While we would argue that buying a new car is always better than buying a used one, there are several compelling arguments that may convince you otherwise. One of them is the fact that used cars are always cheaper – though truth be told they are not cheaper by much, especially if they are not that old. Another perceived perk of buying a used car is the fact that they don’t lose their resale value as quickly as new cars. We have already addressed the whole depreciation problem in one of our earlier articles, but if you’re still not convinced, you might just make a small exception for this year – because 2014 is a perfect year to buy a new car. Here’s why:
Bigger Discounts
The biggest perk when it comes to buying a new car is that you can get plenty of discounts. After all, the price you see on display – the MSRP – is not always the final cost that you pay. It can be lowered through various special offers from manufacturers known as incentives, which are basically “secret” discounts. Of course, in order to use them to lower the sticker price, you need to know what they are, and luckily, Unhaggle’s free dealer cost report can assist you with that.
However, what’s important here isn’t the fact that there is such a thing as incentives, but the fact that incentives are now higher than ever before. According to Scotiabank senior economist Carlos Gomes, incentives have in fact jumped almost $2,000 per vehicle since 2011. Some incentives, like the ones offered as a result of invoice pricing events, bring the sticker price down to the invoice cost level, which is the amount dealers pay manufacturers. The recent deal on new Dodge Grand Caravans has actually dropped the price below the invoice price, basically saving you $7,000 on average.
Director of market analytics for Canadian Black Book believes that this trend will continue throughout this year. He cites that there are more smart shoppers now, who can “do the math and see that they’ll be a lot further ahead to buy a new car than they would be to buy a used car.” Basically, big deals, like the ones we’re seeing this summer, make new cars more affordable than ever before.
Better Long-Term Finance Offers
But apart from getting insanely good discounts, you can now also work out a better lease or finance deal for a new car, some of which stretch by as long as 96 months. Say, if you look up newspaper ads for older 2008 or 2009 models, you might also spot a new car ad that promises $45,000 for four years interest-free.
Deals like these did not exist until the last few years because the auto industry was in a much better shape. However, the 2008 market crash has sent the industry in a downward spiral, which decreased new car sales. So, in order to recover, manufacturers and dealerships started offering more ways of making new cars affordable – and their efforts are now reaping the rewards. This June, for instance, Ford and Chrysler saw some of their best sales in a long while.
Used Car Inventory Shortage Gives New Cars More Value
Unfortunately for used car dealers, the 2008 market crash has also decreased the amount of available used cars today. Why? Because fewer new cars were sold during the recession. For instance, in 2009, the Detroit Three had to reduce their leasing activities along with their reliance on high-volume, low-margin fleet sales to car rental companies. The same happened to many other automakers at the time – in Canada as well.
Before the crash, in 2007, the total amount of cars sold in Canada on lease or into fleets was more than 995,000. According to DesRosiers Automotive Consultants president Dennis DesRosiers, about 40 per cent of those cars were lease-based. But then in 2009, the number of cars sold in Canada on lease went down to the measly 6 per cent, while the number of cars sold on lease or to fleets went down to about 328,000.
Usually, a vehicle that is sold on lease or to fleets gets to enter the used car market three or four years later. So, that’s why, about five years after the beginning of the recession, there are fewer used cars available. In fact, the amount of vehicles coming of lease or out of fleets was 445,000 in 2013, which is about half the number we saw in 2009.
So, what does any of this mean? This means that the used cars that are available now are likely more expensive than they would have been, say, five years ago. This means that the gap between new car prices and used car prices is at an all-time low. For instance, the 2014 Ford Escape’s MSRP is $24,499, but that excludes any incentives, while the 2009 model goes for about $13,888. With a couple of deals applied, you can easily lower the new model’s price to something a little more reasonable.
But in the end, the decision whether to go with a new or used car is entirely yours. However, if you have ever wanted a new car, now is the best time to get one – unless you want to wait for another recession. We sure don’t!
