Used Cars are Expensive
Car buyers browsing the car market for cars trucks and SUVs want a great deal, but may get sticker shock from the extreme high vehicle prices. If your budget is tight and you need to choose between a new car and a used one, you may think of picking up a used vehicle from the car dealership – especially with the increased reliability of vehicles, a vehicle hitting higher miles shouldn’t be a major issue anymore. Yet new vehicle prices may by lower than used vehicles in certain cases!
Interest Rates on used cars trucks and SUVs
The interest rate that you pay on a used vehicle may be higher from a car dealership, meaning that you are looking at a higher monthly payment. This is because a used car is more riskier to lend for than a new car for the car dealership or bank. The car prices for a new car are solidly defined, as are their depreciation rate and vehicle history. This means that the lender can get a great deal giving you extreme high interest rates on used vehicles with higher prices than the lower average price new vehicle.
Maintenance Cost over time
Modern vehicles are certainly more reliable than they have been at any time in modern history. Cars trucks and SUVs are coming equipped with more diagnostic features than ever, and the car manufacturers now have many decades of experience building each vehicle and engine type to fix the flaws the you would previously see each vehicle hitting. This improvement has been factored into car prices, and also in the decrease in car sales. In 2018 the average new vehicle could drive (with maintenance) for well over 100,000 miles, and seeing a vehicle hitting that mark in perfectly good condition is no longer a rarity. The average price of entry level vehicles has not shifted much (though more expensive trims and models see every higher prices in the car market), and car buyers are getting passed the benefit of decades of testing from manufacturers.
This means that you can have a great deal buying a used vehicle that is relatively modern, without the extreme high rate of repair usually associated with purchasing second hand cars from an individual or from a car dealership. New vehicles also come with more expensive parts and systems which are harder to repair and replace. A great deal of expertise and experience is needed to fix the advanced electrical and diagnostic systems on modern cars trucks and SUVs. In 2018 the average cost of repairs skyrocketed with the introduction of electric vehicles such as the Tesla Model X and the Model 3 – even trying to get a headlight replaced on a vehicle like this is enough to give you major sticker shock!
You can get a great deal on a used vehicle
The vehicle prices at a new car dealership will have a much higher average price than the car prices at a used car lot, and definitely higher than purchasing from another person online via AutoTrader, Kijiji or other similar car sales web pages. These new car prices are virtually locked in to a certain price out of the manufacturer, and the car dealership can’t let them go without the vehicle hitting higher prices than they paid to stock it in the first place. While this is of course true for car dealerships and private vendors, they weren’t locked into any price by the manufacturer and you could get the car sales price lower than their own cost if they really need to get rid of it! A used vehicle sitting on the lot or on an online car market for multiple months (or even years!) is a liability for the seller, each extra month it is taking up space is almost like a monthly payment for them to hold onto the vehicle. You can get a great deal if you find a used vehicle that the car dealership or private seller is just hoping to get rid of. Car buyers should look for cars trucks and SUVs that show signs of aging, if you see a vehicle hitting its past-prime date you can snatch up a great deal!
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My name is Dan. I used to work at the biggest dealership in the country and now I teach fine folks like you how not to get f•••ed when buying the car. Now in this video, I want to talk to you about depreciation, where it comes from and why your cars will depreciate 50 percent in first three years. Number one is because there is just plenty of cars around there. There’s a lot of cars. We don’t have a shortage of cars. If you know market, if you understand supply and demand, if there’s a lot of supply, but demand stays the same, prices will go down. And that’s what’s happening. We have a lot of cars. We’re actually overproducing cars by 10 percent, which is crazy. So that means for every 100 cars that we sell, there is 10 cars that are extra sitting on parking lots at the dealerships, just having no business being sold because they’re just they’re just extras. They’re just overproduced. Now, the second reason your car will lose 50 percent in first three years is because of cashback and rebates. This is not offered by dealerships. If it was dealerships will we will never have cash backs. We will never have rebates. These are done by manufacturers. They’re done at certain periods of the year. They’re done for certain reasons. Like couple of months ago, Honda Accord had six months worth of inventory of Honda Accords. They had cash backs. They had rebates going on. Six months worth of supply is just way too much for them to handle. They can’t be parking them for miles and miles and miles.
So what they do is they put on special incentives, they put special cash bags, they put rebates. And what does that do to a car that was sold last year? If I can buy a brand new Honda Accord, that’s worth thirty five thousand dollars for, let’s say, thirty thousand dollars. What happened to Honda Accord that was bought last year? It went down in price five thousand dollars because no one in their right mind is going to go buy a used car for twenty nine thousand dollars or twenty eight or twenty seven or twenty six or twenty five, even when they can buy a brand new one. Thirty thousand dollars. Why would anybody do that? Cash backs, rebates and special offers. Special deals. Keep our car prices down. Why would manufacturers do that? Are they losing money? Not necessarily, because the more cars that manufacturer will put out into the world, the more money they’re going to make from repairs, from parts. That’s really where they’re going to make a lot of their money. Cars are super, super expensive. For example, if a car needs a new suspension, new generator, a new water pump, a headlight after a car accident or whatever the situation is, you know how much profit there is in there. Like a lot, pretty much 80 percent of whatever the part you’re buying is pure profit, 80 percent. So when they’re selling cars, it’s great. But parts is where they really, really, really shine. However, there is an opposite side.
There is a counterforce. And this is called KBB Nayda dealership trades. Our cars would depreciate even faster. And I am all for depreciation. I love depreciation. And why is that? Because it allows me to buy cars at low and true market pricing. That’s it. That’s why I love depreciation. Why would they buy a brand new car when three years later I can buy the same car with any color, with bunch of options that I want for half the price? Why would I buy a new car? It just doesn’t make sense for me to do that. Depreciation is a natural thing. It’s not a bad thing. It’s not bad that your personal car is being depreciated. If your car is being depreciated from 100 percent to 50 percent, that’s kind of 100 percent your own fault. You should have bought a car that’s three years old. That’s 50 percent off already. And then you wouldn’t be getting hit with this depreciation. Baseball bat in the face. So when depreciation occurs, it’s only natural. But there’s three forces that keep our car prices high. New and used. That’s KBB, Nayda, in dealerships, especially trading, especially used car dealerships. So if you increase the used car prices up, what’s going to happen? The new car prices will also go up. So it’s the dealerships that are constantly raising the prices. It’s not the car manufacturers. It is not the car manufacturers. It’s not the price to produce a car. It’s not the expensive materials. Expensive material has went down. Price to manufacture a car has went down significantly a lot because of robots.
Can we compare robots in 2018 compared to nineteen eighties? Are they kind of different? Yeah, they’re Heyl a different. They’re way better. They’re faster. They’re more efficient. It doesn’t take more. It doesn’t cost more. It doesn’t take longer to produce a car in 2018 compared to nineteen eighties. Then how come prices of trucks went up by eight hundred percent when everything else went down? Simple, because if dealerships, dealerships are constantly raising the prices, raising the prices, raising the prices on used cars. If they used car prices are going up, then what’s going to happen to new car prices? They’re obviously going to go up. It’s only common sense for us to have low car prices. We have to do only one thing. We have to cut out the middleman. We have to go around straight to the car manufacturers. We have to buy cars directly from car manufacturer. And there’s nothing I can do about this. Unfortunately, because dealers are paying millions and millions and millions and millions of dollars to state government, to local politicians who have car dealerships being place and us not being allowed to buy cars directly for manufacturers. So that’s the bottom line. Hey, if you enjoyed this video, give me a thumbs up below and link to subscribe button over my head or watch one of those two videos if you want to see more money saving tips about cars. This is Dan with 60 minute car. I’m signing out and I’ll see you on the Internet.
