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New Car Cheaper Than Second Hand

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Parents just got back from the Toyota garage, and apparently brand new cars are cheaper than an identical model second hand car, because of finance deals.

They are looking to enter into a deal where they put up £4200 deposit (trade in value), then pay £312 per month for two years (£7500 total) at the end of which the garage will guarantee to buy the car back for £8600 minimum. By my reckoning this works out at £1550 per year for the facility of having a car for two years that is on average one year old.

There is also a one year old second hand car (identical model) available without finance for £12,500. The dealer has told us will devalue at about £2000 per year for the first two years.

I simply don't understand how it can be £450 per year cheaper to own a brand new car verses a second hand car (identical model). As far as I can tell, the only options are

1) The devaluation estimate is way off, but this doesn't seem to be the case

2) Toyota (and I assume other manufacturers) are desperate to sell new cars, and are offering subsidies/incentives so large as to actually make new cars cheaper than second hand ones.

Are car manufacturers really still in this much trouble? Or have I just been the victim of good salesman ship?

Interested in any input from you all

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Read your original post but can say, emphatically, like I really mean this OK...

It is nonsense...there is simply no way that buying a new car rather than a used one makes financial sense..ever...end of.

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Parents just got back from the Toyota garage, and apparently brand new cars are cheaper than an identical model second hand car, because of finance deals.

They are looking to enter into a deal where they put up £4200 deposit (trade in value), then pay £312 per month for two years (£7500 total) at the end of which the garage will guarantee to buy the car back for £8600 minimum. By my reckoning this works out at £1550 per year for the facility of having a car for two years that is on average one year old.

There is also a one year old second hand car (identical model) available without finance for £12,500. The dealer has told us will devalue at about £2000 per year for the first two years.

Lets look at your examples:-

new car - £4200 + £7500 leaves you with a car that you still owe a £8600 balloon payment on. That can then be used as a deposit on another new car (which is what the guarantee buy back really means).

old car - £4200 + loan of £8300 say (£10000 in total) gives you a car that you own outright.

Note the really problem with the new car deal?

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The devil will be in the detail.

I suspect your parents have been offered a lease rather than a HP agreement.

The salesman can put a large buyback on it because he knows in 2 years time a new car will cost significantly more and this car will be a % of the next deal. Your parents will never 'own' the car simply be leasing it for two years and at the end of that if they don't do a deal they are minus their car.

May well be worth checking that out IMO.

BF

Edited by BLOW FLY

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when I bought my last car from a dealership, they lied though there back teeth. They found a car on the computer and suggested they bring it locally for us to view, for no cost, and we could walk away. When the car arrived they changed there tune and said we would have to pay £700 if we didnt want to buy the car! Don't trust anything a dealership says

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Guest Noodle

Read your original post but can say, emphatically, like I really mean this OK...

It is nonsense...there is simply no way that buying a new car rather than a used one makes financial sense..ever...end of.

Not so sure. It's a weird market right now. I've seen 2nd hand stuff that's as expensive as new. It's the same here in the East. Cars don't lose value, you're better off buying a brand new one.

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It is nonsense...there is simply no way that buying a new car rather than a used one makes financial sense..ever...end of.

If you mean in absolute price, then yes obviously you are correct, the new car is significantly more expensive than the second hand one, however in terms of the devaluation cost, this doesn't seem to be the case.

When my parents got back from the dealership I expressed an identical sentiment to them. However after looking at the offer, and prices on the internet, it does seem to be the case. According to the dealer, people like you and I have been propping up the used car market. There are some people who will never look at a new car, no matter what the deal is on offer, they are so sure that second hand must be cheaper than new that they just refuse to even consider the alternative.

I've checked and rechecked the numbers, and with the exception of dodgy number for the devaluation, then yup, a brand new toyota is really cheaper (in devaluation terms) than a second hand one.

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Not so sure. It's a weird market right now. I've seen 2nd hand stuff that's as expensive as new. It's the same here in the East. Cars don't lose value, you're better off buying a brand new one.

What are you on Noodle?..he he.

You are quite right, much better to take on finance for a new set of wheels, being as it is that they never lose value.

Edited by Flatdog

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Guest Noodle

What are you on Noodle?..he he.

You are quite right, much better to take on finance for a new set of wheels, being as it is that they never lose value.

I was looking at vans. Depends where you go, but for 2nd hand values you could almost get a new one. Seems depreciation has disappeared. Scrapage scheme and the quid I guess.

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If you mean in absolute price, then yes obviously you are correct, the new car is significantly more expensive than the second hand one, however in terms of the devaluation cost, this doesn't seem to be the case.

When my parents got back from the dealership I expressed an identical sentiment to them. However after looking at the offer, and prices on the internet, it does seem to be the case. According to the dealer, people like you and I have been propping up the used car market. There are some people who will never look at a new car, no matter what the deal is on offer, they are so sure that second hand must be cheaper than new that they just refuse to even consider the alternative.

I've checked and rechecked the numbers, and with the exception of dodgy number for the devaluation, then yup, a brand new toyota is really cheaper (in devaluation terms) than a second hand one.

...except as eek above mentions it is probably a lease....if this is the case and you are not sure it's a clear case of misselling.... :rolleyes:

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If you mean in absolute price, then yes obviously you are correct, the new car is significantly more expensive than the second hand one, however in terms of the devaluation cost, this doesn't seem to be the case.

Its really quite simple. After paying £7500 on the loan how much would they still owe on the new car (about £8600 based on the figure quoted and past experience) and how much would they still owe on the second hand car (probably £2000 or so).

Now it depends on what you want but personally I like the idea of eventually owning things outright rather than continually having to find a monthly payment.

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I was looking at vans. Depends where you go, but for 2nd hand values you could almost get a new one. Seems depreciation has disappeared. Scrapage scheme and the quid I guess.

Depreciation on motor vehicles has not disappeared, it is inevitable, one ought to look beyond the obvious.

Buy new...FINANCE.

Buy used..usually cash.

Whatever, you know all this stuff Noodle.

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new car - £4200 + £7500 leaves you with a car that you still owe a £8600 balloon payment on. That can then be used as a deposit on another new car (which is what the guarantee buy back really means).

Nope, we asked, and you can take the money anywhere else you want, it does not have to be spent on a new car with toyota.

old car - £4200 + loan of £8300 say (£10000 in total) gives you a car that you own outright.

Note the really problem with the new car deal?

What I'm talking about is the price it costs to have a car for two years, consider the following two cases:

Case 1: New car

Start with old car with trade in value of £4200

Give old car to the dealer and then join the finance scheme on new car @ £312 per month for two years (£7500 total)

At the end of the two years accept the dealers offer to buy the car back for a minimum of £8600

Finish: Paid a total (including trade in) of (4200+7500-8600=) £3100 and have no car

Case 2: Second hand car

Start with old car with trade in value of £4200

Give old car to the dealer and and buy second hand car for £12,500, less the £4200 trade in giving a balance to pay of £8300

At the end of two years sell the (3 year old car) for estimated devaluation price of £8500

Finish: Paid a total (including trade in) of (4200+8300-8500=) £4000 and have no car

Both scenarios we have a car for a two year period, both scenarios finish with us owning no car, but the new car scenario is significantly cheaper. If my calculations are incorrect I can't see where, maybe you can point it out.

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Now it depends on what you want but personally I like the idea of eventually owning things outright rather than continually having to find a monthly payment.

Eventually owning things that don't depreciate, yes. Owning things that can depreciate to zero, No!

I think the question that you need to ask is this. If you need the facility of a car, then how much does that facility cost? With the figures I'm working with, then the new car is cheaper! To me, the emotional enjoyment attached with owning verses renting a car is not worth and extra £500 per year.

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If you mean in absolute price, then yes obviously you are correct, the new car is significantly more expensive than the second hand one, however in terms of the devaluation cost, this doesn't seem to be the case.

When my parents got back from the dealership I expressed an identical sentiment to them. However after looking at the offer, and prices on the internet, it does seem to be the case. According to the dealer, people like you and I have been propping up the used car market. There are some people who will never look at a new car, no matter what the deal is on offer, they are so sure that second hand must be cheaper than new that they just refuse to even consider the alternative.

I've checked and rechecked the numbers, and with the exception of dodgy number for the devaluation, then yup, a brand new toyota is really cheaper (in devaluation terms) than a second hand one.

You present a good case which is in some ways inarguable...but just allow reality to kick in fo a mo'

We own a Toyota or two and love 'em to bits, but would never consider purchasing a new one..far too much bankster involvement.

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The chances of the second hand car devaluing by only £2000/year are very very low, unless it's already 5 years old and cost 40k+ new

Yup, I was deliberately using low numbers to make the case more strongly. How much would you estimate that a £20,000 car would depreciate in year one, two and three?

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You present a good case which is in some ways inarguable...but just allow reality to kick in fo a mo'

We own a Toyota or two and love 'em to bits, but would never consider purchasing a new one..far too much bankster involvement.

I wish we were in a financial position to be able to take such an admirable moral position. Do you also buy your petrol second hand?

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Eventually owning things that don't depreciate, yes. Owning things that can depreciate to zero, No!

I think the question that you need to ask is this. If you need the facility of a car, then how much does that facility cost? With the figures I'm working with, then the new car is cheaper! To me, the emotional enjoyment attached with owning verses renting a car is not worth and extra £500 per year.

Fair enough, emotional attachment to a set of wheels sub £500 p.a.?

On yer bike.

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You are absolutely right. Just looked at some of the small print, and the finance arrangement is based on an annual mileage of 10k, which my parents 7k is well within. However, the numbers still stack up in favour of brand new verses second hand.

So 200,000 miles on the clock and they will still buy it for £8,600 .... what's in the small print??

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I wish we were in a financial position to be able to take such an admirable moral position. Do you also buy your petrol second hand?

I really hope that one day you wish that you had not bothered to make that post.

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Guest Noodle

Depreciation on motor vehicles has not disappeared, it is inevitable, one ought to look beyond the obvious.

Buy new...FINANCE.

Buy used..usually cash.

Whatever, you know all this stuff Noodle.

I was just shocked by used prices there recently.

What happened to my sub-£1k bangers that I could get the best part of a decade out of?

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Nope, we asked, and you can take the money anywhere else you want, it does not have to be spent on a new car with toyota.

What I'm talking about is the price it costs to have a car for two years, consider the following two cases:

Case 1: New car

Start with old car with trade in value of £4200

Give old car to the dealer and then join the finance scheme on new car @ £312 per month for two years (£7500 total)

At the end of the two years accept the dealers offer to buy the car back for a minimum of £8600

Finish: Paid a total (including trade in) of (4200+7500-8600=) £3100 and have no car

Case 2: Second hand car

Start with old car with trade in value of £4200

Give old car to the dealer and and buy second hand car for £12,500, less the £4200 trade in giving a balance to pay of £8300

At the end of two years sell the (3 year old car) for estimated devaluation price of £8500

Finish: Paid a total (including trade in) of (4200+8300-8500=) £4000 and have no car

Both scenarios we have a car for a two year period, both scenarios finish with us owning no car, but the new car scenario is significantly cheaper. If my calculations are incorrect I can't see where, maybe you can point it out.

But case 1 is wrong as you won't own the car after paying £11700 for it. Instead you will either have to agree another loan to repay what you still owe on the car, or start a new lease agreement.

If you really want a new car go and see what lingscars cost as a monthly lease. At least then you can sell the car privately and use that £4000 to offset some of the rental cost.

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Nope, we asked, and you can take the money anywhere else you want, it does not have to be spent on a new car with toyota.

What I'm talking about is the price it costs to have a car for two years, consider the following two cases:

Case 1: New car

Start with old car with trade in value of £4200

Give old car to the dealer and then join the finance scheme on new car @ £312 per month for two years (£7500 total)

At the end of the two years accept the dealers offer to buy the car back for a minimum of £8600

Finish: Paid a total (including trade in) of (4200+7500-8600=) £3100 and have no car

Case 2: Second hand car

Start with old car with trade in value of £4200

Give old car to the dealer and and buy second hand car for £12,500, less the £4200 trade in giving a balance to pay of £8300

At the end of two years sell the (3 year old car) for estimated devaluation price of £8500

Finish: Paid a total (including trade in) of (4200+8300-8500=) £4000 and have no car

Both scenarios we have a car for a two year period, both scenarios finish with us owning no car, but the new car scenario is significantly cheaper. If my calculations are incorrect I can't see where, maybe you can point it out.

I'm sorry but isn't there a huge hidden liability here?

To benefit from the trade in you have to buy a new car? And on and no so that your car always costs you 1500 or so a year whereas an old car for cash will cost you less and less (in cash terms) over time?

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