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Best deal might be new car, not used

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Best deal might be new car, not used

Company incentives, financing packages keeping prices low

Sunday, April 18, 2010 2:59 AM

BY JOE TASCHLER

MILWAUKEE JOURNAL SENTINEL

MILWAUKEE - Of all the twists and turns that have roiled the U.S. auto industry in the past two years, this might be the strangest: Dozens of new-car models are cheaper to buy over time than their used counterparts.

Two factors contributed to this unusual situation:

• Robust demand for used vehicles, stirred by the deep economic downturn, has sent prices higher.

• An incentive war is raging among manufacturers, led by Toyota, which is battling the fallout from a huge safety recall.

When you do the math and compare financing rates - most vehicles purchased in the United States are financed - the cost of a new car ends up being lower than that of a used car when averaged over time.

"When things get tough, I think people turn to used cars because they automatically assume that's a better deal, which is a reasonable assumption," said Jessica Caldwell, senior analyst for the automotive website Edmunds.com.

"The funny thing is, we've noticed that because of the finance offers and incentives, there are actually some new cars that are cheaper to purchase than used cars."

Certainly not every new-car deal will save money over a used car. But if you're in the market for a vehicle, it would be wise to at least look at the option of buying new to save money, market-watchers say.

"It just kind of flies in the face of logic that this is actually possible," Caldwell said.

Edmunds has compiled a list of vehicles - more than 100 - on its website under the tag "New Cheaper Than Used." Those vehicles are "either less expensive or nearly the same to buy" compared with their average 1-year-old used counterparts, the company says.

"There are a significant number of vehicles on that list," Caldwell added.

It includes cars such as the Honda Civic LX four-door sedan equipped with a 1.8 liter, four-cylinder engine. According to Edmunds' analysis, the typical monthly payment for a new model would be $306. For the same model that is certified pre-owned and a year old, the typical monthly payment would be $329. For the life of a 60-month loan, total savings would be $1,380 for the new car.

Or the Buick Enclave CXL1 four-door sport-utility vehicle equipped with a six-cylinder engine. Typical monthly payment for the new model is $628. For a year-old certified pre-owned model, the typical monthly payment is $675, Edmunds says. Total savings over the life of a five-year loan: $2,820.

Dealers have noticed the trend.

"Prices on the late-model used cars are pretty close to the prices for new," said Andy Palmen, president of the Palmen Automotive Group, which has dealerships in Racine and Kenosha, Wis. "Used-car prices, particularly for the late-model vehicles - 2009, 2008 - you start looking at what I have to pay for them and what I can sell somebody a 2010 for, they're pretty close."

Much of the difference has to do with finance rates, Caldwell said.

"Manufacturers will subsidize new-car loans but don't do it for used cars" because they have no interest in selling used cars - they've already sold them," Caldwell said. "It's pretty much up to the dealer to sell those used cars rather than the manufacturer giving incentives."

Prices of used cars and light trucks in the United States have been moving steadily higher in recent months and are likely to continue climbing, industry analysts and dealers say.

The overall price for used cars is worth watching because of the size of the market involved. Even though new cars garner the most attention, their sales are dwarfed by those of used vehicles.

"Everybody talks about a new-car sales rate, which had a high of 15 (million) or 16million a couple years ago, then dropped down to 9 million, and now it's going to end up around 12 million," said Russ Darrow Jr., owner of the Russ Darrow Group of dealerships in southern Wisconsin. "What nobody hears about much is that used-car total sales, including private sales, every year are about 40 million. That speaks for itself."

Darrow is a 44-year veteran of the automotive business and has 18 Wisconsin dealerships that offer more than a dozen nameplates.

Demand for used vehicles remains robust, he said.

"We're looking for good used cars," Darrow added. "We're out trying to buy them. We're trying very hard to buy used cars right now."

In Wisconsin, the used-vehicle market has outperformed the market for new vehicles during the past decade, according to data on registrations compiled by Cross-Sell Inc.

Since 2000, new-vehicle registrations in the state fell by nearly half, dropping every year in the decade.

Used registrations statewide, however, have moved up and down, posting significant gains mid-decade before falling along with the economy in recent years.

Still, the percentages are telling. Registration of used vehicles statewide dropped 19 percent in 2009 compared with 2000, according to Cross-Sell. Registrations of new vehicles slid 46percent statewide during the same period.

"It used to be that a new-car dealership would sell two to three new cars for every used car," said Jim Tolkan, president of the Automobile Dealers Association of Mega Milwaukee. "Now, it's about 50-50 or a tad more used cars than new cars at most new-car franchises.

"There's been a large turnabout," he added. "Most new-car dealerships have to have an active used-car department to survive."

link:

http://www.dispatch.com/live/content/business/stories/2010/04/18/best-deal-might-be-new-car-not-used.html?sid=101

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Best bang for the buck IMHO is to take really good care of the car, drive it carefully, and keep it 200,000 miles or more, like Trinicria bob and others here do.

Helps sometimes to buy it new, when you know what you are getting.

Chris

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