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New or used? Buying new makes more sense than ever

Published November 15, 2012

My main role as an automotive journalist is to help you choose the right new car. That is, you’re going to buy a new car, which is an entirely different question.

There are lots of reasons to buy a new car: You get exactly the trim level, options, powertrain and colour you want; the latest and greatest in technology and safety features; plus a full factory warranty, which brings protection and some peace of mind.

There’s also a whole host of psychological reasons, including driving a car that expresses your personality, and the undeniable thrill of being the first person to drive it.

Do you sense a “but” coming? Here it is: it can be expensive.

Traditionally, the biggest cost element in your vehicle budget isn’t gasoline, maintenance or repairs. It’s depreciation. A car can lose double-digit percentages of its value the minute you drive it off the lot. Its value as a transportation device drops much slower than its resale value.

Which is why I have never bought a new car myself. Ironic? Approaching fraud? How can I tell you what new car to buy if I never buy one myself?

Well, as a freelance automotive journalist, cost is a major issue for me. Plus, I drive new cars all the time, and get paid for it!

So, in a magazine dedicated to the joys of new cars, why am I telling you to buy used? I’m not, because the rules have changed. It may, in fact, pay to buy new these days.

There are two major reasons.

One: lousy sales of new cars over the past four years, as our financial system teetered on the brink, mean fewer used cars are available now.

As a result, used prices are higher. The difference between a year-old car and a comparable new one can be as little as a couple hundred bucks. So if you can’t save big time buying used, why would you?

Second: with today’s world-wide glut of vehicle production capacity, sluggish sales in Europe and even China, car makers are desperate to return to the days when they could sell everything they make.

As a result, incentives have seldom been higher, or more consistently spread through all price ranges, than they are now. You never used to see “money on the hood” of BMWs or Mercedes, or even most Hondas and Toyotas. You do now.

Cash back. Low — even zero — interest rates. There’s scarcely a car line that doesn’t have at least some models with big enticements to sign on the dotted line.

Car companies are also coming up with creative ways to lure you into their stores.

For many buyers, a car purchase is based on how much they can afford out of each paycheque. As a result, you now see offers of “$119 every two weeks” instead of a monthly hit. Sure, it ends up costing the same. But just as $1.99 sounds less than $2, a bi-weekly payment sounds more affordable.

Some companies were forced to stop leasing cars after the economy crashed. Their balance sheets couldn’t carry the loans, and most financial institutions had no interest in the game, either.

But most are back in the leasing game now. With a lease, you are financing only the difference between the car’s purchase price and its projected value at the end of the term, not the entire cost of the car. The monthly hit is lower, and you can drive the same car for less money, drive more car for the same money, or split the difference.

In theory, a lease will cost more in the long run than an outright purchase, and, at the end of the term, you don’t own anything. But car companies have found that lease customers are more likely to buy or lease another car from the same manufacturer and/or dealership.

And because marketing dollars are all about getting new bodies through the door, they often subsidize lease deals and chalk the difference up to the marketing department.

Is it the right time for used-car shoppers to consider new cars?

As always, you have to be vigilant and get the numbers right. But my guess is, buying new now means buying smart.

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