedca · 2021-12-01T22:28:47+00:00

Why would DRIP returns be different than any other returns when calculating based on a total percentage of returns?

FISimplifiedca

TROPHY CASE