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    While there are many benefits to buying a brand new car, it may not be the most financially sound option (Faris ♌, Flickr).

    by: Bengt Halvorson | AOL Autos
     

    There's something special -- and tempting -- about getting a brand new car. No one else has played street-racer, forced the glove box shut, spilled soda in the cup holders, or left paw prints on the leather. And for a while, you'll look like you've really arrived.

    Just understand that even before the new car smell fades and all the little nubs wear off the tires, the value of your vehicle will plunge off a cliff. If you have to part with it early, you'll be dealing with some harsh realities that can leave you underwater in a big way. Unless you’ve bought an exceptionally in-demand model, a new vehicle typically loses about 20 percent of its original value as soon as you take delivery.

    "The big cost is that hit the minute you drive off the lot," said Consumer Reports automotive test engineer Jake Fisher.

    Dropping Like A Stone

    This plunge, called depreciation, doesn't stop after bringing the car home, either. Cars routinely lose a third or more of their original value over the first year of ownership.

    For instance, Vincentric, a firm that calculates vehicle ownership costs, anticipates that a 2010 Chevrolet Malibu LS sedan will lose more than 40 percent of its value in the first year. That’s more than $7,600! Over five years, that number jumps to $12,600. Compare this to buying a used 2008 Malibu, if you will. While the new Malibu carries an MSRP of $21,825, Vincentric estimates that it would sell at a market price that’s closer to $18,100. The used model is only about $12,400, and it will lose just $2,600 in its first year, and $8,000 over five years.

    However, there are other ownership costs to take into account. Vincentric predicts that repairs and maintenance together (including tires, brakes, oil changes, and everything but gas), will be about $2,900 for the 2010 Malibu over five years, but about $5,900 for the 2008 Malibu over that same period. The company has some other costs they add to their calculations, as well. But when they do all the math, the overall operating costs of the new 2010 Malibu in just its first year, amounts to more than the sales price of the used 2008 Malibu. Sure, the repairs and maintenance went up for the used car, but not enough to offset the tremendous depreciation.

    “It’s very difficult to make a financial case for a new car,” said Vincentric president David Wurster.

    Paying The Price For Luxury

    Luxury makes are particularly hard hit by depreciation. For instance, the 2010 Mercedes-Benz S600 is expected to lose about $55,000 in value from its $150,000 sticker price in the first year. It will continue to depreciate over $40,000 more in the following four years.

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    Think of this as the cost of owning the vehicle in its most appealing, attention-getting years. Does it mean that much to you? If you're almost as happy to be seen in a nearly new vehicle as a new one (and honestly, who else is going to tell the difference with a Malibu?), Consumer Reports says that the best values are two- or three-year old models, as they're past the steepest part of the depreciation curve, yet have some of the latest safety features and a lot of service life left.

    Making this an even better play is that late-model used cars (up to even five-year-old ones) are more reliable than ever. Consumer Reports found this year that today's five-year-old vehicles have about one-third fewer problems than five-year-old vehicles did in 2005. Three-quarters of three-year-old vehicles have no problems over the course of a year, while two-thirds of five-year-old vehicles have no problems.

    Vehicles do typically need some major repairs by their seventh or eighth year, so the ownership expenses go up somewhat. But even on a 15-year-old car with 200,000 miles, what you would spend annually is likely a fraction of that first-year depreciation, said Fisher.

    But who wants to drive around in an old beater? To a lot of people, it doesn't matter that the numbers don't make sense. That said, some vehicles make more sense new than others and if you are one of those practical shoppers you should still run the numbers.

    For instance, the Toyota Tacoma, known for its strong resale value, suffers about $5,600 of depreciation in its first year, from a $19,205 sticker price (and a $18,200 market price). Allow $2,500 for repairs and maintenance in five years for the new 2010 Tacoma, versus nearly $5,700 over five years for a used 2008 Tacoma that costs roughly $14,000. This lower number for repairs and maintenance actually helps bring the total cost of ownership for the new Tacoma right in line with the used 2008 model, when you calculate it over five years: about $35,200 to $35,000, according to Vincentric. In this case, it certainly makes sense to start with the new one.

    New Car Peace Of Mind? Maybe Not

    The other advantage of buying new is, of course, that you'll get a full factory warranty and probably won't end up stranded by the side of the road. Vehicles become more likely to have major issues in their seventh or eighth years, typically, but a five-year-old vehicle isn't that much more likely to have a serious breakdown than a one- or three-year-old vehicle. Overall though, you're unlikely to take advantage of the roadside assistance that comes with most new cars, for anything but a flat.

    Find your vehicle's Kelly Blue Book value

    "If you really want to optimize your value, look at a late-model used car," says Fisher, like a one- or two-year-old vehicle with 25,000 miles. Many might mistake the vehicle for being new, while you won't lose thousands to depreciation.

    Concerns about safety are another top reason to want a new car. But if you're looking at the least expensive new cars, you might be safer in a late-model used car.

    “You can’t say that a 2008 will have more safety features than a 2007," said Mike Calkins, manager of the AAA approved auto repair program. "But manufacturers have realized that safety sells."

    If you’ve been considering smaller cars because of price, but you’re especially concerned about safety, you might want to consider a late-model midsize sedan. “People tend to think about features, but the size and weight of a vehicle is important, too,” said Insurance Institute for Highway Safety (IIHS) spokesman Russ Rader.

    Electronic stability control, a lifesaving, must-have safety feature, can be tough to find in an inexpensive small car from just a few years ago, Rader said, as are side airbags in some models, so "if a small car is what you want to buy, it would then be crucial to get a new vehicle."

    Beware Finance “Deals”

    The other tempting thing about new cars is that automakers often make them easier to buy. Attractive new-car financing, often available only on new vehicles through the automakers own finance arms, can sometimes offer low payments and zero-percent financing options that you wouldn’t be able to get on a used car. But again you'll want to run the numbers, as these offers are typically offered in lieu of other money-back incentives, leaving you paying close to full price in the end.

    Calkins agrees that certified pre-owned (CPO) programs, which put late-model used cars through a stringent automaker-supervised inspection, present great alternatives to new cars as you’re “getting more than just the standard warranty, and you do have an added assurance of quality.”

    One final aspect to consider is insurance. Be sure to call your insurance company and get a quote for any vehicle you're considering. In a vehicle’s first few years, as long as its financed, you'll need to have the vehicle fully covered. For most vehicles, given the same driver, insurance doesn't cost much less for a five-year-old vehicle than it does a new one.

    Conclusion

    While this is a lot of dizzying numbers and factors to weigh, the bottom line is that it almost never works out in favor of buying new. But whether a new car is really worth it depends as much on you, what you need, what you want, and what you can afford. "The purchase of a vehicle is far different than buying a toaster," remarked Calkins.

    Of course, to salespeople, realtors, and others whose success depends on image, being seen as a trendsetter can make buying new worth it. Otherwise, if you really dig that new-car smell, be prepared to pay. You might be better off getting one of many new-car-smell air fresheners and taking a few deep whiffs.

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    Discuss
    1 - 20 of 121 Comments
    arvig May 13, 2010 4:52 AM
    steshark posted this: "This article is a farse. It is written at the request of the auto industry that are now saddled with all those used cars from the cash for clunkers program" My reply: Actually, if a car was taken in as a "Cash for Clunkers" trade in, the engine was destroyed via pouring some silicate mix down into the cylinders via the same opening where one pours in the engine oil. After that was destroyed, the rest of the car could be sold for scrap. But NONE of the Cash for Clunker trade ins were kept, in fact the whole idea since in theory every Cash for Clunker car had a lower MPG then the new car being traded for was to get it OFF of the road. To let it be then sold would completly defeat one of the two reasons for the program.
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    sgentilejr May 10, 2010 2:01 AM
    Buying a brand new cars pays___IF____you are a good responsible driver who is going to maintain the vehicle ON SCHEDULE and make it last. If you are "Crash Gordan" it don't matter what you buy since you crash them all anyway and none of them last you long. My purchased new 1982 Dodge Ramcharger 318 cu. in V8 2-wheel drive new in 1982 when Chrysler was on the ropes and got a federal loan guarantee. The List price was over $12,000 and the discounts and rebates because Chrysler was in trouble at that time brought the price way down to $7,800 with sales tax to own it.. It now has 497,000 miles on the original engine and transmission, without either of them ever being rebuilt. IF you maintain them they last and if you drive responsibly. That is what happens when you change the oil 166 times during 497,000 miles (28 years) and change the tranny fluid at least 9 times. Rattles like hell but runs like a top. You can drive responsibly and maintain them and save a fortune or you can drive carelessly and spend you life paying for cars and fines. It's YOUR choice. When new it got 22mpg at a steady 55 to 60MPH. Now it still gets in excess of 20MPG after all of these years at a steady 55 to 60MPH and that is with no computer, no fancy electronics and just the original 2 BBL carb.
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    sellgen2003a May 07, 2010 5:08 PM
    In looking at that long article, I thought I would summarize what I spent on cars through the last 40 yrs: 1. Used VW Bug - drove 3 months at a car cost of $300 2. 1 yr old Chevy Chevelle - drove three years for approx. car cost of $1,000 3. New Chevy Chevette - drove three years for total car cost of $100 4. Several year old Cutlass - drove three years for car cost of -0- 5. New Buick Regal - drove eight years for car cost of $8,000 6. Four-month-old Nissan Maxima - drove eleven years for $18,000 7. Four-year-old Nissan Maxima - drove five years for $10,000, before giving to daughter 8. New Daimler-Chrysler 300 - pd $25,000 and plan to drive for twenty years. If I'm able to achieve that goal, then I'll have a total car cost of 62,400 for 60 years. Just over $1,000/yr. Probably around $40,400 for the first 40 years, if I count $1,000/year for the first three years with the Chrysler 300.
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    sellgen2003a May 07, 2010 4:46 PM
    Back in 1970, my first fulltime job at a bank paid $350.00/month. Had a lot of fun and bought my first car, a pale aqua 1966 Volkswagen "Bug" for $600. It was the most fun car I've ever driven and I had a ball in it for three months, until a valve blew a hole in a gasket! Sold it to someone who fixed up VWs for $300. In 1971, my older brother wanted to buy a new Datsun 280Z, and I agreed to buy his 1970 Chevy Chevelle for $3,000. Fabulous car! I wish I still had it. Royal blue w/white racing stripes, the Chevy emblem in the rear window and the best acoustics of any car I've ever had! He had installed one of those eight-track players that slid out and hid under the seat when the car was parked. All the great music from the 60's! It was a guy magnet and a joy to drive! My fiance ordered me to sell it three years later. Should have kept the car and dumped him! The boy who bought it was overjoyed, and I was embarrassed to be seen in fiance's banana yellow and black 1970 Camaro! In 1977, I bought a little stickshift Chevy Chevette for $4,000 and loved it until a big pickup crossed the line and hit me head-on, Jan 4, 1980. I survived w/crushed wrist and several surgeries only because I was wearing my seatbelt! Insurance company gave me $3,900 because it was low mileage, and I bought my older brother's Cutlass, silver w/red interior and T-tops for $4,0000. Hated that red interior! When I became p.g. four years later, I traded in the Cutlass on an elegant 1983 Buick Regal that cost $13,000, and I received a $4,000 trade-in for the Cutlass. The Regal safely carried my daughter in her various carseats for eight years,until I traded for a beautiful 1990 Nissan Maxima w/leather which some wealthy man had bought and driven for four months/4,000 miles and traded for another new car. I paid $20,000 and rec'd a $5,000 trade-in on the Regal, which had 80,000 miles and looked like new. Drove the Maxima for 11 years/196,000 miles and sold it in 2001 for $2,000 to a used car dealer, buying a three year old, 69,000 mile Maxima w/cloth seats for $10,000. It was valued at $6,000 in 2006, when I fixed it up and installed new tires and a new cd player/speakers and gave it to my daughter in college. It had 125,000 miles, so I knew she had years of miles left. I bought a 2006 Chrysler 300 that had been driven by the dealership manager. It listed at around $30,000, but because he had put 3,000 miles on it, I got a discount, plus $1,500 in rebates and wound up at around $25,000. Wonderful car, which I'll probably drive for 20 years or more. It has 32,000 miles in 3.5 yrs. It was designed by Rolls Royce, who never built it. Daimler Chrysler bought the plans and put the RR designed interior and exterior on an E Class Mercedes chassis/engine/everything else, per a Chrysler employee in the know. Drives like a dream and is the prettiest car on the road since some of the classic, 1930-40 luxury cars. As I've always done with my cars, I park in the back 40 when I go anywhere to protect it from obnoxious people who don't mind dinging other's doors. The dealership called, wanting me to trade cars, as their used car inventory was low. Out of curiousity, I allowed them to check over my leather-interior 300 that has been treated with TLC and looks brand-new. They offered $12,000, and I laughed at them. Of course, they had a cloth-interior, year-old 300 for which they wanted nearly $30,000! My favorite salesman told me privately that the majority of people trade every three years and lose at least half of what they paid for the car, each time. He said that's why this country is in trouble, and I agree. And, the dealers are making a fortune off our used cars when they resell them. Tips I've learned: Nissans and Toyotas hold their value MUCH better than the American-made cars - that is before Toyota began having so many problems. I think Nissan is wonderful! (The only reason I bought my 300 is because I knew Daimler was building the car as a Mercedes, combined with its beauty.) Before I bought the 300, I drove my ten-year-old Nissan Maxima to several other dealerships to look around. Salesmen came out of the woodwork asking if I wanted to trade in my Maxima, to which I explained that I was giving it to my daughter. I asked why they wanted it so badly, and the response was always that they had a huge demand for Nissans/Toyotas in the $5,000-6,000 range. I'm sure it is because of their dependability and the fact that it is easy to get a minimum of 200,000-300,000 miles from them. Lots of people wanting good, well-taken-care-of, low mileage cars for small amounts of money. If you're wanting a newer car, detail your car and put it on a highway with a big sign. You'll get the profit that some car dealer would get from it. I got lucky because I knew that my older brother took excellent care of his cars. Also, the wealthy man who brought new cars every four months had obviously taken care of my first Maxima, which was corroborated by the dealership. My second Maxima was a gamble, but I called the previous owner who lived locally and asked about any problems. I was very lucky, but friends who have bought cars from little ladies/older people who took good care of them have also had good luck.
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    arthurkahl May 05, 2010 6:54 AM
    Years ago I used to buy a one year old car because of the depreciation but they all had some problem that was apparent after driving them for a while. Then I knew why they sold it. Then I got a GM card and I got a 5% rebate back on a new car. The new car off the lot became cheaper than a used car with low mileage and that unforeseen problem. Time goes by so fast and mileage adds up quickly. A new car has the new car warranty and no dents or scratches. It doesn't pay to buy used especially if you keep it for 14 years like I do. Buy a new 1 year old overstock and keep it for a long time is your best bet.
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    simzillyjp May 05, 2010 6:03 AM
    Twelve grand for a used car? I doubt it. Go to any car lot in Southern NJ. & you'll see that used cars are priced as high as new cars. I had a someone tell me it's easier to finance a new car. You'll never get a used car for so cheap unless it's been damaged real bad.
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    watson9f May 05, 2010 1:42 AM
    the REAL cost of a new car: list price plus dealer installed options plus insurance plus repairs when warranty runs out. vehicles built since 2000 model year are increasingly loaded with electronic junk that adds NOTHING to re-sale value or insurance value. the cost of repair alone for these is staggering by itself, but could cost your life due to the distractions they cause and do it yourself tinkerers, and don't forget the new drive-by-wire godzilla fron toyauto.
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    afr1216 May 05, 2010 1:22 AM
    Bought a 91 Lotus Esprit Turbo in 2001. Paid 28k. Sold it in 2003 for $27,500. Try that with any other car. Porsche - Corvette. Never happen.
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    gquarn May 05, 2010 1:12 AM
    The best deal is lease returned auto's. There usually well kept and serviced regularly This is from me who spent 30 years as a car salesperson. GQ.
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    xpriori May 05, 2010 12:45 AM
    100 K Warranty is cool and along with depreciation it makes a new car a suckers delight !
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    steshark May 05, 2010 12:31 AM
    This article is a farse. It is written at the request of the auto industry that are now saddled with all those used cars from the cash for clunkers program. Most used cars just don't last. the writer is just a cheap prostitute selling bad information.
    Report This
    babydollthumper May 05, 2010 12:13 AM
    I've always wanted a new car. Mine have always been slightly used. I know they depreciate and all that, *********** would be nice!
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    vlady1000 May 04, 2010 11:49 PM
    If it is an expensive car and under normal market conditions, I buy used. But they did not take into account the huge rebates, loayality reabtes, GM Credit Card points. Clunker, etc, etc delas that you can get on a new car/truck at times (especially last Fall). I have bought 3 new inexpensive cars in the last 12 months. A Saturn for $11,800 (MSRP $20,600), a Vibe for $12,300 (MSPR $19,600) and a Silverado for $17,300 (MSRB $24,000) and throw in a deuction for sales tax too on your tax return. All these were less than the typical 1-2 year old used car of the same model. Those days may be some what over, but it can happen!!
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    legodaddy57 May 04, 2010 11:47 PM
    Buy what you want as long as you can afford it. You only LIVE once, and if you have the money to enjoy what you like, then buy it, be happy, have fun, that's what life should be about. So what if they sent the wolves out after you to buy the bigger more expensive model with low interest and payments for 7 years, more than likely you're going to take care of it and enjoy it for 7 - 10 years so you might as well try to negotiate for the lowest payments possible over the longest stretch of time....if you can afford to make the payments just do it and have fun driving your new ride. That's what I've always believed, nobody gets of of life alive, and you can't take all your money with you to the grave. Enjoy what YOU like doing as much as possible the hell with what everyone else thinks or says.
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    purplesatinpjs3 May 04, 2010 10:55 PM
    We have some know-it-all posters here.
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    bdunitagain May 04, 2010 10:44 PM
    I've had used vehicles, that go down as legends, and new vehicles, that I compare to the Titanic. In 1996, I purchased a very used Chevy Silverado. Aside from not taking the gas gauge seriously, I had no real problems with it . In 2004 I sold it to someone else. I couldn't find the paperwork on it, so I wrote down the mileage, as seen on the odometer. Later, I found the paperwork, and when I ran into him at a party, I said, I have to tell you, I think the chevy might have way more mieage on it than I thought. Don't bother he said, the Chevy has now got 260,000 milses on it, what's a few more? This was 4 years later. What I had discovered, it had 100,000 more miles than I thought. He had, by this time, put a lot of bodywork into it. The only reason he stopped driving ******** a 454 engine, and it whines when it sees a gas station. When my husbands (purchased brand new) F350 Super Duty , started showing signs of age after 5 years, I told him to be on the lookout for a cheap used replacement to tide us over. We ended up with a 2002 Chevy Silverado, about to be wholesaled. He brought it home, overnight trip. We had a mechanic go through it, tell us what it needed, asked for that to be done by the dealer, at same sale price. Aside from having to replace the power window assembies, after bad weather , and forgetting not to force the issue, no problem. If anyone out the has a Chevy truck, however, I would suggest that you take the check engine light seriously. There is a very good system on Chevy, it analyzes not only the engine specifics, but how the vehicle is driven. 50.00 now can mean not paying 1000.00 later.
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    wwilderson May 04, 2010 10:35 PM
    I've done both, and agree - it depends. I've bought used cars with a clean Carfax, that later showed clear signs of flood immersion. I've bought a new PU that had lots of problems in the first year, but 33 years and 100s of k miles later is still going strong. In many states license plates and insurance strongly favor older vehicles. I pay $10 on the pickup for plates, 50 times as much for a nearly new vehicle. It is true that many cars are on the used market because someone is tired of their problems. If you know your stuff and do your own work this can lead to great deals. I got an SUV for thousands under market (non-working auto door locks, non-working power mirrors, broken rear hatch latch etc). About $250 in parts and a few hours work and it is like new.
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    bobecm May 04, 2010 10:24 PM
    Irobertson: They don't call them Bowel Movement Works cars for nothing!! Worn out at 150,000? That's nothing on my old Fords and Chevys.
    Report This
    clyek May 04, 2010 10:12 PM
    If you think you can afford a 50 percent depreciation off the 'window price' in the first year of ownership,, then get after it.
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    garryo May 04, 2010 9:56 PM
    My 12 year old Toyota has over 300,000 miles on it. Since it has been well maintained since day one, my repair bills have been small, few and far between. If your new car loses most of its value as soon as you drive it off the lot, then don't sell it! Drive it untill the wheels fall off.
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    While the shine and smell are tempting traits of a brand new car, is it really worth it to buy new over used?
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