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Originally Posted by Isaac Zachary
I take it that the econobox has never really existed. The average weekly wage has gone up some 15% since the 1980's until July of 2023. A lot of new cars, such as a new Corolla, are cheaper now than back then, but still not exactly within the price range of a median individual wage of around $40,000 per year.
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New cars have never been for the median household. If you look at the average income of a new car buyer they have been much higher than the median household income for decades. The "American Dream" of the middle class worker with a house and 2 shiny new cars in the driveway has always been a lie. For too many people put themselves into massive debt chasing that dream.
As Redpoint said multiple times, cars are depreciating assets that one should spend as little as possible buying and using. Used cars are a far better value than new cars. Unlike Redpoint I actually have bought new vehicles but that was more than 2 decades ago when I was making stupid financial decisions and living beyond my means. (That was also before I read Rich Dad Poor Dad or the Millionaire Next Door) Today I could easily afford to buy new cars but I still have the mentality of looking at a car as seeing XX hours of work. I look at a car and say: Option A is 1,000 hours of work. Option B is 500 hours of work. If I invest the money saved by buying a used car I can retire YY years earlier.
The younger the person the bigger the impact. I've mentored about 2 dozen newly graduated engineers in my 25 year career. Every one of them wants to take that first paycheck and buy an expensive car. I show them the math that the money saved and invested today is worth a bit more than 3 years of their base salary 35 years from now. I ask if driving a nicer car today is worth working 3 more years when they are in their 60's. Of course they say something stupid like "You have to live for today" or "I can't even think of living life at 60". Only 1 new engineer I've mentored fully funded their 401K instead of buying a new car.
When I was 15 - 25 I thought I wanted to drive a Porsche. Now that I could drive one I would much rather spend a couple extra decades retired instead of working so I can drive a Porsche - to work.
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Originally Posted by Bicycle Bob
It was GM that really "discovered" the used car. They didn't want to compete with the Model "T" on price, so they started taking trade-ins, and turning another profit by offering those, which were still more desirable in many ways. Thus, we have always had to make do with what someone wanted to make an impression with. The last major attempt I've heard of to offer minimal motoring was the Tata Nano, but that new-car smell just wasn't enough.
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That lesson has been carried forward - especially by German luxury brands. BMW and Mercedes do not like to offer large discounts on their cars. Instead they offer slightly discounted leases, get the car back in 2-3 years, and then sell it again as "certified preowned" with a very profitable warranty.
Quote:
Originally Posted by Isaac Zachary
But if the calculations of Edmunds are anything to go by, a brand new Corolla hybrid might be cheaper in the long run.  |
A new hybrid is cheaper than a new Versa because fuel costs and maintenance costs are significantly less. However a 3-5 year old hybrid will be significantly cheaper than a new hybrid. Personally I think the sweet spot is to buy a car when it is 3 - 5 years old and sell it at 10 - 12 years old. It is old enough when purchased to have lost 30 - 40% of the original value but new enough at 10 - 12 years old that it should not require any major repairs. Let someone else pay ten thousand or more extra for the new car smell and have the car nickel and dime them with things breaking all the time.
Quote:
Originally Posted by Isaac Zachary
Another question that runs through my head is, do I sell the Avalon now while it's still worth over $10k, or do I wait 3 years later when it has 200k on it, and pop in a $5k hybrid battery when that dies and keep going in a 14-year-old car with over 200k on it?
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Normally I would say sell it and buy something newer but the market today is not a normal market. As Redpoint said, the consequence of lost pandemic auto production is that there are millions fewer cars on the road than there should be. That massively pushed up car prices. People that were working but couldn't spend money on dinners out, drinks with friends, travel, and other services chose to spend money on things like cars and houses. More money chasing limited supply drives up prices. Classic supply and demand economics.
New car prices have basically recovered. Cars are on the lot, people are no longer paying thousands over MSRP, and manufacturer incentives are back. However, used car prices have not returned to normal yet - at least not for cars that are 3 - 5 years old. There is still a shortage of slightly used cars so their prices are still high. A 5 year old car might still be selling for 25 - 30% of new instead of a more normal 45 - 50% of MSRP.
I'd say the best thing to do if you don't need a car today is to continue to wait for the market to stabilize.