How Much Is That New Car Smell Worth
Free Money Finance just posted that he buys new cars, which really surprised me. They just depreciate so fast, that you couldn’t help but end up owing more than the car is worth. I can’t imagine I’d every want to buy a new car.
A few months ago, my family was shopping for a minivan and I did quite a bit of research. I started out by getting a general idea of what model we were looking for. Consumer Reports was a primary source of information, followed by user reviews on MSN Auto. After lots of looking, we decided that we were comfortable with a Honda Odyssey or Toyota Sienna. These new vehicles started at $25-40k+ depending on features.
The average price for used vehicles generally followed these prices:
2 years old: $16-20k
3 years old: $14-16k
4 years old: $12-14k
5 years old: $10-12k
6 years old: $8k
8 years < $4k
That means, on average, these vans decreased in value about $8k in the first 2 years, then about 2k/year after that until they hit about 6 years old. Keep in mind that that first $8k in two years is equivalent to about $350/month or about $80/week. Or roughly the equivalent of throwing a $20 bill out the window of your car each day you drove to work for two years.
We ended up getting a Honda Odyssey that was about 6 years old for around $7400. We worked it out so that it was $8k after all of the fees and taxes. The vehicle is in pretty nice shape, and has (relatively) low mileage. I’m much more comfortable with a car that depreciates at $100/month and that we are planning on driving for 5+ years still.
