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  #1  
Old 12-01-2004, 10:32 AM
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Moderato Moderato is offline
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Does buying a new car make sense?

I'm starting to wonder if buying a new car is worth it at all. If you do buy a new car I think it's important to make sure you will be content with your decision for a long time or else you lose so much money. Take me for example:

Bought new:

01 VW Jetta TDI kept it for 2 years or so, sold it because I wanted something bigger and faster. (mileage was great but after 2 years I was bored to tears driving it) Lost about 9K from what I bought it for.

04 WRX STi kept it for 8 months, sold it because although the car peformed well after the "fun factor" wore off and I came to my senses, I couldn't stand the crappy build quality of the exterior and interior. (The engine, tranny and suspension were solid though). Plus it attracted alot of undesireable attention from kids & cops. Lost about 8K from what I sold it for.

04 330i have had it for 8 months & 9k miles, I still have this one!

Sure I wasted money and I really couldn't afford to do what I did, but I'm much happier with the 330 then I was with those other cars. We are all enthusiasts here and our cars are more to us then mere transportatiion and that is how we justify these costs to ourselves.


So the problem with buying new cars is the enormous depreciation in the first 2 years. Since I've gotten my 330i I've tried my damnest to keep it looking brand new, but it's got wear and tear on it. A door ding here, an unexplained scratch there, a rock hit there. I somehow managed to put a 1 inch curb mark on my rear passenger wheel and I don't even know when it happened, my first wax job was, let's just say less then perfect, and you know what? My car is a used car now. So what's the point of buying new? Even if you try your best the to keep the car new it's an impossible task. Just because of it's nature the car will be subject to unavoidable wear and tear. So what's the point of buying new? If you can find someone like me who after 1 year or 2 decides they want something different, took care of the car and is selling you can save thousands. And why not? that car is no different then your 1 - 2 year old new car. I'm not sure if I'm ever going to buy a new car again. If you buy a new car and decide after 2 years you want something different you're screwed, but if you buy a 1 - 3 year old car in good condition and decide after a year or two that you want something different you won't lose nearly as much money.

As much as I love the 330i I've thought about selling/trading and getting an M3 but with all the money I lost on the other cars I just can't bring myself to do that. (plus my wife would divorce me and after what I did with cars these past few years I can't say I would blame her). So I'm either going to trade/sell the 330 in at least 4 - 5 years from now, when I will have gotten the most time for my money out of the depreciation and get an E90 M3 or keep it for like 10 years and get a good condition 1 - 3 year old "fun" sports car and if I decide to sell that car for some reason after a year or two it won't have cost me that much.

Sorry but I'm feeling very right now. I always thought, that buying a new car was the way to go because you know how it was treated and broken in, but lately I've been thinking and now feel that unless you plan on keeping the car for 10 years It just doesn't make sense to buy a car new.
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  #2  
Old 12-01-2004, 10:45 AM
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Quote:
Originally Posted by Moderato
Sorry but I'm feeling very right now. I always thought, that buying a new car was the way to go because you know how it was treated and broken in, but lately I've been thinking and now feel that unless you plan on keeping the car for 10 years It just doesn't make sense to buy a car new.
I agree. But I like hanging on to my cars, so I'd rather get something new so I can get exactly what I want and know its history from mile 1.

I used to not be a believer in leasing, either, but for certain people and for certain cars, it makes a hell of a lot more sense than buying new outright, or even buying used.

It's a good thing that there are so many options out there.
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  #3  
Old 12-01-2004, 10:49 AM
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No, the depreciation of the first couple years will be about 1/3 to 1/2 of the value you paid for it. Especially as quickly as you turn over cars, you've lost in 2 years and 8 months $17,000. If you can afford it and having a 'new' (which isn't always more reliable) car is important to you, then spend your money as you like.

I'll never buy a new car. The 1,000s I save will easily fix/repair most problems what will come up in the next few years.
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  #4  
Old 12-01-2004, 11:26 AM
marc92606 marc92606 is offline
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Quote:
Originally Posted by Moderato
I'm starting to wonder if buying a new car is worth it at all. If you do buy a new car I think it's important to make sure you will be content with your decision for a long time or else you lose so much money.

[some text deleted]

Sorry but I'm feeling very right now. I always thought, that buying a new car was the way to go because you know how it was treated and broken in, but lately I've been thinking and now feel that unless you plan on keeping the car for 10 years It just doesn't make sense to buy a car new.
Buying used is tempting. You should save a lot of money provided that you pay a reasonable price (one that reflects the actual depreciation of the car). The difficulty lies in determining a reasonable price for a used car; they're all different. Somehow you must find one that meets your criteria for condition, mileage, equipment level, and price. And you also hope to find one that doesn't have any hidden issues (abuse, accident, etc.).

If you can pay for the car before the warranty expires then you won't have major repairs to pay for while you're also making payments. But maybe you're a pretty good mechanic and can do the repairs yourself for considerable savings.

My experience with used cars has been spotty. I had one used car for several years and more that 100K miles. Another one was bad, I owned it for only four months and spent quite a bit on repairs. Immediately after the last repair I traded it in on a new car.

Good luck.
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  #5  
Old 12-01-2004, 04:11 PM
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It depends. You actualy lose most of the value once the car is titled, at that point, it is a used car.

We keep cars for a LONG time, so new makes more sense. But if you are searching for the car you want, or you just like the swap cars, then used or lease makes more sense.

Just like many things in life, you have to sit down and take a long, hard, and truthful look at yourself and what you want and how you work.
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  #6  
Old 12-01-2004, 05:40 PM
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I take different approaches depending upon my intended use of the car.

For our family ride, I have always bought year old low mileage cars and then pile up the miles on them and we drive them 'till they die.

For my daily driver, I recently sunk a whopping sub 3K into a 110K mile e30 and I'm rolling up 30K/year on it and setting it up as an autocross/track car for my son. It's a cheap, fun ride.

For my fun car, I bought my M3 new, drive it on the weekends and keep it in pretty close to like new condition. I have no intention of selling it, so depreciation is not an issue.

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  #7  
Old 12-01-2004, 06:01 PM
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Just one word.... LEASE
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  #8  
Old 12-01-2004, 08:34 PM
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Quote:
Originally Posted by orion7701
Just one word.... LEASE

yes, if you plan on short term ownership and can live within the mileage constraints then you are a much better candidate for leasing
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  #9  
Old 12-01-2004, 10:50 PM
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Considering AF-RX8 buys a new car every other month or so, I'm curious as to his input in this discussion.
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  #10  
Old 12-02-2004, 01:44 AM
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Yeah-- its almost never worth it (from a purely practical, financial point of view) to buy a new car. Most people buy new cars more for emotional reasons (want specific options, want to be the only owner, want the latest and greatest, perceived better reliability, etc). Supposedly, buying a 2 year old car is the "sweet spot" in terms of buying after the inital depreciation, but before there's really any mechanical wear and tear. That being said, if I had bought my car as a 1 or 2 year old CPO car, it probably woudln't have cost much less than the price I paid via euro-delivery; so I'm not so sure its always worth it.
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  #11  
Old 12-02-2004, 06:49 AM
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rob (above) mentions good experience with 1-2 year old used cars, but I can say a 5 year old used car won't save you any money, from my experience. At least if you buy it from a dealer.

Buying & selling privately is the only way to minimize big depreciation, whether the car is new or used. Did you trade in your used cars?
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  #12  
Old 12-02-2004, 07:06 AM
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Quote:
Originally Posted by Dawg90
rob (above) mentions good experience with 1-2 year old used cars, but I can say a 5 year old used car won't save you any money, from my experience. At least if you buy it from a dealer.

Buying & selling privately is the only way to minimize big depreciation, whether the car is new or used. Did you trade in your used cars?
The Jetta I sold privately, the STi I traded in. Both times I let emotion make the decisions and not logic. If I had bought both of those cars slightly used instead of new I would have been better off. I love the new C6 Corvette and would love it as a 3rd car, but it's pretty hard for me at this point to justify buying a new one, when I can get a 2 year old Z06 with 10K - 20K miles for almost 15K - 20K less.
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  #13  
Old 12-02-2004, 07:10 AM
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I like to buy 1 year old cars.
The car has taken some of the depreciation hit and still has plenty of warranty left.
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  #14  
Old 12-02-2004, 10:06 AM
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Moderato ... you bring up some very good points and I think if you switch off cars alot then finding a nice 1 or 2 year old car with low miles on it is a great way to go.

I go through cars a lot and usually go with new cars but lately my 3rd car has been a used one and now that I know I am getting rid of my current 3rd car I am thinking the smartest move is to just find a 1 or 2 yr old car ...

The biggest problem I find is getting the right used car because there aren't many people out there selling a year old car and those that are out there seem to be overpriced and the savings only amounts to $3,000 to $5,000 less then a new one. That to me is not a good deal and these people are dreaming.

A quick example, I've been chasing this guy selling an 03 A4 3.0 with 11k miles. He first wanted $33,500 (i think that was the amount), he is now down to $31,500. This car is worth no more then $26,000 to $27,000. I offered him $28,000 and he still won't take it. He never drives the car and I see it parked every weekend at his office and it never moves. It's been a couple of months he's been trying to sell it and he still won't come down on the price ... it makes no sense to me doesn't he want to sell his car ? ?

Anyway, sorry to sidetrack but I do agree it's a smart way to go but then again, buying a car is an emotional choice and the smart move isn't always the route you want to take.
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  #15  
Old 12-02-2004, 11:40 AM
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Quote:
Originally Posted by AF-RX8
Moderato ... you bring up some very good points and I think if you switch off cars alot then finding a nice 1 or 2 year old car with low miles on it is a great way to go.

I go through cars a lot and usually go with new cars but lately my 3rd car has been a used one and now that I know I am getting rid of my current 3rd car I am thinking the smartest move is to just find a 1 or 2 yr old car ...

The biggest problem I find is getting the right used car because there aren't many people out there selling a year old car and those that are out there seem to be overpriced and the savings only amounts to $3,000 to $5,000 less then a new one. That to me is not a good deal and these people are dreaming.

A quick example, I've been chasing this guy selling an 03 A4 3.0 with 11k miles. He first wanted $33,500 (i think that was the amount), he is now down to $31,500. This car is worth no more then $26,000 to $27,000. I offered him $28,000 and he still won't take it. He never drives the car and I see it parked every weekend at his office and it never moves. It's been a couple of months he's been trying to sell it and he still won't come down on the price ... it makes no sense to me doesn't he want to sell his car ? ?

Anyway, sorry to sidetrack but I do agree it's a smart way to go but then again, buying a car is an emotional choice and the smart move isn't always the route you want to take.
Yeah, people ask way too much for months, then end up trading the car in for below what you offered. Doh!

We ended up getting our house for about 9% off their original asking price, cause the previous owners held out for 4 months asking too much money, while having 2 mortgages on the house, which they'd already vacated. People need to research market prices when they sell.
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  #16  
Old 12-02-2004, 12:24 PM
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Quote:
Originally Posted by Dawg90
I can say a 5 year old used car won't save you any money, from my experience. At least if you buy it from a dealer.
But that depends on the car type, the specific car's history (which you may or may not get an accurate view of) and what you pay for it initially (which gets back to knowing the market and the value of whatever it is).

For instance, my mother used to buy these used Buick LeSabre/Electra/Park Avenue cars when they were 4-6 years old from a local Buick dealer. They were low mileage cream puffs and she knowingly overpaid for each one. About $1000-$1500 more than they were worth, but considering how cheap the cars were, it was a big premium. She'd put 100,000 miles on them in three years or so and then go get another. The repalced cars would stay in the family fleet for another three to four years and rack up another 50-75,000 miles before my father would sell them to the kids of his coworkers for a couple hundred bucks, donate them, or otherwise dispose of them. All told, I think she's gone through seven in the last 19 years. As awful as these cars are to drive, with a minimum of regular maintenance, they are dead nuts reliable. The only repeated issues are alternators (good for 100,000-125,000 miles) and power window motors which start to go at around 150,000 miles or 10 years. Nothing expensive or difficult to fix.

I'm not sure how many "good" cars we could say that about, though. It just depends on the car.
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Old 12-03-2004, 12:33 AM
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Hmm... Let me try to sumarize a little bit, and try to include some recollections from other threads.

Rule number one:
A car driven routinely is an expense, not an investment. On the day you get rid of your car, you will have less money than you would have had had you never gotten a car in the first place.

Corallary to rule number one:
Deep in their hearts, most people don't truely believe rule number one. We'll talk about why later.

Rule number two.
The car you need to drive looks something like a Toyota Echo, with a 60 horse engine, old fashion crank-sown windows, and no stereo.

Rule number three.
The car you want to drive, at least on this forum, is most likely a BMW of one form or other.

Rule number four.
Given the first three rules, BMW's are like a crack habit, except that crack is much more affordable.

So, fellow BMW junkies, the goal of this thread is to figure out how to get the most "high" from our dollars.

But first, we need to go back to rule number one. Why is everyone deluded into thinking their car is an investment? That is because of one thing cars and investments have in common: risk. (Wait a minute! You're guaranteed to lose money and there are additional risks? Given the last few years of the stock market, maybe a car is an investment...)

There are real risks in car ownership that affect the actual cost of "my precious:" repairs, accident damage, depreciation; the list goes on. Your stomach for risk will determine the prudent course to take.

So let's look at the various choices, assuming you haven't already suffered withdrawl symptoms and had to go drive around the block to feel the smooth acceleration of that teutonic marvel sitting in your garage. Admit it... It's calling you... Drive me! ...ahem...

OK, the first choice is new versus used.

The big disadvantage of a new car is the first-year depreciation. A high residual value ride liek a BMW or a Honda will depreciate 30% in three years, under normal 12 to 15,000 miles per year driving conditions. Other brands can be as bad as 50 to 60%. Deprecition is more or less logarithmic, in that there is a steep drop in the begining, and a shallower drop in later years. Empirically, about half of that depreciation will be in the first 12 months of ownership, with a disturbing amount of that on the very day you drive off the lot. IF you need that new car smell to feed your habit, you're going to pay for it.

On the upside, the strong resdiual value of a BMW keeps the cost of new car ownership closer in overall cost to used car ownership, due to the strong residual value. Stated another way, the depreciation "curve" is slightly less steep in the first year or so, compared to other brands. However, this does mean that it is steeper, relative to other cars, in later years. Think about it a bit. Eventually, the car is going to be worthless on the scrap heap. When does it lose its value: at the beginning or at the end of its life?

In other words, a car with terrible residual value, like a Jaguar, might be a better used car bet than a BMW, just because of how quickly the price drops. So, if you drive it till the wheels fall off, a low residual brand might be your best choice, assuming the wheels fall off at the same time. That being said, I don't see BMW as having long term reliability significantly better than other makes. I've seen Toyota's with 250,000 miles on them and be ready for more.

In summary, new versus used comes down to whether you need the new car smell to feed your habit. I would have a hard time making a case that a new car is cheaper than used. But you might have a fighting chance in a BMW, due to strong residuals.

Another factor in new versus used are repair costs. This is a risk-related factor. New cars have warrantees, meaning the maintenance costs are known with certainty, used cars either have shorter or no warranty. You might get lucky with a good car, or you might not and get stuck with a big expense.

The second, and final decision is lease versus buy.

This is primarily a risk-reduction equation.
Leasing pretty much allows you to define all your costs up front, where when you buy, you really won't know what you car is worth in three years for another three years. Much like insurance, you will pay a small fee to cover the risk that the lessor is taking. You also have to live within the miles restriction you purchase up front.

Again, with a high residual brand like BMW, where, in addition, BMW offers subsidized lease rates, leasing is a very cost effective option compared to buying. However, there are limitations. If you want to recover your seats in hot pink leather and put a supercharger on your motor, leasing may not be for you.

I hope this is helpful...
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Old 12-03-2004, 03:26 AM
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A couple of other points.

Leases make sense only if you turn over cars a lot. It you are going to drive the wheels off of them, buy.

As for cars as an investment, only collector cars are investments. And what a collector car is is where the risk is. You might buy a car as an investment, but the market nt suppport it and the value falls. But if the car is rare or unusual, and you =keep it long enough, and in relatively good condition, it will be worth more later.

The other place you can make money buying and selling a car later is if demand far outstrips supply Say the first 6 - 9 months of E46 M3 sales. If you wer lucky enough to get a car, you could drive it a few months, then sell if for more than you paid for the car becasue there were people who wanted the car NOW badly enough to pay over list. The risk here is wait one month too long, and you car is now a depreciated used car.

Over the years I have had:

2 demo vehicles (one only had 770 miles on it)
1 built car (hot rod from a car my Dad bought new)
3 used cars
4 new cars (2 ordered, 2 off the lot)

All have given me good service with reasonable repair records. Only one so far sold for more than I paid for it. But if you take into account the money in mods, I about broke even, maybe made $100.
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Old 12-03-2004, 09:01 AM
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Quote:
Originally Posted by iversonm
Eventually, the car is going to be worthless on the scrap heap.
This is something I've been thinking about as well. Even if you buy a car and keep it for 10 years, it still cost you a certain dollar amount per month to drive it. For example I paid about 42500 for my car including tax. If I don't spend $1 repairing it and I keep it for 10 years it will still have cost me $354.16 per month to drive it. Now that $354.16 per month figure doesn't take into account 2 things: 1) The total amount of repair costs and 2) the amount of money I would get if I sold the car after 10 years. So if we could guess how much both of those numbers would be, we could get a projected cost of ownership for the car after 10 years. (I picked 10 years because I can't imagine buying a new car and keeping it for longer then 10 years as your daily driver. After 10 years I would think one would want a new car, you only live once!)

1) I put about 14K miles per year on the car so after 3.57 years it will be out of warranty and all costs would have to be paid by me. So I will be responsible for 6.43 years of repairs. If I only need regular repair work that number might not be that high, but If I need a new tranny or engine rebuild as well as regular repair work, then that is the risk you take when you keep a car that long and much be factored into your decisions .

2) After 10 years the car will have 140K miles on it. Now how much could a 10 year old E46 330 with 140K miles on it possibly be worth?

So if we could come up with some hypothetical numbers for 1 & 2 then we can see how much buying a new car and keeping it for 10 years and then selling it would actually cost on a monthly basis. So what I would do is take that hypothetical number and use it to determine if selling my "new" car after a certain amount of time would make sense. So I would think that if I could sell my car for what would amount to $375 a month of ownership that would be a good deal and on a montly basis it wouldn't matter if I sold the car at any time as long as it only cost me $375 per month to drive it because that is my estimated cost of ownership if I keep the car for 10 years. Let's say I sell as soon as the warranty runs out in order to avoid repair costs. For my driving at 14K per year that would mean I should sell the car after 3.57 years: $375 * 42.84 months = $16,065. Ok, $42,500 - $16,065 = $26,435. So if after 3.57 years, just as the car goes out of warranty if I can sell it for $26,435 and buy a new one, then at that point, financially speaking it would be the same thing as if I kept the car for 10 years, except this way I would never have to deal with the headache of having an old car that can potentially break down, and I wouldn't have to deal with repairs.



Am I making sense or am I totally off base here?

Last edited by Moderato; 12-03-2004 at 09:05 AM.
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  #20  
Old 12-03-2004, 10:38 AM
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Quote:
Originally Posted by TeamM3
yes, if you plan on short term ownership and can live within the mileage constraints then you are a much better candidate for leasing
Even 3 years is turning into too long for me. I'm too mercurial.
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  #21  
Old 12-03-2004, 10:39 AM
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Quote:
Originally Posted by blueguydotcom
Even 3 years is turning into too long for me. I'm too mercurial.
That's why a few people around here are getting near the end of their two year leases...
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Old 12-03-2004, 11:44 AM
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Actually don't forget the other costs, like insurance, parking, and of course your per mile costs of gas, oil, tires.

Yeah, some people are mercurial. I on th eother hand, do buy new and used cars, but seldom get rid of the older ones.
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Terry Carraway

'95 Alpine M3 LTW
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'02 Topaz M3
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Old 12-04-2004, 10:26 PM
Niftster Niftster is offline
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Location: Florida
 
Join Date: Dec 2004
Posts: 308
Mein Auto: a beater right now
I have bought one car new. It was a 2001 Honda Accord, my third car and I was too young and dumb to realize the difference until I went to trade it. Up until that point, I had never ventured into new car territory. Since then, I have bought used in the form of demos and stuff.

The drastic drop in interest rates and the 0 percent financing thing really turned the market on its side. A segment of owners found the cars purchased before the drop depretiating at alarming rates. People were upside down overnight. Through family, I know the owner of a Chevy delearship, and while he wont advertize this, will privately insist buying used when it comes to the SUVs (I've owned 3 of those gas guzzlers).

I personally can't justify buying a new BMW of any type. I'll put all the money in the world in land property, but a car is just a car. The problems with the new models scare me a little. I dont' have the money to afford the initial depretiation hit. I keep a car on average about 3 years and rack up between 15k and 18k miles a year.

It's a matter of preference. I know a few people who have burned thousands buying and trading. If money is an issue, buy used. If you want a return, then look at vintage or antiques. The only car I owned that held its value was an old 911, but I didn't drive it every day either.

I have a 325 I am shopping around while looking for a used 5 or 7 series. Maybe it's just me, but this go round is way more difficult than a few years ago when I traded for the car I have now. For the first time, I had to leave my market area and start looking elsewhere. It's funny to see that my car depretiated into the low teens, while the used cars I have looked at haven't depretiated at the same corresponding rate.
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