The Late Model Used Myth (Part 2: Import) UPDATED

Part one of this series discussed the small difference between the price of a two year old used domestic car and a brand new model that could be purchased with incentives and dealer discounts. The results showed that a little money could be saved on the used model but nothing worth writing home about. Unlike and undesirable car like the Sebring, many models from Honda and Toyota are in high demand due to gas prices. In my opinion this makes buying a used one a dumb decision. I’ll use a 2007 Toyota Corolla as my example.

2007 Toyota Corolla LE with Automatic Transmission and 12,000 miles.

Retail KBB Price: $16,880
Trade In KBB Price: $
Private Party Price:
2009 Corolla LE with Automatic Transmission MSRP: $16,650

Going by these numbers the used car actually costs $30 more than the new one! You would be an idiot to by the used one at the retail price. The new model’s price doesn’t include the $660 transport fee but the 2009 model is a brand new redesign and is probably worth the premium. The car still magically goes up in value once the dealer gets it’s hands back on it but at least the amount between trade-in and retail is a little easier to swallor. With gas prices so high it’s unlikely that a dealer is going to negotiate much on a new or used model like this but some people think it’s easier to get dealers to compete with each other over new cars instead of used. This is because they can compare apples to apples and mileage isn’t a factor. Cars with high resale value like the Civic and Corolla are always going to sell close to their new price and in my opinion it makes little sense to buy a used one.

UPDATE: From the Wall Stree Journal,

“Some used cars’ prices are even approaching the levels of new models. The average 2006 Honda Civic costs $16,118, or 86% of what a new 2008 model costs. The average price of a used 2006 BMW Mini Cooper is about 81% of what a new model costs. And the long-sought-after Toyota Prius costs 87% of the new-model price. Typically, three-year-old used cars cost between 50% and 60% of their new equivalents’ prices.”

Even more evidence that the token advice of buying a late model used car doesn’t make sense a lot of the time.


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