I understand the used car market is inflated as well, but I was looking at some new car prices and was frankly shocked.
Yes I get the benefit of a new car is you get no history with it and if you take good care of it, then it may last quite a long time.
But just checking some of my local dealers…
A BASE MODEL Toyota Corolla is over 25K. This is supposed to be one of the most simple and basic car someone can guy.
There’s no way the average Canadian is buying this right? Median income is like 60K. So the average Canadian needs to spend ALMOST HALF of their gross yearly income on the most basic car imaginable.
Now don’t even get in to SUV, trucks, Hybrids etc. Then we enter insanity territory.
So what are people doing? Is the new car market now a luxury market for top earners? Do we all buy used even at inflated prices?
Owned many cars in my life before 2024. Never ever bought a new one. Why? As soon as you drive off the dealership lot you lost at least 20% of its value. New model, new problems. Recalls issues etc. You have zero information on reliability. Bought 2-3 year old cars with low mileage.
I have 2-3 years knowledge of the issues and reliability and… I paid almost half of what it was worth 2-3 years ago. When I resell it, I will not lose half of its value.
Example: in 2014 I bought a 2011 Mercedes C350 for $24,000 with 26,000 kms. In 2011 brand new, this was a $75,000 car (CDN $) plus tax and rest over $80,000. I sold it last year with 120,000 kms for $16,000. Original owner lost 68% of car’s value in 3-4 years. I lost 33% of its value in 9 years. Can I afford a new car? Absolutely! Do I want to waste money? Yeah no.
Is your question, does it make sense or what is everyone doing? Because everyone is in debt, and new cars are almost always the worst investment of your life time.
You see everyone driving expensive cars cause they’re in debt. You also see everyone in expensive cars, because you’re looking for them. You’re comparing yourself to the other’s and that’s all you see.
If you see a brand new Camry for $25,000 – you should get it because the website has cheapest at $35,000 at 6.7% for 60 months. That’s a total of $41,300 paid for it.
Then in 5 years it’s going to be worth $21-$25k (based on a quick Facebook search of 5 year old Camry’s). You are negative $15,000 in value. That’s $3000 a year negative value.
I sound like Dave Ramsey, and I like his teachings a lot.
But I couldn’t follow his ‘Beater’ car advice. I need a reliable car for work.
Best option is to buy a $15,000 car in CASH around 2020-2018. Aim for 60,000km. It might be a Kia or Nissan. But honestly they are still good cars. You can drive those cars for 5 years, and they won’t have big maintenance issues either (as long as you don’t buy a lemon).
5 years from now, that car is probably still worth $7-$8.
That’s a negative value of $7k over 5 years.
Forget what others do. Don’t put mortgage payments on your car.