I am car shopping for the first time in quite some time and I am shocked by how expensive 1-2 year old vehicles are. They are basically the same price as a new vehicle after all the incentives.Is a used car bubble coming because I cannot believe this pricing is sustainable. Thoughts?

usflyer msp wrote:

I am car shopping for the first time in quite some time and I am shocked by how expensive 1-2 year old vehicles are. They are basically the same price as a new vehicle after all the incentives.Is a used car bubble coming because I cannot believe this pricing is sustainable. Thoughts?

We just bought a used car last month to replaced my GFs beloved and unfortunately totaled Nissan. Tell me what you have been shopping b/c that may be why you are seeing the prices you are.


Anecdotally from this last shopping experience to when we got her old car in 2013 I found that at the same price point we were shopping then that there is a lot more selection available. Which makes sense given that new car sales are now relatively healthy, vs. in 2013 when it was just beginning to recover meaningfully from the post Great Recession era.

It really depends on what you are looking for. For instance, 1 or 2 year old Subarus, are only $1,000 or $1,500 less than brand new. Why would I buy a used one? I'll buy a new one, and pick the exact color and options I want.

Other cars, like Jeeps or Fiats, are 20% less. If you are looking to lease, then many luxury brands hide incentives in their lease rates, so as not to hurt their resale values.

So, in other words....it just depends. If I may ask, what are you looking for?

I am just looking at simple compact cars; Jettas, Cruzes, Civics, Elantras, Fortes, Imprezas, Mazda 3's etc - pretty much everything in this class excpet for the Corolla (does not offer heated seats) and the Sentra, Lancer and Dart (pieces of crap). The price difference between a new 2016 with incentives and used in most cases has been less than $1200. I think that is nuts...

I always buy used, 1-2 years old, the last one saved me about $10k, with 5k miles on it (1 year old), you just need to spend some time digging and have some flexibility in what you want.

I have also developed a relationship with a couple of salespeople at one of my local dealerships, when I am ready for a "new" car I call them first, if they have it in stock I run over there, if not, they keep an eye out for one, when they find it I get a call. BTW, this is actually a Lexus dealership, same prices as everyone else, but the whole buying experience is so much better.

Right now I am looking for a 2015 V8 Hyundai Genesis, new price is around $57k, I cannot bring myself to spend that, 2015's can be found in the mid $30's, the issue is however, Hyundai will lease me a new one for around $400 a month, that is something I am thinking through.

Most 1-2 year old cars are lease returns, or returns from rental companies (which tend to be excellent purchases).

Those cars are seen as many people as excellent alternatives to avoid the large initial depreciation of a new car purchase. Yes, some of the incentives have lowered that hit.

The last three 'new' cars I've purchased were 2 year old models from rental car companies. They were excellent vehicles.

usflyer msp wrote:

I am car shopping for the first time in quite some time and I am shocked by how expensive 1-2 year old vehicles are. They are basically the same price as a new vehicle after all the incentives.

Some are, others drop like a rock. That said, a vehicle with very strong residual values may be a good candidate for leasing.

usflyer msp wrote:

Is a used car bubble coming because I cannot believe this pricing is sustainable.

I think there are a couple bubbles in the automotive market:

1. There has been a lot of subprime lending for cars in the last few years, not unlike we saw with houses in the mid 2000s. Cars are being financed with longer terms and lower down payments to people with worse credit. Cars may even be worse than homes since they are inherently depreciating assets.

2. Large trucks and SUVs have been selling like crazy lately but if oil prices move upwards for an extended period, I expect you'll see many of those being dumped on the used market and manufacturers struggle to sell new ones.

usflyer msp wrote:

Dart (pieces of crap).

I had a rental Dart a few weeks ago and it is undoubtedly the worst thing I've ever driven. Most of the things I hated about it were the same things I hated about the car I learned to drive in, which was a 1992 Caprice. The Dart is crap by any standard, but coming from a company with Fiat and Alfa Romeo resources at their disposal is just sad.

jetwet1 wrote:

Right now I am looking for a 2015 V8 Hyundai Genesis, new price is around $57k, I cannot bring myself to spend that, 2015's can be found in the mid $30's, the issue is however, Hyundai will lease me a new one for around $400 a month, that is something I am thinking through.

Hyundai still seems to have poor resale value, even though they have improved their product. I would avoid leasing one since cars that depreciate heavily are the least attractive. Buying one used might be the best option.

rfields5421 wrote:

Most 1-2 year old cars are lease returns, or returns from rental companies (which tend to be excellent purchases).

Lease returns are good, although I've always been told to beware of ex-rentals since rental companies tend to avoid maintenance when possible. That said, rentals don't seem to always be stripped out crapboxes these days at least. (The Dart I had is an exception, though I suspect all Darts are junk. I have no interest in finding out for sure.)

When the old 02 Caddy died I did see fast looking at both used and new. So did the daughter and her husband. They actually came up with the best option for me - a new '16 Buick Encore. It is a small SUV that came with a lot of discounts. The $28.5K went to $21.5 (including the Caddy being towed to the dealer), 500 for military service, conquests discounts and GM clearance cash.

While it may be a far different car than I had I'm really pleased with it. Easy in & out, far better economy. better vision, OnStar, etc. Buick also was ;listed today as one the better quality brands:

http://www.usatoday.com/story/money/car ... /92678638/

One-two year old smaller cars in some markets, due to cheap gas prices at this time, may be a good bargain. In July I bought for cash a 2014 Ford Focus SE with the sport package, (spoiler, sport wheels, slight trim difference, 4 wheel disk brakes) with just under 20K miles, for $13.500 - trade-in of $2,000 + tax and 'fees'. The car was super clean even with its mileage, seemed to have been well maintained, everything works and still has 17K or 12 months left on the bumper to bumper warranty. It may have been a lease car, the Ford dealer I got it from got it from a dealer only auction house, it was sold by Ford, it came from near Glens Falls, NY (about 200 miles away) so not a 'city' car. A comparable 2016 model would likely be at least $19,000 even after rebates and other breaks + taxes and 'fees' and maybe a slight difference in trade in so at least $5,000 more. A new model likely would have meant a loan, maybe even a near 0% one, something I was trying to avoid. Yes it may not be what I 100% exactly wanted but is was probably just as close as what wanted as was available at dealerships in Northern NJ via web searches.

BMI727 wrote:

jetwet1 wrote:

Right now I am looking for a 2015 V8 Hyundai Genesis, new price is around $57k, I cannot bring myself to spend that, 2015's can be found in the mid $30's, the issue is however, Hyundai will lease me a new one for around $400 a month, that is something I am thinking through.

Hyundai still seems to have poor resale value, even though they have improved their product. I would avoid leasing one since cars that depreciate heavily are the least attractive. Buying one used might be the best option.

Hyundai seems to be trying to create a resale value with a low lease rate, it will probably come back to bite them in the butt, butt a fully loaded Genesis V8 for $400 a month (36 month 15k miles a year $2500 down) is something that is hard to pass up, and of course in 3 years I get to walk away from it and it's resale value.

And yes, I was surprised by how nice it actually is, my father in law just spent $115k on a new Lexus, I drove his car then the Genesis, I would describe it as 8/10 a L480h at 1/2 the price.

jetwet1 wrote:

Hyundai seems to be trying to create a resale value with a low lease rate, it will probably come back to bite them in the butt, butt a fully loaded Genesis V8 for $400 a month (36 month 15k miles a year $2500 down) is something that is hard to pass up, and of course in 3 years I get to walk away from it and it's resale value.

That may be the strategy. Regardless of if it works you might as well take advantage without risking your own money on depreciation. Let the lessor bet on the curve.

jetwet1 wrote:

And yes, I was surprised by how nice it actually is, my father in law just spent $115k on a new Lexus, I drove his car then the Genesis, I would describe it as 8/10 a L480h at 1/2 the price.

The Koreans are trying to do to Lexus what Lexus did to the Germans (mostly Mercedes at the time). I think eventually they'll succeed too.

Everybody.

In France the average (!) new car buyer is 65 years old.

In my family (me, my parents, sisters, brother) nobody has bought a new car in their life.

I recently got a new company car, first new car in the family !

My wife's Hyundai Sonata is the most unreliable that I have driven in 56 years of driving. We were looking at cars to replace it when the Caddy needed replacing after 14 years. The Sonata is a true POS and we are still close to replacing it.

BMI727 wrote:

I had a rental Dart a few weeks ago and it is undoubtedly the worst thing I've ever driven. Most of the things I hated about it were the same things I hated about the car I learned to drive in, which was a 1992 Caprice. The Dart is crap by any standard, but coming from a company with Fiat and Alfa Romeo resources at their disposal is just sad.

You're shitting me, really, the last time FIAT built a really good car from scratch without any help was the Coupe FIAT from 1993 to 2000, we don't know if the new Alfa Giulia is good, we'll have to wait a year or so before the jury is in, so that last really good Alfa was probably designed before you were born, or even swimming around in your daddy's nut sack, that would be the 164, which was a cooperative effort with FIAT (Croma), Lancia (Thema) and Saab (9000).

Aesma wrote:

Everybody.

In France the average (!) new car buyer is 65 years old.

In my family (me, my parents, sisters, brother) nobody has bought a new car in their life.

I recently got a new company car, first new car in the family !

French used car prices are extortionate. In the UK a car generally loses 30% of its value in the first year and after 10 years is worth about 500GBP. My RH drive 2002 206 is worth 10 times as much in France as in the UK.

Most of my French colleagues (30-45 yo) buy new cars.

Another factor that should be included in a New v Used decision is the bundle of financial factors. This time of year the discounts are from the manufacturers are pretty attractive, as is the potential option of Zero interest rates. You can get current rebates on Edmunds.com or other car sites.

When you are thinking about interest rates go to your bank or credit union and get the charts of different auto loans. New (or under 6,000 miles) will have a better interest rate than a lot of used cars. Wen looking at the difference in payment per month per $1,000 you may see more motivation for going new.

The other factor may be the importance of the warranty and how many years you would be covered. Sone repairs can really close the difference between new and used,

For those wondering why the used car market is, and has for several years been, so very tight, I have three words: "Cash for Clunkers."

The ill-named Cash for Clunkers program was a disaster for the used car market (from the buyer's side, not so much the sellers), because, despite its name, the vehicles it took off the road were, by definition, not "clunkers" at all, because in order to be eligible for the program, they had to be road-legal and licensed.

What was worse about the program is that, not only were vehicles removed from the road, but as part of the program, the engines of these vehicles were purposely destroyed, thus ensuring that a huge swath of the used car marketplace, and used car owners at the lower end of the socio-economic spectrum, were deprived of vehicles. In addition, otherwise road-were the vehicles which needed new engines no longer had a ready supply of engines available in the used auto parts marketplace.

As a result of this program, there was a huge shortage of used cars, a shortage which is not yet been overcome.

My personal strategy for buying used cars at a reasonably decent price is to utilize a specialized dealer, one who purchases vehicles at the dealer auctions at which the vast majority of lease-return vehicles are sold, and that which most purchasers are auto dealers looking to populate their used car lots. The agent with whom I work conducts the purchase, and charges a flat $500 fee on top of the auction price, which usually leads to a savings of 15 to 18% in comparison to the prices sought by the dealers on their lots.

Who buys used cars?

My mother... she's still driving a Hyundai with more than 200'000 km / 128'000 miles. She even bought it second-hand. She had the car checked by one of my car mechanic cousins, who assured her that the thing would run for another year at least.

And that cousin buys a $500 car every autumn, repairs and improves it, and sells it in spring - even with a profit.

One thing to consider is investors are looking for opportunities to invest their bucks. Financing car deals/leases might be more profitable than the bond market.


David

sccutler wrote:

For those wondering why the used car market is, and has for several years been, so very tight, I have three words: "Cash for Clunkers."

Cash for clunkers ended in 2009 with a total of 690,000 vehicles processed. In 2015 38.3 million used cars were sold. There is no way that program is still influencing the market.

I purchased a used 2005 PT Cruiser in 2006 that had about 20,000 miles on it. The PT now has 110,000 miles and is going strong. I stay on top of the maintenance and most of the miles I drive are on the highway. People keep on telling me to get a new vehicle but I just can't see doing it as I only drive about 8,000 miles per year.

I just bought my new car today. I paid 17K for for a 25335 MSRP 2016 Chevy Cruze with 12 miles on it. A used 2016 with 4500 miles on it and fewer amenities was 19.8K at the same dealer. Makes no sense...

usflyer msp wrote:

I just bought my new car today. I paid 17K for for a 25335 MSRP 2016 Chevy Cruze with 12 miles on it. A used 2016 with 4500 miles on it and fewer amenities was 19.8K at the same dealer. Makes no sense...

What's the history of the car? I'm assuming it was a demo model, but there has to be a reason for that difference in price.

BreninTW wrote:

usflyer msp wrote:

I just bought my new car today. I paid 17K for for a 25335 MSRP 2016 Chevy Cruze with 12 miles on it. A used 2016 with 4500 miles on it and fewer amenities was 19.8K at the same dealer. Makes no sense...

What's the history of the car? I'm assuming it was a demo model, but there has to be a reason for that difference in price.

Chevy has a 20% cash rebate on the remaining new 2016 Cruze's but bupkis on the used...

usflyer msp wrote:

BreninTW wrote:

usflyer msp wrote:

I just bought my new car today. I paid 17K for for a 25335 MSRP 2016 Chevy Cruze with 12 miles on it. A used 2016 with 4500 miles on it and fewer amenities was 19.8K at the same dealer. Makes no sense...

What's the history of the car? I'm assuming it was a demo model, but there has to be a reason for that difference in price.

Chevy has a 20% cash rebate on the remaining new 2016 Cruze's but bupkis on the used...

That's why they have used cars for stupid money in the lot ... people are trading their "slightly used" cars in on brand new ones that work out less expensive. One of the risks of heavy rebating practices.

When I bought my car in March 2015, they offered me a substantial discount to take the last remaining '14 model off their hands. In the end, I decided not to, since the '16 model had some safety features I particularly wanted (and the '14 was black, and I have no desire to ever own a black car again!)

Have never bought a new car, but plan my next one to be brand new (bucket list item) and also it'll probably be my last, all being well, so it'll be a bit special - assuming were not driverless vehicles by then. Had a family member buy a new car recently, and they're quite reasonably priced at the moment due to a number of factors (sorry, haven't read the whole thread here) so that does make a difference in the decision making. Also, once you've had a new car, buying second hand again may be a let down. I know people who upgrade every year or two, but you've really got to make sure that there is something to gain from this? Actually, there is nothing to (financially) gain from buying vehicles.. they are a modern necessity full stop. I will say, I've never had a car hire purchase loan, on that note, and yeah, I've had some pretty basic cars in the past, with troubles to boot.. as a result, but at least I've owned them.

usflyer msp wrote:

I am car shopping for the first time in quite some time and I am shocked by how expensive 1-2 year old vehicles are. They are basically the same price as a new vehicle after all the incentives.

Which I believe is the reason the two or three year old car was traded for a new one by the family member, just taking advantage of the current situation of things, which can't last? Of course, you need to be set up to be in this situation in the first place. I am not sure how it is going to be when I go shopping for a new new car. I obviously should do some research beforehand. May not be a viable decision (at the time re the current maket).

dfwjim1 wrote:

I purchased a used 2005 PT Cruiser in 2006 that had about 20,000 miles on it. The PT now has 110,000 miles and is going strong. I stay on top of the maintenance and most of the miles I drive are on the highway. People keep on telling me to get a new vehicle but I just can't see doing it as I only drive about 8,000 miles per year.

That PT has paid for itself a long time ago and gives you opportunity to set aside cash for the future. That 02 Caddy gave us a lot of opportunities, including a Masters for the daughter. At the same it is very nice at my age to have an auto warranty that will last until I swap it out for another new car.

dfwjim1 wrote:

I purchased a used 2005 PT Cruiser in 2006 that had about 20,000 miles on it. The PT now has 110,000 miles and is going strong. I stay on top of the maintenance and most of the miles I drive are on the highway. People keep on telling me to get a new vehicle but I just can't see doing it as I only drive about 8,000 miles per year.

The rings in my PT dropped after 120,000 miles. I admit the rings dropping was probably my fault, but, still, I would buy another one in a second. It was great for road trips.

I financed a two year old rental return Corolla. A brand new Ford Fusion would have been the same price. But, someone who shall remain nameless who I am virtually married to, told me to go with the Toyota. My next car will be new. And from a different dealer.