Cheap financing close to 0%, and long term contracts. In fact, financing on new vehicles is far far better than financing a used vehicle. Why would anyone vinance a used vehicle? Because even used they cost more money then most have in their bank.
Used cars require repairs, meaning they require a place to do these repairs or extra income to cover a mechanic. Also how does one recover from vehicle related downtime in a car centric society? These things should be priced in.
So, how much money does one need to get into a used vehicle and how much safety net do they require? Mind you, during covid car market flipped on its head, new cars were (and still are) 3-6-12-24 months wait, and used car market saw a massive increase in prices.
> It really is true today that buying a trusted used car is WAY easier than buying a new car.
Could you elaborate on this? Is this a recent development?
I bought a new car in November 2020 and while I certainly don’t _love_ the dealership experience and I’m probably less uncomfortable with financial negations than your average person, it didn’t strike me as a particularly painful experience.
> Okay, so what about used cars? The average used car price in the U.S. is now over $28K (KBB). That's more than I've ever paid for any new car I've ever bought!
That's more than I've spent on buying, taxing, insuring, MOTing, and repairing every car I have owned since I passed my driving test nearly 30 years ago.
We live in an age of ubiquitous information. It has never been easier to learn how to repair things. Why would you pay more than most new cars cost, when you could pick up some shiter for a few hundred, run it until it breaks, and then figure out how to repair it from a couple of youtube videos?
> you are smart enough to know that you don't borrow to purchase a depreciating asset. If you don't have the cash to buy a new car, buy used.
This is nonsense. If you can borrow money for less than you can earn, you should borrow. I know people who, buying a new car, had saved cash to do so. But they got 0% financing. So even sticking that money in a CD made them more cash.
What you mean to say is "if you do not realize that you are paying a lot of money for the use of a new car, not for an asset"
> The average monthly payment for a used car is $500/mo, and $700/mo for a new car
Average isn't a very interesting number here. I know a guy with a $15K/month car payment, I'm sure people like him push the average up.
If you're trying to save money, don't go for average. Buy a cheap used car, ideally in cash, and your operating costs will be minimal.
The sky is the limit how much you can spend on a car if you wanted to splurge(waste), but you can also a fully functional car for very cheap if you care to save money.
Because new cars are nice, and people are bad at time value of money? Also I think it's partially a cultural thing, very few of my friends and family buy brand new cars but I know some people would never even consider a second-hand vehicle.
> It's almost as bad as cheating on your wife (and far, far worse than cheating on a gf).
What a curious point for comparison! Although I get your point if you just mean purely financially.
> Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive.
They do think about this, which is why the second-hand market for cars is so healthy.
To be accurate, you should restrict your assertion to those people who only buy brand new cars, which is necessarily a far small population of people who buy second-hand.
There are more people who think about this (they buy second-hand) than people who don't.
>1. Buy a $5000 car up-front, which is an expensive up-front cost for me (and more than most people my age have in savings). If I've been careful in investigating the car, it will work most of the time and only cost me $500/year in repairs.
Is this accurate for the US? I live in an expensive European country and a used car around that price would cost next to nothing in annual repairs, unless you really drove it a lot. Do you need to pay $5k up front? It's common here to take loans for used cars.
> Is it just people wanting new cars less, or less new cars being available?
Both. New cars are very expensive and most people can't afford them. The used car market is nearly 3x the size of the new car market (in cars sold, not $).
Also, as cars have become more reliable many who would otherwise buy new are buying lightly used
off-lease cars (i.e. certified pre-owned). Many people understand the instant depreciation hit that comes with a new car, and want to avoid it.
Add to all that there is currently a supply chain issue for critical parts needed for new cars.
> Reality is that no one owns a car for 200k miles anymore.
Do you have statistics on that?
I purchased my previous car (a Dodge) when it had 8k miles and had it as my primary car until 240k miles. It only started to have serious maintenance issues at 220k miles. I not only paid it off, but saved enough money to be able to pay for a new car in full. I would recommend to anyone, as it is really nice to not have a car payment.
> is having a car really so essential to holding down a job and accessing services in most of America (etc.) that taking out a loan to acquire a car becomes a necessary evil?
US public transit is really bad outside of major urban areas. In the (medium-sized) city I live in, the only public transit is an unreliable bus service that only covers a few areas of the city with really limited routes. We don't really have taxis, either, and there's enough sprawl that you can't bike to places easily, so your options are to either use uber/lyft for everything and hope you can get a ride reliably, or buy your own car.
Median household income in the US is only around $60k/year [1], which makes it pretty difficult to afford a car without some form of loan. If you save up pretty far in advance, and buy a cheaper used car, it's probably doable, but most people don't want to do that (and if everyone tried to do that, used car prices would likely go up to almost the price of a new car anyway).
>So many people will be underwater on their car loans.
Can you clarify what you mean? A car is a rapidly depreciating asset; being underwater is the norm. It's only been during the pandemic that used vehicle prices have outstripped loan values.
Cheap financing close to 0%, and long term contracts. In fact, financing on new vehicles is far far better than financing a used vehicle. Why would anyone vinance a used vehicle? Because even used they cost more money then most have in their bank.
Used cars require repairs, meaning they require a place to do these repairs or extra income to cover a mechanic. Also how does one recover from vehicle related downtime in a car centric society? These things should be priced in.
So, how much money does one need to get into a used vehicle and how much safety net do they require? Mind you, during covid car market flipped on its head, new cars were (and still are) 3-6-12-24 months wait, and used car market saw a massive increase in prices.
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