The Value In a Used Car
“At some point, you just gotta let it go.” He stared me right in the face as he said it with a slight grin and a look in his eyes hat said, “you really want to continue driving that piece of junk, really?” He was talking about my car, my used car!
I looked out the window and there it sat looking just beautiful. Not a dent, barely a scratch. My car drives like a dream, has excellent acceleration ( although I use that acceleration responsibly and only in emergencies). It even gets about a thousand kilometers per tank when driving across Canada. The interior is flawless and everything works. Everything except a small rattle that they cant figure out.
And for that, “I gotta let it go? Really?” After staring at him in disbelief for what felt like five minutes, a technician interrupted to explain the work to be done on my car and how long it would take: $800.00 and only a few days.
As I finished the paperwork I caught the reflection of the beautiful new XC90 that was in the showroom right behind me and my wife was already exploring it. It was amazing and the safety technology that this car has in it will amaze anyone. In fact, the company says that they aim to have zero fatalities in their cars by year 2020 and are well on their way to that goal now with the cars they already have on the road.
Leaving there I was convinced that I was buying that new car and even if it was 80,000, I was going to get that car. But of course after the excitement wore off and the new leather smell left my nostrils, my wife reminded me that it would be crazy talk to discuss buying any new car. After all, did we not buy this car used and has lasted us almost 10 years. In fact, if they actually fix the issue once an for all, it would last another 300,000 km at least.
There is the story of the man who drove his Volvo P1800 for 3 million miles. The 3 minute video can be seen here. Surely, my car that is in such amazing shape can last another 300,000 km.
Ten years ago I bought my beautiful Volvo S60 on a used car lot in Toronto for 12,000. It had 77,000 km on it when I drove it off the lot. After about 4 years it started to have an annual issue with the rattle that they can’t seem to fix and that cost me on average about 500.00 per year.
Am I bias in favor of used cars? Are used cars really worth it in the long run. Some people I ask say yes, of course and others say no.
Edmunds.com indicates that one minute after you drive your new car off the lot, it’s value is 91% of what you paid for it. After a year, it depreciates an additional 20% and after 5 years your car is worth about 37% of what you paid. In some cases, getting that amount is not guaranteed.
I picked six vehicles to do a new/used comparison. I got as close as I could to the exact same vehicles, but in newer cars there are technologies that are not obvious when building a vehicle online.
There are other factors to consider when deciding between new or used vehicles other than price. Here are just three:
- Reliability. I call it the range anxiety. How far will this used car take me before it gets too expensive to fix, or it just dies. This is a real thing. I have heard horror stories where used car buyers regretted their purchase. There are some vehicles that are known to have severe issues the older they get. In fact, Consumer Report has a list of used vehicles to avoid. However, Consumer Report also has a list of 10 New Vehicles that are unreliable.
- Sexiness. Ok, this is a matter of taste, for sure. But the general thought is that new versions of a vehicle are more attractive and better styled than older versions. Now that may be true with cars like the Ford Fiesta (which I truly loved back in the 80’s) and the new sexier version, It is not true for all cars. For instance, the Volvo S60 was really something with the classy-sporty design around 2004-2006. I believe that if they left that style alone, just updating the headlights, without changing the cars profile of front style, it would be a hit.
- Toys. Yes, new cars have more toys and features. USB connections, bluetooth, heated or cooled cup holders, rear cameras, blindspot detection, more comfortable seating, hybrid electric-gasoline fueled. In many cases, entering a new vehicle can be filled with wonder.
But overall, where is the true value? Are the days gone where a person would keep their car until it died? Are we now expected to forever pay for a vehicle, going from one financing arrangement to another; from one new vehicle to another?
“The benefit of purchasing a used vehicle is that it holds its value longer. the 15 to 20% loss in value when driving a new vehicle off the lot is not realized when driving a used vehicle off the lot.” Trevor Snell, MiAgency.ca in Hamilton.
My humble opinion, when considering the saving on insurance, past used car vs new car experience and immediate saving on vehicle cost, used cars make sense the most.
Thank you to my vehicle sources linked below. Although at these prices, the vehicles listed in this ad may be gone by the time you read this article, however I encourage you to investigate for yourself. Visit the car lots in this article or in your neighborhood and compare. For me, I will definitely get that sexy XC90 because it is just that awesome. Yes, it will be mine. Just not today, maybe used in 5 or so years.