Quote:
Originally Posted by Derek Sutton
Too much misinformation to address each one individually.... I've sold in the neighbourhood of 500 vehicles over the last 4 years and getting advice from people who buy a vehicle every 10 years is not the best way to go. Feel free to PM me with any questions you might have.
Depreciation averages 30% year one, 17% year 2 and 8% year 3. This varies by vehicle and market but it is a good rule to follow. So 55% in 3 years. There will be some variances based on km's and vehicle (a Dodge Journey for instance is much more then that and a Jeep Wrangler hold its value much better).
Resale value really only makes a differenc if you plan on re selling it in a short period of time. If you plan on driving it for ten years and miling it out, the resale is only going to be a fraction of the original price no matter what you buy.
Those advocating for a year or two old vehicle vs a new vehicle need to consider all the factors, beyond depreciation. Cost of ownership, payment, perks of buyIng new etc... What makes more sense of theses two scenarios?
One: Buying a $37000 two year old truck at a 6.49% interest rate for a payment of $760 a month over 5 years
Or?
Two: Buying a new $50,000 truck at 0% over 6 years for a monthly payment of $730????
That's why people buy new.
There also the leasing way of ownership which makes sense for so many people but the refuse to listen. If you are in the 3-4 year of ownership cycle, I strongly recommend exploring the pros and cons of leasing. Remember you don't truly own your vehicle untill the last payment is made and most people are trading it in long before the 6 or 7 years is up.
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Based on your depreciation numbers above the two year old truck should only cost between 26k and 29k. So you jacked up the used price significantly.
You also can’t use purchase price when determining the cost of a vehicle. You need to use depreciated cost in the year you plan to sell minus purchase price. Your cost of ownership is based on the decline in value each year.
The cost of that 50000 truck in year 1 is 15,000. The cost of the two year old truck in its year one is 3000 plus the interest rate differential (about 2k). In year 4 and 5 of new vs 6 and 7 of old you would need to include more maintenance cost in the older vehicle. However despite all that it would need to be an exceptional scenario for the lifecycle cost per km to be higher on a 2 year old car than a brand new one over the next 5 years of ownership.