The price of new cars

I get my new cars with 0%-1% financing and bargain down to where the dealer isn’t making much money outright. I would never spend cash on a new car.

We’ve done a mix of used (beater or just a couple years old) to new. It depends upon our needs at the time and what’s available.

We had planned to get one of our boys a relatively new car when he needed one for med school, but honestly? The incentives Ford had at that time for new graduates made a new car less than two thousand more expensive that a good used one (2 years old). He’d have been crazy to buy used at that price point. We didn’t want him to have a beater car for med school in a snowy location. Safety and reliability counts for us.

Other option is to buy a very limited production car…I bought one in September and took delivery in December and it’s selling used for more than I paid for it…
Obviously an unusual circumstance but they are out there

We found the same with buying used. A 2 year old car was not that much less than a brand new one, especially since the new one came with 0-0.9% financing. Now for our kids… they are got used. Roughly 6-7 years old.

Our '01 Explorer we bought 2 years used, but got an amazing deal. We were talking to the salesman when the dealership’s owner came up. H grew up with him and they got to talking. He asked if H was interested in that car and H said sure, for X price - it was less than a 2 year old Escape that we were also considering. The owner said sure on the spot. The poor salesman’s jaw dropped to the floor. But that was probably the only time we got a great deal by haggling. I hate it with every fiber of my being, and I want the salesman to make some $$$ to raise his family too.

Car dealers have a lot of profit centers. They make money on new cars. They make money selling trade-ins for more than they paid for them. They can make money on interest rate spreads if they arrange financing. They make money selling add-ons/accessories. They make money on extended warranties. I know people who go there with the idea of not getting ripped off on one part of the transaction (such as “my friend got screwed on her trade-in, I am not going to let that happen”). They focus a lot on that one part of the transaction and get a good deal on their trade. But get screwed on another part of the transaction. Dealer looks at the transaction as a whole and isn’t really concerned where they make their money.

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In car transactions, trade-ins, used car sales, financing, add-ons, extended warranties are typically bigger profit centers than new cars. Also, making the deal more complex than just a cash purchase of a new car increases the ways for the buyer to get confused in all of the complexity and therefore increase the profit the dealer gets out of the buyer.

Note also that manufacturer incentives can affect what is a better deal for the buyer and dealer. For example, there can be an option of a rebate or manufacturer-subsidized financing (how the 0% interest rates can be gotten for good-credit buyers). Or there can be a rebate that requires financing through the manufacturer’s finance company (but typically not as low as 0%).

Another profit center is service and maintenance (other than the $40 basic service of oil change and tire rotation that is commonly advertised at some brands’ dealers).

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In my limited experience I have not found that trade-ins make a huge difference if you are looking to buy new. You don’t get that much. The smart thing is probably to buy a 3-year-old car of a “reliable” brand (i.e. Honda, Toyota, and their luxury counterparts, Acura or Lexus) that has just come off lease, and you can still get a limited warranty. But there is something about being the person to put all the miles on a given vehicle that IMHO is worth paying for if you can. We maintain our cars scrupulously and keep all the service records.

We are giving our 10-year-old Subaru to the kids rather than trading it in. It’s still a great car and only has 100K miles on it. Never gave us any trouble.

PS we don’t buy extended warranties. We “self-insure.” If you don’t buy a lemon you don’t need the extended warranty, and if you unfortunately buy a dud you are protected by “lemon laws.”

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The service/maintenance add-ons are almost always money losers for the consumer. Free lifetime oil changes? OK, only if you are below 15% on your car’s computer and you happen to be in the area.

I still do not understand the benefit of buying a 2-3 year old used car from a dealer. Sometimes it is “certified” and comes with an extended warranty. But in our experience, the cost savings from a new car was minimal – maybe 10% less (so $3000 on a 30k car). BUT, you will always have a car 2-3 years older, so assume it will always be worth less when you sell it as well. So I don’t see a huge advantage of slightly used over new.

I think I mentioned this elsewhere, but don’t remember where, so apologies if a repeat.

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When we have traded in cars, we did it mainly as a way to get rid of a car without the hassle of trying to sell it ourselves. By the time we get rid of a car, it doesn’t have much value left anyway, so we use the dealer to dispose of it.

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@kjofkw my present car was purchased off a lease. It was 3 yr old and had 42K miles. We paid 19K when comparable new ones sold for 30K. So we got much more than a 10% off. 7 yr later I still have the car, 110K miles, and I owe it free and clear. We got the remainder of the new car warranty, which I think was 6 yr 60K miles.

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When we bought a certified used Ford Escape it came off a business lease so was hardly used and was the Titanium model giving us all the bells and whistles. A comparable model was over 10K more though we could have gotten the basic model for a similar price. We’ve learned we like bells and whistles. We still own the vehicle. H uses it daily. It’s a 2014.

The last one we bought - also a Ford Escape Titanium was new though (2019). It came at 0% interest, but I did the math on the cash price and found it was roughly 1% difference. I can invest and make more than 1%, so we took the 0%.

For that one we treated ourselves to a new touring vehicle the summer my mom and H’s mom both passed away within 6 weeks of each other - with a wedding for our youngest tucked in there. We didn’t want to take time to shop and the “ideal” vehicle we could have ordered was right there on our favorite lot - color (blue), towing package, and all. We named it after our moms.

We buy what seems right at the time TBH.

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Get ready to pay more for less…

https://www.seattletimes.com/business/chip-shortage-forces-carmakers-to-leave-out-some-high-end-features/

Interesting article about EV’s and temperature

Check out this article from USA TODAY:

‘Temperature can have up to a 40% effect on range’: Ford Mustang Mach-E’s estimated range was driving owner nuts

https://www.usatoday.com/story/money/cars/2021/05/09/ford-mustang-driving-range-battery-pre-conditioning/5015932001/

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Did a double take when I saw a mustang mach-e the other day in a parking lot. Such a cool car! but yikes on the battery situation in extreme climates.

Not much different from cell phone battery life - in extreme cold you don’t get the hours you do in temperate weather.

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Except that it’s easier to keep your cell phone warm than a car.

Yes if my cell phone is out in the cold, it will drain the battery. But if I keep it in a pocket close to my body, my body temperature will keep my phone warm. Which is what I do when I’m skiing.

As the linked web page states, much of the range reduction in cold weather is due to running the cabin heater. Heated seats consume much less energy.

@kiddie is correct that the current batteries don’t last as long in colder weather. It’s a limitation due to the chemistry of the current battery technology. Chemical reactions just aren’t as efficient and complete at lower temperatures.