This post by Jim from Blueprint for Financial Prosperity is interesting - I love his devil's advocate series, but I have to say that in general leasing can't possibly be a good option for me, since I believe in driving a car into the ground. However, we may end up having to sell the car when we have kids so we can get a bigger one.
What this really made me think about was how much money we lose on buying a new car as opposed to a used one. My experience with my first car (a 10 year old Honda) was spectacular, but my husband has had some significant bad experiences sinking lots of money into repairs almost every month. When he bought his first new car a few years ago, I think he decided never to go back. Right now we don't own a car, so we'll have to agree on whatever we buy in the next 6 months or so. I wanted some real information on how much cars depreciate in the first couple of years, so I went to Kelly Blue Book and here are the numbers for the basic Toyota Prius, the car we're considering buying:
new Prius 22,339
2006 Prius 20,720
2005 Prius 19,360
2004 Prius 18,000
All of these are for the basic version of the car, despite the fact that if we buy it new or used we will be looking to add a few options. But I was too lazy to figure out and fill in the exact things we might want. I am therefore assuming that a better options car won't lose all of its added value as soon as it's driven off the lot. Generally I would think that a better stereo or whatever is good for the resale value. So the breakdown is:
Year 1 -1,619
Year 2 -1,360
Year 3 -1,360
This suggests that the loss the moment you drive it off the lot is $260, which seems like a totally reasonable amount to pay for the extra year you get before you have to start paying major repairs. The way that I think of this is that since we're planning to drive this car into the ground, we are paying for the car's whole aging process over the years that it needs more and more repair work. If we buy one that's a couple of years old instead of a brand new one, we will still have it for years 3-10 or whatever. You're paying the premium for the early years when hopefully everything works right. With most cars, the first day or so "costs" the most, because that's when the biggest depreciation happens, so if you find a fairly young used car, you save a lot of money skipping the "expensive" first year. However, it seems like the Prius is different, because its "new car premium" seems to be only $260. This could easily be a good price to pay for the relative lack of hassle of being able to buy quickly and without the uncertainty of finding the right car in the right color with the right options in the right area when we want to buy it. Not to mention the value of getting all of those things just right, so we don't have to make tradeoffs between mileage, color, distance from us, etc when deciding which car to buy. Instead, we can put (hopefully less) energy towards finding the best deal from the dealerships in the area where we want to buy it.
The question of whether a $22,000 car is really worth it when we could buy a used Honda Civic (or even a new one for $16,000) is a completely different one that I'll cover in another post.
Do any of you have any opinions on this question of buying used or new? Do you have any thoughts or experience with the Prius specifically?