Note: This is not a commentary on affordability. Clearly the buy-and-hold-forever technique is generally the lowest total cost option since the cheapest car to own is... you guessed it... generally the one you already own. ~~~~~ What about insurance payouts if your car is totaled? That’s less of an issue than it seems on the surface. Remember that if you pay 3K below MSRP for your new car (option B) vs MSRP for option A, if it gets written off by the insurance company and they pay you 3K less for B than A, you’re still at the same net cost to you because B started out less.
Alex on Autos I know quite a few people who bought a car because of resale value, and they hate it. It’s like buying a phone for resale or laptop 💻. Buy a car that you like and it does what you need it to do.
I don’t care about resale value, because again it’s about getting a car or truck or suv you like and you can afford. In general if you keep up on maintenance and learn how long things last you won’t get beat. As crazy as it sounds I had a 2012 fiat 500 it was the most reliable car I have owned. I have owned a Chrysler 200, INFINITI QX56, Ford Focus, Honda Accord, fiat 500 my first new car I bought because I liked it and the salesmen told me it has good resale value. True I made out when I sold it but I want happy . It was not fun to drive. Seats was too hard. So my advise buy a car you like and try everything. I tried the fiat and begged the salesmen to take it home, been a fiat fan ever since.
My Hyundai is 9 years old and has pretty bad resale value but it doesn't matter. It hasn't cost me a penny other than routine maintenance so far and dirt cheap to keep it on the road. I'm good as long as I get the value out of what I paid and my car has been a fantastic example.
I don't care about resale value. I care about the best price at purchase. I keep my cars 8-10 years or 100-125K miles. At that point I've gotten my monies worth out of it. That's my story and I'm sticking with it!
I've typically sold my cars after 6 years, usually 1 year after I paid it off, and then got a new car in the $25k range. I regret not keeping my cars longer now that I'm in my early 30s. I plan to keep my current car until the wheels fall off. I usually put 130k miles on my cars. Car payments keep you poor.
This good advice for people that view cars truly as just transportation devices and nothing more. As soon as you expect anything more driving until the wheels fall off starts to lose value.
Debt keeps us poor. It's a lesson most of us haven't learned including me. I love the Stinger but not willing to set myself $54K + back. I will patiently wait till summer of next year to get a pre-owned. I'm done enriching financial companies at my own peril
@@fycfyc1 Priorities change. I went from a 2017 Mustang GT to a 2014 Mazda6, and now I'm in a 2018 GTI SE because the $10k difference between a slow Mazda6 and a slightly used 1 year old GTI was worth it to me. The GTI is a great blanace for me because its a practical car that is capable of 40mpg, yet is still a lot of fun, and if maintained, will last a long time. It cost me $23k. I will pay it off next year.
Im using my paid for car since i start working 5years ago..been looking to find used quite new cars these days,dave ramsey mix with scotty advice seems decent for stable income family amidst these pandemic..once this is over,should i get the Honda Odyssey or a 2014 SantaFe guys?$15k is the most i wanna stretch
I'm so glad you made this video. I never understood the argument sone make about resale value in vehicles. Personally my family and I keep our vehicles until they die. I've never seen the appeal of buying a vehicle then trading it in for less money, you're just throwing money away at that point.
As someone who has previously worked in the the automotive industry, this video is perfection. Everything is explained so well and is completely factual. Just an absolutely outstanding job, Alex!
I still don't understand the appeal of a lease. Why would i want to worry about mileage and wear and tear? I don't want to have to worry about getting a ding in a parking lot and the manufacturer charging me $1000 bucks extra for door dings. Or mileage penalties, I don't want to be nervous about taking road trips and going way over my allotted mileage and being reamed even more upon return.
@@rv2167 Depreciation is actually higher on higher end cars, that is why most BMWs and Mercedes are leased. That is also why those companies don't care that much anymore about long term reliability.
It's no different in that regard than buying it and selling it after three years. You are still going to get a lower price for a higher mileage car and you are still going to have to either fix the door dings, or accept a lower price for the car. The leasing company is just building that in to their equation. The ONLY way those things don't matter, is if you are going to keep the car for 8 - 10 years - at which point the mileage and digs don't matter as much. This is really the difference between getting a new car every few years vs. keeping it running for a decade. Dings and mileage will always matter when you put a newer model car on the market; not so much when you are selling a clunker.
This is the best breakdown I’ve ever seen for car resale value. This really put cost of ownership in perspective, thanks so much for doing this video Alex.
@@kenc2257 Our(Edmund's)2018 Mazda CX-5 had a sticker price of $34,505 when it was new. After a year of driving, our odometer had about 17,600 miles on it. Assuming clean condition, the CX-5 had a private-party appraised value of $24,818. This is a 28% depreciation, which is worse than our long-term fleet average of 22%.
Spot on Alex! For used car buying this is even LESS of an issue. Most vehicles bottom out in value around $2,000, unless you count the junkers that go all the way to their scrap price of $500. So I would argue that buying a used car with a high percentage of depreciation (low resale value) is actually an excellent idea. Buy that 2015 (in 2020) with low resale value and now your total depreciation over 5 years of ownership is $1,000-$2,000/yr. And even if maintenance is $1,000/yr that’s less than the $3,000+/yr paid on a lease. My envelop math makes a lot of assumptions but the point is there’s a lot of very nice 5yr old vehicles with “low resale value” that are worth owning. Edmonds complies lists of these bargain buys regularly.
Excellent explanation. I keep cars a long time, and overall costs of ownership like reliability and fuel efficiency make all the difference for me. My cars do not have a lot of resale value as they have well over 150k miles-- I usually donate them to charity.
I'm keeping my car until it won't start no more (which might be kinda soon since it's a VW LOL). The thing I do think about is safety. Crash safety has gotten so much better in even the last 2-3 years on many models to the point that if you value safety getting something newer makes sense.
Great presentation. I hold onto my vehicles and have always thought of resale value as partly an index of how the market values factors like reliability and efficiency and other quality factors. With good data on the factors relevant to my purchasing decisions available separately I will pay less attention to resale in future. Thank you.
What a great presentation, Alex! You touched on many points I consider when purchasing a vehicle. First, I usually keep a car for 6 or 7 years and typically replace it when it tops 100K miles, sometimes a bit sooner. This means I never lease a vehicle. Both because it makes no economic sense and because I would hate to feel that I cannot drive a vehicle as much as I'd like before encountering the dreaded per mile charge associated with exceeding the mileage limit on a vehicle. Second, T I tend to buy the highest trim I can afford of a vehicle rather than purchasing a base level trim of a competitor in higher price category. I do so because I've found over time that a higher trim tends to yield a higher resale value and quicker sale that reduces somewhat the initial premium I pay for the trim. That quicker resale is important since my time has value. And honestly, because I typically like the bells and whistles of a higher trim vehicle. Finally, I NEVER pay MSRP or more for a vehicle. If I cannot get several thousand dollars off MSRP for a new car, I choose another dealer or another vehicle. In 2018 I replaced a top trim 2012 KIA Sorento (a brand not known for strong resale value) for a new vehicle. The Sorento had about 75,000 miles on the clock. It had been 100% reliable with virtually no unexpected expenses over the six years I owned it. It was also exceptionally clean with a complete set of documentation of every service and even a record of fuel purchases over its life. The dealer offered me a trade-in value within $800 of the KBB estimate of a comparably equipped Toyota Highlander with similar mileage and in the same condition. Further, I had purchased the 2012 Sorento for about $6000 less than the best deal I was offered by a Toyota dealer for the Highlander in 2012. The combination of a surprisingly strong resale value for a well cared for KIA Sorento compared to the resale "champ," the Highlander, and the fact that I originally purchased the Sorento for far less than a comparable equipped Toyota meant that I had a net savings of over $5000 compared to what I would have paid for the Toyota.
@@normt5463 Actually I have a great deal of respect for Toyota's business model and many of their vehicles. And the single minded focus on reliability obviously sells a lot of cars. But Toyota's high RANK in reliability tells a consumer nothing about its actual frequency and seriousness of issues and the fact is that most modern vehicles are highly reliable. So reliable, in fact, that the vast majority of new car buyers can be assured they will encounter nothing more than a minor issue or two over five years of ownership. I find the long bumper-to-bumper warranty of the KIA mildly reassuring but I also recognize it's more a marketing feature that costs KIA/Hyundai almost nothing in terms of redeeming those warranties simply because their vehicles seldom encounter the problems that a warranty covers. Further, Toyota achieves their strong reliability metrics in part by being extremely conservative in term of introducing innovation (e.g. turbocharging) in their vehicles and by cost cutting in other ways. (e.g. cheap materials in rear seats) As far as resale is concerned, the best way to reduce depreciation loss is to avoid replacing a vehicle on a three year schedule and hold onto it for at least five years. Or as Alex suggests, lease a vehicle and don't exceed the mileage limits of the lease. But recognize that frequent replacement of vehicle is a very expensive hobby and accept it as such.
@@stephenhendricks103 I've never had a car in for repair work within the first 3-5 years except for 2002 Mercedes. All Canadian, Sweden, Austrailian, Korean, China...built vehicles have never had problems with. The last two decades most everyone has caught up to Toyota in percieved quality and reliability. Except for Honda which has really gone down hill last decade. The key today is spending less up front. You can get a nice $10,000 discount off of MSRP on Korean and domestic brands which put the "Toyota Tax" into play. The psuedo residuals of some like Honda will never match the savings with heavy discounts on MSRP. See Edmund's longterm tests that have the Japanese losing more value than average and that is in California where some brands are not as prevalent. With discounts it doesn't matter if you trade every 2-3 years as you are ahead of the depreciation curve.
@@normt5463 I agree with everything you said, Norm. And my experience has largely matched yours. I'd only note that if one wants to minimize depreciation cost, holding onto a vehicle for at least five years is an excellent strategy.
People who buy German luxury cars lease mainly because they cost a small fortune to repair once the warranty expires. The 10 year cost of maintenance for BMW for example is roughly $17,800 vs. $5,600 for Toyota. (Consumer Reports data.)
@@randomrazr According to Consumer Reports, the Lexus average maintenance cost over ten years is listed as $7,000. Mercedes Benz and Audi ten year cost are at $12,900, and $12,400 respectively.
We're in the keep on driving it camp. We've had virtually all of our cars for > 10 years so the resale value is going to be low. Current car - Volvo V70 - will be 19 years old shortly. We're not counting on getting anything much out of it when we get the new car - XC60 T8 - but it's been a good car for all of those years so it was worth the money.
Love your videos! Super excited that you did one on the financial obligations of vehicle owning, and the true cost of ownership of a vehicle. It's also important to keep a monthly budget in mind. It doesn't really matter what your vehicle is worth at the end if it's outside your budget from the start because it has "traditionally high resale value". I just purchased a 2020 MINI Countryman S All4 last week, which I didn't really even consider until I watched your review of the '17 or '18, whichever one it was. Something that I think is important to keep in mind is that no matter what the vehicle ends up costing over the length of ownership, it still needs to meet your monthly budget. I realize that my Countryman isn't going to have the resale value percentage of its sisters, X1 and X2 (I cross-shopped the X2 with the MINI), but it gives 99% of the BMW's experience at 80% the cost. In my particular area, Wichita, KS, the BMW X2 was going to be about $50/month more expensive to finance than the Countryman, and wasn't $50/month more vehicle, not to mention, more expensive to insure. That's why I decided on the Countryman instead, and I love it!
This has to be one of your best videos ever! Very informative. It was a review for me due to experience. But I wish I had seen this video when I was 18. I wouldn't have lost so much money in cars. Keep these videos coming..
Yep. For some reason, I can buy into (literally) spending a lot for a car, but I am annoyed by upkeep/repairs that cost too much or happen too often. I'm 65 and just bought my 4th car ever, so I do hold onto them longer than most people do.
this is probably the best way to shop for a car. one that fits who you are, all your likes and financial standings. you can pinpoint the perfect car for yourself and never feel like ou got ripped off
Our(Edmund's)2018 Mazda CX-5 had a sticker price of $34,505 when it was new. After a year of driving, our odometer had about 17,600 miles on it. Assuming clean condition, the CX-5 had a private-party appraised value of $24,818. This is a 28% depreciation, which is worse than our long-term fleet average of 22%.
I bought a '16 Maxima brand new. The resale value is so low (vs. what it would've cost to lease over the time I've had it), I have to keep it; luckily, I love it! (yes, even with the CVT transmission). I'll probably lease next time so I can easily get rid of a car when I get tired of it (also. so I can have perpetual bumper-to-bumper coverage).
Here is another thing to consider. Staying with the same car brand. I have found that if you purchase the same brand from the same dealer, you will get a better deal and more out of your car than if you switch brands and dealers.
Don't know where you're seeing a new Accord for $219 per month. Maybe it was just a bait and switch ad from your local dealer. I just looked at Honda Accord lease offers at Honda.com and it shows $249 per month for 36 months, plus $2,499 cap reduction down payment for an Accord LX CVT. That works out to over $319 per month with no down payment. Most $x99 per month lease payment ads are deceptive because they hide the down payment in smaller print lower down in the page. You can have any low payment you want if you put a big enough amount of cash up front.
whiteandnerdytuba I checked a couple different areas in both northern and Southern California and it had the same lease offer I listed. If it’s not a national program, then it shouldn’t have been mentioned.
@@rightlanehog3151 I hope you are wearing hearing protection as hearing aids can get costly early on in life driving those poor crash standards, tin boxes around.
Good stuff, Alex! My concerns include safety and reliability...that’s my baseline. Then I consider features I want or need in a car. We’ve kept our cars well over a decade and were fortunate they happened to have high resale values in large part because we didn’t even put 100k miles on the cars. Now that safety technology is rapidly changing for the better, we’ll probably keep our cars fewer years than in the past.
All vehicles are safe today. Anything updated or redesigned since 2013 should have small over lap crash integrity on drivers side. Even safety features cannot stop accident as from bone head drivers. Subaru is no different. www.usatoday.com/story/money/2019/08/12/car-accidents-subaru-crosstrek-involved-most-at-fault-crashes/39934165/
@@normt5463 Some are still safer than others. Take the Ford Explorer 2019 model because you can still get a new one. They never did well in an overlap crash, and other makes had outstanding ratings.
I like your video's ample, useful information!! My story was what not to do. I purchased a VW that was expensive to keep running. The payments were expensive too. The warranty was only 2/24 but VW agreed on many things to stretch to 50k. I refinanced it but that caused my total payments to balloon in long term. I was never comfortable sitting for very long in the car and it messed up my back. Manual seats can suck. Sometimes I overadapt but the real issue is that I was forever upside down on my loan until the ten year mark. So I was stuck with it. My next new purchase I opted for Honda reliability but have lost out on comfort. Now I believe comfort should always be #1 because you only get one body in life regardless of expenses.
Never pay down on a lease. If you put 3k down on a lease and total it out leaving the car dealership, you will be out 3k. If you're getting a lease . Pay as little as possible when you get it.
I was amazed at how many of my friends were "buying "all of these expensive (and unreliable) luxury cars. Then most of them admitted that they (or their company) were leasing them. THat explained why they were driving around in expensive junk, when I knew they wouldn't have otherwise spent their money foolishly. Ive been buying a Honda/Toyota and been keep them for 9-10 years (about 100k mi) and have been happy with this arrangement. I suppose if I could write off the lease payments id do the same.
John Hanks That’s not true. Cars don’t last forever. Plus look at a the amount of money you’ve paid out in 5 years and consider that you always have a warranty with a lease AND with most luxury brands, your regular maintenance is covered for 3 years too. After 10 years, you’ve paid $50k on an Acura, but had you leased one, you’d actually have paid the same, except you’ve always had a warranty and a new car with the latest safety equipment. You think people with money are dumb? Believe me, that’s not the case.
I mean there are a couple schools of thought if you always want a new car then lease. As he says in the video if you want to keep it for 3 years you should lease. If you want to keep a car for 10 years then buy one. I buy used luxury cars cash and drive then 200k miles. No payments just cost of maintaining then, plus registration which is crazy where I live.
I love vehicles with poor resale value. I just bought a 2013 Genesis 5.0 sedan with 44k miles for $16k. Fastest, most luxurious vehicle ive ever owned. I would never buy one for $50k, but Hyundais poor resale allows you to get one lightly used for extremely cheap.
Often overlooked, but I was recently reminded that resale value matters if your vehicle is totaled in an accident. I was planning on keeping my paid off Subaru Forester for many more years, but I was rear ended and it was a total loss. It held its value well though and I walked away with a check for 50% of my purchase price on a 7 year old vehicle with 85k miles.
How much did you pay? Used 2012 Forester's are $9,000-10,000 around the country. Just those head gaskets replacment alone would eat at that resale value
If you talk about purchase price vs insurance payout, there is less difference than you think. As I discuss in the video, “resale value” as normally discussed does not take into account actual pricing. This skews the % in flavor of cars that sell close to MSRP and disadvantages cars that sell well below MSRP. However if you take a look at actual price paid vs trade in value or insurance payout prices you’ll see the percentages are much, much closer.
I factor many things at time of purchase not just resale value I never lease I usually keep my vehicles around 5 to 7 years , sometimes until it's useful life is done like my Yukon Denali my old Trip family hauler I had it since 2002 350k and still functions great only replaced water and fuel pump once I do most of regular maintenance sometimes more difficult things I take good care of my vehicles my last vehicle is a 13 Infiniti g37 lot of people didn't recommend it but I still bought it 83k later it's been completely trouble free and I truly enjoy driving it ,driving dynamics is high on my list when purchasing vehicles,great analysis Alex it will be very different for everybody but we still need to inform ourself when buying a vehicle.
I never worry about resale value because we typically keep our cars 10-14 years. I mostly focus on type of car we need and features wanted in our budget range to get a top 3-4 choices. Then I check reliability first, then factor in a guesstimate of the operating costs over the life of the car. Our 2017 Chevy Bolt EV will get less expensive the longer we keep it and it's just my commuter car. So average of $18 a month for fuel and no maintenance costs make it the best vehicle I've ever had. By the time our Forester needs replacing EV's will be the majority of the market so it's our last ICE car.
I own a 2003 Honda S2000 at 22,000 miles it's trade in value is around $16,000 or 50% it's $32,000 original price. Cars that were produced in small numbers and not available anymore hold their value best.
I keep my vehicles for eternity. Resale value is not important to me either. Total monthly,yearly, interest etc cost is. I'm currently comparing the new Toyota Rav4 le and the Mazda CX5 sport. I found that even though I can get the CX5 for $2200.00+ less than the Toyota, the insurance and fuel cost on the CX5 would be more. The Mazda would have a cheaper monthly car note but the Toyota would be cheaper each month total and in the long run. Also, unlike Mazda, Toyota dealer car service centers are everywhere you look. I also think Toyota's port injection/direct injection combo would be less maintenance than Mazda's direct injection only with cylinder deactivation.
I very much disagree. Resale value is very important for most people as it matters most if you are keeping the car for the average 3-5 years. I leased a high resale value vehicle (RAV4) in 2016, and when I wanted to flip it 1 year before lease end I actually got a positive equity (ie the car was worth more than what I owed for the remainder of the lease plus the buyout). Instead of paying penalty for early return like most leases, I got an extra incentive for a new popular SUV. Most car reviewers unfortunately have a conflict of interest and they won’t mention these issues for new car reviews because they don’t want to upset car manufacturers as they will stop getting invited to new launches etc..
I traded in my car to the dealership and regretted it since. Luckily i took over my wife's Crv payment and made up the loss plus i didn't have to pay taxes. I personally like reliable SUVs with a high resale value like a Honda or Toyota. To me, leasing is like making a deal with the devil himself. And i only use credit unions for my loans. I keep my vehicles for about 8 to 10 years.
I'm a buy and hold type, so resale is irrelevant. I've driven two vehicles since 1989, and I'm still driving the second one. I use a balance of three criteria: what fulfills most of my needs (daily driving and business), what I will enjoy looking at each day in the driveway, what has the lowest cost to keep long term. I identify what those vehicles are and I look for the best deal I can find - even if it's quite a distance.
When I sold cars most of my customers did not care at all. They knew if they bought new were taking a loss, leased, bought used to have someone else take the hit before them, or drove them into the ground. And never BUY luxury, always lease. I sold Toyotas.
I beg to differ Jay G, because "usually" if your vehicle has a high(er) resale value it's indicative of past reliability track/trend. And that "reliability" means something, even if I don't sell in 10 yrs, but hand it down to a family member going to high school or entering college.
@@thejake8099 I currently have 4 cars. The oldest 40 years and newest 13 years! The highest mileage one only has 107,000 miles on it! Think of all the money I have saved over the years and still enjoy the use of 4 vehicles. And insurance and taxes are almost nothing!
@@thejake8099 Resale value is based only entirely on the "perception" of the brand and rarely is it ever a direct reflection of the car itself, Ford for instance has poor resale value across nearly their entire lineup but entry's like the Ford Fusion are very, very reliable. It also fails to account for cars that are fully redesigned or if they are the last model year of that generation, recently refreshed cars typically have 2-3x more issues than one does from the end of a generation for instance. You pretty much need to judge a model of car as a stand alone entry, because every brands have good cars and bad ones.
@@BigHeadClan I'll disagree and for reference, compare Japanese vs American vehicle reliability from 1970-1990..there's a reason why Japanese vehicle's have consistently "perceived" as reliable and were/are...from then to 2020... I'm not talking about a 90 day ownership survey. When they'd introduce a new vehicle, there was less chance it'd be in the shop monthly, again, past track record...So Honda, Subaru, & Toyota were/are able to command higher prices and still do..heck Ford is about stop selling all those reliable cars..and just finished a class action suit on the Ford Focus, that's without doing a Google search.
@@thejake8099 Cars from 30-50 years ago have nothing to do with modern automakers or the vehicles they sell today, and I wasn't talking about the first 90 days of ownership but long-term over 100,000 miles. Case and point Hyundai/Kai was one of the single worst brands in the world in the 90's, but today they are one of the best value of any of the brands and offer far longer warranty that most other manufactures. German cars were considered some of the best you could buy back then as well, now they are plagued with issues. And if you want to discuss class action lawsuits nearly every brand has at least one against them right now, Nissan just settled for the CVT fiasco for 2009-2015 models, had rust issues from 02-07 for their sedans. Subaru frequently had timing belt and head-gasket in the early 2000's, Honda & Toyota had massive oil consumption issues in 2009-2012 with Honda frequently having electric issues on most models today. Every automaker has its issues, which is why you need to evaluate every model of car on it's merits right now... Not where they were in the past because things change.
My first new car purchase was a new Ford Focus, 2000 model year. I planned to drive it until the wheels came off. It flooded, 1 year later in Tropical Storm Allison. After that depreciation hit, I never bought a new car again.
Wow this is a great explanation. I guess instinctively I have been focusing on cost of operation. I buy efficient used cars and drive them into the ground for 8-10 years. I wonder about leasing because of the mileage restrictions. I track my mileage and drive right at 15k miles per year. Aren't leases based on 10k or 12k miles a year?
15K is tricky although there are leases that will do this by default (and you can always add miles to the lease), but generally if you’re OK with an 8-10 years lifespan then you’re on one of the least expensive paths available as that will always be cheaper than 3+ back-to-back leases over the same time.
I believe for most cars resale value is related to long term reliability. We keep our cars as long as possible so reliability is important that is why we have typically bought either Hondas or Toyotas. Currently we have three Hondas at 2017 Accord, 2007 Civic, and a 2003 S2000. Previously we had a 2003 CRV with 265,000 miles and we would still be driving it if not for it being wrecked. We also have a 51 year old Corvette. Guess which one is the least reliable, off course for that one it does not matter,.
100% this. my wife's 2013 camry has been paid off for several years, it has no issues and current goal is run it to around 2028 unless somethign major happens to it. by then we have extracted basically all of the value out of it and use.
I choose to not lease vehicles. I always finance and then when the loan is paid off and I receive the title I hang onto it for another year or two meanwhile saving money so when I trade the current in with a sizable down payment, I may get a $100-$200 monthly note and that’s livable but the first car is the killer that most screw up on. That’s just my view on it and how I’ve done it.
Fascinating how many people tout moral superiority for buying cheap cars and driving them into the ground. Whether you can't afford anything better or make a conscious decision to carry yourself and your family in something less safe, that choice is just as valid as someone leasing a BMW.
Alex on Autos True, but I was talking about a 10-year-old car vs a new car. We know from Grand Cherokee and Explorer offset crash test failures that old platforms just don't hold up.
Based on my experienced, resale value only matter to the seller. If youre the buyer (90% of the people) you have no rights to brag resale value when the seller just made you pay full priced.
I really used not care about resale. I wanted the latest and the best. In my 30s I leased total of 4 cars , all BMW 3 series, for 36 months. Then I bought my last car paid it off early and kept it for 9 years. It was a 06 Z4 M Coupe. The resale was great. I got about 40 % of what I had paid for. Used that money and paid off my current car that is now 5 years old. Planning on keeping it for another 5 years at least. It’s a M235i. Not having car payments is heaven. I’m 50 now and much more financially responsible not to get into crazy leases and continue make monthly payments.
if you had a M240i I would have said to hold onto that car for as long as you can, BMW may end up going FWD with the next generation 2-series which would immediately turn the previous generations into a bit of a collectors item. The M235i is still an awesome car but it does have the older N55 engine which hits reliability issues over 100K mile... Either way enjoy the car while you can and just keep an eye on where BMW is taking the brand over the next few years.
I bought a Tundra. I liked it. It’s what I wanted. Lucky me it has great resale value --- if I wanted to trade it in or sell it. Hanging onto it fir now.
The domestic trucks are discounted more off of MSRP and will be similar prices as your Tundra down the road. As Alex mentions true cost to own is more important than resale because if it cost more to buy and drinks more gas your psuedo resale will be gone.
@@normt5463 You missed the part where I said I liked it - the biggest reason I bought it. The resale value is a perk. KBB has cost of 5 year ownership numbers - Tundra 3k above f150 and 3.5k above Ram. Also in 114,000 miles the only time it was in the shop was for a broken leaf spring (and oil changes/rotations). Having my vehicle is as important as well. That's not to say that other manufacturers don't have vehicles that can do that but as a whole the Tundras are known to have less issues. I'm not bashing any makes - I have always had the attitude of you enjoy your ride and I'll enjoy mine. I love that we have choices. The Tundra was mine.
@@chucknorris5141 Cost to own does include purchase price? KBB only uses MSRP so when you factor in almost $10,000 less for a domestic truck you are really getting a Japanese raping!
Higher demand vehicles with higher reputations of reliability tend to have better resale value. Total cost of ownership for lower resale value/lower reliability may be higher cause you may need to purchase a extended warranty, repairs, etc. Years ago I bought a new last gen Toyota Tacoma for $4k off MSRP at $24k, drove it for nearly 3 years and sold it private party for $19k. No repairs and still under warranty.
Leasing is the most expensive way to own a vehicle as you are paying for depreciation plus dealer profits. Better buying 5-7 years old from a private party with good maintenance history and keeping for another 7-10 years.
Aye it's what I've done for all of my cars, got 6 years out of my 02 Altima that I paid 7K for when the previous owner (my old man) paid nearly 30K. And even then when it got written off I repaired it and sold it for another 2K the thing is still on the road actually at nearly 250K miles. Currently driving an 09 G37 which cost me 13K 2 years ago, about to do my first actual repair work on it which is new end-links for $250. lol
Resale value is more important to used car buyers, since there's money to be saved buying a car with lower resale. Depreciation isn't linear, it declines exponentially with age (more early on, less later). 3 yrs is generally the sweet spot to balance value with wear and tear for buyers interested in long-term ownership.
Excellent commentary! The only thing I would add since there were comparisons made between purchasing and leasing costs is that there is more and more lease return costs to be anticipated as car companies have turn this process into a big cash grab/residual value purchase incentive which usually turns out to be a bit more expensive.
People who buy used cars tend to complain about resale value and the initial hit of depreciation. If they prefer to keep a car until the wheels fall off, then I actually argue buying new. It’s all wear and tear by you, not someone else. You get warranty and lower interest rates. In theory, you could keep the new car longer than the older used car.
Plus you control the maintenance and driving habits. With a used car, you don't really know how it was driven. Carfax and others have lots of info, but not all.
jamie t, another crucial point, the conventional wisdom to buy used can only go so far. You need someone to buy new or else there are no used cars. Furthermore, if people only demand used cars, that further drives the price up to the point that the savings can be negligible compared to a new car.
Why buy OR lease? The average car sits 95% of the time and is constantly losing value. OUCH! You have to park it, secure it, maintain it, feed it, and insure it. Soon you will be able to Uber or Lyft your ride just about anytime and anywhere, no driver tip required! That should cover about half the population. You can also ride share, rent a car, walk, ride a bike, get a taxi, or ride on public transportation. Question car ownership!
The ONLY time you should ever lease a vehicle is if you have another vehicle in the household you own. I have seen more people get screwed on this. Husband and wife both lease, jobs are great they have a kid, rent a small house ect. 3 years down the road when lease time is up now theres 2 kids and mom cant work as much because of the kids and 2 kids means more money on supplies and the older one is getting ready for school and the lease for moms car is up and they can't afford a new lease so now they are stuck with one car where that one has a lease up in 8 months so now they need to figure out how they are going to get another vehicle before the 8 months is up. You can not predict what will happen in three years. 2005 was great, 2008 was the biggest recession since the great depression. I own my jeep and my mother leases her sonata. If in 2 years we can't afford a new lease, we are still guaranteed to have my jeep for as long as its registered and runs. 1 car will make things complicated, but 0 cars makes it even worse. Leasing should never be your first option, you are ALWAYS better off buying used if you can't afford to buy a new car, period. Don't take it from me, go ask a real financial adviser and see what they have to say. Also KBB is wrong on so many levels, they will give horrible values to realworld better vehicles while promoting values of terrible vehicles. If you are ever selling a used vehicle, sell it on your own. Never trade in unless a dealer gives you some unicorn deal because you can get what dealers sell it for if you have the paperwork to support the vehicle is worth (history of servicing ect, which is free, just save the reciepts from mechanics or autoparts stores in a file).
I bought an accord 2013 for 28,500 and traded it after 6 years of use for 14,500. True cost after 6 years = 14000. It would cost close to double of that if I had leased the same car back to back.
Resale value doesn’t matter whatsoever to me because I keep them forever (current one has 186k and is 15 years old. I buy it new, service it regularly, and keep the interior up. When I get sick of looking at it (as is the current case), I will sell it to CarMax and get whatever the book value is for it. I’ve had my use out of it and it isn’t going to make me any money anyway. That’s just me. 😉
In Australia new car sales are plummeting due to GM , Ford and Toyota withdrawling manufacturing. This combined this tightening of consumer credit thanks to a recent Royal commission is strangling the market. traditionally Toyota and in my experience Mazda hold values better than most but because of their common place availabilty it can work against you. At purchase I drive a very hard stance as I have sold cars previously . I work towards the dealers hold back profit margin and always choose the perceived sweet spot in the range for future desirability . I then mother my car with as much care and attention humanly possible for the second most expensive purchase most people can make. I have always placed a high regard for safety so if that means a few thousand dollars in depriciation Im in
I thought it doesn't matter until I figure out it does. I drive a lot(20k plus each year), so lease isn't an good option. I bought my S60 at an incredible price but now it is worth nothing at the moment and the worst is no one is buying it. At the meantime a cheap when new Accord and Camry can still easily sell for more. I recently sold my wife's Mazda at a reasonable price (little higher than trade-in value), I got bombed with all inquires. I used to be a firm believer that it doesn't matter but now I changed.
I've owned half a dozen used cars that I paid under $5k for. I kept each for 1-2yrs and resale value losses were minimal ($1k or less), but repair costs during the 1-2yrs ownership on the more problematic cars were averaging out to basically a monthly lease payment on a new compact economy car (usually somewhere around $200/mo). I got tired of dealing with buying other people's problems and being left stranded several times, so I started buying new economy cars with the intention of driving until the wheels fell off. Unfortunately, all 3 I've bought since 2012 have had major problems within the first 2yrs of ownership. Not all repairs covered under warranty due to exceeding mileage limitations. Loses on depreciation alone were as much as $8k each after only 2-4yrs. The first new car was showing early signs of needing a $5k transmission replacement the 2nd year of ownership, which would have been out of pocket, since I was about to exceed the 60k mile powerteain warranty. I traded it in. The 2nd new car was rear ended and totalled after 4yrs ownership. So again I took a huge hit on depreciation. Now on my 3rd new car in only 6yrs, this car has NEVER run properly. Engine issue. Dealership won't do anything for me currently. It's a long story. The amout of resale value lost over the last 6yrs would buy a whole new car! So I'm thinking the cheap used car route is still the least costly option based on my experiences. I completely agree with Alex that buying new only makes financial sense if you plan on keeping the car a long time (always my plan with the 3 new cars I bought, but we see how that turned out). Short term, a lease makes more sense. The only catch is, leases have strict maximum mileage limits and you'll pay extra if you exceed the limit. So if you're driving, lets say, 25k miles per year like I was, it might more sense to buy than lease. Not sure though.
@guy proulx why is that? If you're going to say I should have bought a Civic or Corolla, those cars have significant problems now too. They just cost a lot more.
I have a 2015 Ram 1500 and it's been great so far. I'm planning on keeping it, but I do wonder how long modern vehicles will last. I had a 96 Chrysler mini van that I got used, and by 2006 some parts were unavailable because it was 10 years old. At least with the Ram they've sold a bunch, so that should be less of an issue. When I bought my truck, resale wasn't on my radar as I intend to keep it. Comfort, capacity etc was what I looked at. And price of coarse.
I've had several new cars. A 1992 Ford Escort - my grandson has that one. A 1998 Jeep Cherokee - my nephew has that one. A 2004 Silverado -still in my driveway and hauling crap. A 2009 Honda Accord - my wife's. And a 2018 Jeep Cherokee - my daily. I don't give a whit what resale value is, because if it's a good deal, then it's a good deal. I have had several used cars as well, and believe me, I got my money out of them.
Lease payments are directly affected by the residual value of a vehicle, so it does matter. The lower the end-of-lease residual value is, the higher the lease payment is going to be. Lease payments are basically the total depreciation of the vehicle over the term of the lease (MSRP - residual) + fees/taxes divided by the total lease term in months (to put it very simplistically). So the lower the residual value of a vehicle, the higher the lease payment due to the higher depreciation. This is why certain vehicles, like American cars, tend to lease poorly. Their residuals are so low, the lease payment sky rockets. Manufacturers can help offset a low residual with a low money factor (basically the interest rate on the lease), but it doesn't always cut it. Volvos have terrible residual values, but they tend to also offer very low money factors, which makes the leases halfway decent. The best leases are normally BMW or Mercedes because of high residuals and mid-level money factors.
This is not always the case, well, not directly. You see, luxury car companies especially will use their own residual estimate based on nothing other than getting the lease rate to where it needs to be. This is why so many options in lease heavy categories lease so similarly. This is less of a thing in the mainstream but in the luxury segment the named residual on your lease likely has little to do with the actual value at the end of the term.
I guess I'm in the keep it category. I have a loaded 2007 saturn aura with 63,000 miles in great condition. It doesn't have all the new safety tech, but I think I will still keep it.
I'm only interested in resale value because I buy used, and I like to see how much a car I'm looking at has depreciated, and how good a deal it is. I've only put 14k miles on my car in the past 25 months, and I hope to keep it until it dies, or we're no longer allowed manual operation of a car on the highway. We'll see which comes first :)
You've provided some excellent information here, Alex. For reasons that you clearly stated, I've been leasing my vehicles every 3 years since my retirement. The upfront costs are less and I know exactly what the residual value will be once that vehicle is at the end of said lease.
I don't really care for resale. It's nice to have, but I usually buy a new car, pay it off in five years, hold onto it for 3 more years, and then I decide either keep it as a commuter while adding a second car or trade it in for the down payment on the new a new one. But like Alex says, I keep it for a long time where the value basically vaporizes. I do take care of it, but not so much to retain its value but rather because I want it to stay reliable and quite honestly I enjoy keeping it running and looking like new.
I still keep in 2020 Toyota Prius 2005 bought brand new with no resale value whatsoever and even changed the battery in 2015 being in Louisiana was out of warranty and still believe its a better value and low cost of ownership than purchasing or leasing a new or even a preown car.
@@normt5463 The car had an issue the leaking rain shortcuted and made 2 cells bad. Should I know and fix it ftom the beginning the battery would be good for 20 not 10 years. Then consider 3200 usd price tag spread for 10 years which way better than any car paiment monthly.
Well, since my 2nd vehicle gets twice the MPG as my first one, I would probably be keeping my 2014 PiP for more than 13 years; assuming nothing major happens that will require me to get a newer one. My 1st vehicle had 22 MPG; 24 MPG if I was lucky enough. So my PiP is all worth it taking into account I drive 3x more miles than before. Recently, I have started upgrading the interior of my Prius Plugin. I do not plan on purchasing a full EV as an additional vehicle, but maybe hydrogen powered once the infrastructure matures.
Excellent info Alex, thank you 🙏🏻! For those of us that get new vehicles every year, or that enjoy modifications that are not easily extricated, traditional financing, or paying ca$h may be path of least resistance. Thanks for all your incredibly high, consistent, content 🙌🏻!
Resale value is pointless because it is based on MSRP. If resale was based on actual sale price then most vehicles, (not high priced luxury cars), would have an equivalent resale value. Cars that sale at MSRP will have a high resale value, and if cars sale with discounts and rebates taking the price below MSRP, then that car will have low resale value.
Resale is important to me. I typically keep a vehicle about 3-4 years. I do alot of driving yearly so I would get killed on mileage at the end of a lease since I have just one vehicle.
If you drive a great deal and keep a car for 4 years, then fuel economy should be your #1 factor with a blend of purchase and resale value second. In this example for instance (in the video) the Rogue with lower resale value would still be less expensive because it simply cost less. However, the rebuttal would be the RAV4 hybrid which would save enough fuel to come out on top despite the higher costs.
Michael Hatfield Also, trade in value is less than resale value. If you trade in your 500 for another Fiat, the dealer might sweeten the deal because they want used car stock (assuming it wasn’t trashed). Otherwise, the dealer will just sell the car at wholesale. It sounds like you got a wholesale-value trade in price. I’ll bet you could have gotten $10K in private sale. Condition and miles matter-- a ton.
Lease tells me you bought too much car for your income. I buy a car that will be paid off in 3 years when a typical lease ends. Drive it until 200k miles or about 15 years. My experience after 200 k miles the repairs get too expensive to justify keeping even with a Toyota.
Norm T, Seatbelts are the most important safety feature followed by airbags. My 2000 Chevrolet Silverado has both seat belts and airbags and I feel safe driving a 5,000 pound 4x4 pickup on the freeway buckled up.
I have never considered resale value when I buy a new car, and I always buy new. I probably should lease because I drive very little, low mileage, but I always purchase and pay cash.
i use to look at resale value, but not anymore.. i have owned Toyota, Nissan, Hyundai, Suzuki, Mazda and now Kai depending on what the vehicle is being used for my Toyota needed almost as much maintenance as any vehicle in its class for a heavily worked vehicle, Honda's suspension components made it too expensive to ran.. so it boils down to need, use, cost to run or cost of ownership vs resale value
I bought a new ‘84 Ford Ranger (regular cab, 4 cylinder, 5 speed). It depreciated all the way down to $500 when I sold it (after 19 years). I still have the ‘96 GMC Suburban (2 wheel drive) that I bought new 24 years ago. Now I am getting worried about its resale value. 🤔🤨☺️
My next car will likely be in the 3-5 years or longer worth of keeping it. The lower end of the price range would be something certified preowned-type in the more reliable camp (Probably Toyota unless there's something else out there). If I can wait for a new car, it will be end if year or early next, and whomever makes me the best deal.
Pretty much any GT2, 3 or 4 Porsche will appreciate in value. My old mans co-worker bought a 911 GT3 and Porsche came back to him a year later and offered him 40% over the price he paid when the car was new because there was a huge demand for that model. lol
