Buying a three-year-old
YONKERS, N.Y., Sept. 2 /PRNewswire-USNewswire/ — A new Consumer
Reports study of owner costs shows that choosing a reliable three-year-old
car instead of a new one can save drivers thousands of dollars over the
first five years. In many cases, that’s enough to pay for all the gas used
during that time.
With relatively low mileage, modern safety and convenience features,
and usually a much lower price than similar new vehicles, late-model used
cars are in the sweet spot of auto deals.
On average, CR’s findings show that consumers can save 32 percent in
the first five years by buying a three-year-old car. Similarly, with a one
or two-year-old car, they can save 19 and 27 percent, respectively.
According to the analysis, buying a 2005 Toyota Camry with a V6 engine,
for example could save consumers about $13,000 over five years compared
with buying a new 2008 version. At $4 per gallon, the driver could pay for
all of his or her gas during that period (based on driving 12,000 miles per
year) and still be almost $2,500 ahead.
Similarly, driving a 2005 Ford Focus can save more than $8,000 over the
first five years, compared with buying the new Focus. And with demand for
big SUVs plummeting and their used-car values dropping, drivers could save
$25,500 over five years by buying a three-year-old instead
of a new one.
CR’s five year owner costs are based on: Depreciation — Calculated by
using CR’s Auto Price Service. Fuel costs — $4 a gallon for regular gas
and $4.20 for premium, based on driving 12,000 miles annually and CR’s
overall fuel economy for the vehicle. Insurance — The cost of insuring an
average driver based on data from the Insurance Institute for Highway
Safety. Interest — CR assumed buyers purchased cars with a 15 percent
down on a five-year loan; http://www.Bankrate.com was the source for the
average interest rate. Maintenance and repairs — Data was taken from CR’s
2007 Annual Auto Reliability Survey. Sales tax — Calculated using the
national average at the time of purchase.
“A reliable late-model used car can be one of the best values out there
when buying a car,” said Rik Paul, automotive editor, Consumer Reports.
“Savvy shoppers can also get a more upscale model with more features for
the same owner cost as a less expensive new car.”
The full report is available in the redesigned October issue of
Consumer Reports, on sale September 2 on newsstands and online at
Why used cars are good values
The real key to used-car savings is depreciation, or how much value a
car loses over time. On average, depreciation accounts for a whopping 45
percent of a new vehicle’s owner costs over the first five years, with the
steepest drop in value coming in the first year.
By contrast, a three-year-old vehicle has already taken its biggest hit
in resale value. Its depreciation accounts for only about 25 percent of its
five-year owner costs. Big depreciation for new cars means lower prices for
used cars, which in turn mean lower finance charges and sales tax. When
combined, that can cut owner cost dramatically.
However, CR found that some popular models such as the Mini Cooper and
don’t depreciate much. So buying a used version of those
models results in modest savings.
Many people shy away from buying a used car because they’re afraid of
buying someone else’s problems. Yet CR’s reliability data show that cars,
overall, are much more reliable than they used to be. Rust and
exhaust-system problems, once common in older cars, are no longer of major
concern. And reliable late-model vehicles usually have few problems
overall. That said, if a car hasn’t been well-maintained, reliability and
value are wild cards.
To check reliability predictions, visit http://www.ConsumerReports.org/cars.
While most used cars on the market are five years or older, it’s worth
looking for late-model used vehicles that are three years old or less.
Drivers can often find a late-model used car with many of the latest safety
features, such as electronic stability control and side and curtain air
bags. It’s even possible to find one with a transferable factory warranty.
(C) Consumers Union 2008. The material above is intended for legitimate
news entities only; it may not be used for commercial or promotional
purposes. Consumer Reports(R) is published by Consumers Union, an expert,
independent nonprofit organization whose mission is to work for a fair,
just, and safe marketplace for all consumers and to empower consumers to
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To maintain our independence and impartiality, CU accepts no outside
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SOURCE Consumer Reports