13 May 2011

This Ever-changing World in which We Live in

For many years now, the conventional wisdom has been that used cars offer a better overall financial deal than used cars. Well, it took a sea change for that to become the conventional wisdom and it might be time for another look. 

My grandfather was a mechanic in a small town in Southeast Kansas. He could fix anything, be it car, truck, or farm equipment. He taught his children that buying a used car was buying somebody else’s problem. It made sense at the time. In those days, people bought cars and drove them for their useful life. If anyone was selling a car, there was probably a reason.

As our economy developed and the auto industry became more competitive, folks began to trade cars more often. It may have been conspicuous consumption, or accommodating growing families, or just wanting the latest in an ever-evolving selection of bells and whistles, but more perfectly good used cars were available in the marketplace.

More than one automobile sales professional in the past ten years has told me that the best deal in a car of any kind is a used car with a manufacturer’s warranty. These tend to be vehicles that were driven by corporate users and have been well-maintained as well as completely refurbished and evaluated by the manufacturer before being placed back into the marketplace.

Think about a sales person who works for a medical supplies company and drives around a lot visiting customers and delivering product. It is more cost efficient for their employer to buy a large number of cars directly from Ford or Toyota, distribute those cars to their sales force, and insure those cars through one policy than to manage transportation for all of their employees individually. This same company will replace these cars on a regular basis and return them to the manufacturer, who will place them into the market creating a secondary supply.

However, in since the recession, the landscape has changed again. The market for used cars, particularly the high-quality, manufacturer’s warranted type, has become increasingly competitive. When looking for a small, fuel-efficient car last summer, my husband and I found that the difference between new and used in our car category of choice was minimal. All of the great bargains in used cars were in the luxury segment, or in minivans. We bought a new Honda Fit and plan on driving it for at least five years, although based on my personal history our little Scooter doesn’t have to worry about being traded until 2020 or beyond.

Used cars are not the rejects of my grandfather’s era, but they cannot universally be considered better deals financially than new units. If you are looking to buy or replace a car, certainly give used cars a chance, but don’t discard the possibility of buying a new car out of hand. This advice particularly applies to fuel efficient vehicles that you plan to own for at least five years.  

For more information, check out this article from Kiplinger: http://kiplinger.com/columns/kiptips/archives/when-it-pays-to-buy-a-new-car.html

No comments:

Post a Comment