November 11th 2005.

There are three kinds of used cars:

1) Those that are overvalued because they are popular or have a reputation for quality and reliability.

2) Those that are cheap because they are really nasty.

and

3) Those that are out of favour for no really good reason and are being shunned by the buying public.

Category three may not find you a ride that sends tingles down the back of your spine, but it will find you,
let's say, a winter beater that allows you reliable transportation while your Lexus or Ferrari or..............whatever,
sleeps in a warm dry garage.

Lately, I suspect that both the Ford 500 and the Saturn LS series fall into this category, as time will tell.

So the decision to buy a brand-new car needs very careful consideration.

The question of why people spend a huge amount of money  on a new car when they could spend a lot less on the same car
after someone else has broken it in (and that toxic "new" smell has dissipated),  has never been satisfactorily answered.

Nor do the arguments trotted out by those who spend their money on a new car withstand much scrutiny.

Yes, you can choose the specification yourself but, unless you’re dealing in the esoteric, you’ll be able to find the same car with
the same equipment on the second-hand market.

Worried about the car being stolen, or having had its odometer turned back?
Buy from a dealer or the original owner, armed with a file full of maintenance records and the chances of buying such a car
are minimal.

You don’t like the idea of someone else having run it in?
Cars are built to such fine tolerances these days that they need a minimal amount of break in and are so strong that they
have to be thoroughly thrashed repeatedly from stone cold before you’ll do any damage.

Concerned it will break down?
Shop in the nearly new market and buy close-to-new-car reliability, miss the teething problems, enjoy the remainder of the
manufacturers warranty and still save yourself a packet of money.

Even so, 30% of all cars sold this year will be brand-new.

For the other 70% of us, the nearly new market offers conspicuous bargains.

The temptation to go for the fastest-depreciating thing on wheels is clear but to be resisted — no car ever lost its value quickly
without a reason. On the other hand, buying a used version of the best car in the class is also likely to cost you proportionally
more as a used proposition.

What’s needed are good cars that, for some reason unrelated to quality or reliability, lose their value more swiftly than they should.

Take a PT Cruiser: a good car and  unlike its Neon cousin, reliability has not been an issue.
It is still one of the most fun “shopping” carts on the market.
Yet because of a recent $5000 discount when new, and because it’s about to be replaced, second-hand prices are rock bottom.

It works with family cars, too. The Hyundai Elantra has been replaced and woe betide anyone who has just spent lots of money on a
new one. In little more than a year it will be worth less than two thirds that amount despite still being a good car with near-as-dammit
guaranteed reliability.

The issue here is image: It's the "Pony hangover", it’s just not cool to drive a Hyundai.

And, as a very broad rule of thumb, the more expensive the car, the bigger the bargains.

Even the best names incur savage depreciation. A new $ 61,600 Lexus GS300 will be worth just $ 39,900 after 18 months.

To save you the math:
If you buy new that’s more than $ 278 a week, every week down the drain in depreciation.
If you sell it after 18 months, the person who then buys it will incur less than half the depreciation in the next 18 months.

Or how about really pushing the boat out? A new high end Audi or SAAB depreciates like mad.

Buy a 2002 non-turbo model with less than 60,000 kliks on the clock and you’ll save yourself almost two thirds of the new price.

The math here is somewhat easier:
When new it equates to more than $2 a Km in depreciation. So if you drive your kids five Km to school and collect them at the
end of the day, the trip will cost $20 in depreciation alone.

Sports cars, because they are desirable, are more resistant to depreciation but not all are immune.
The Z series BMWs suffer from a styling that is not to everyones' taste.
It should be stressed that cars do not always depreciate because they are bad cars.
They are very often good cars that depreciate heavily despite their inherent strengths.

Anyone can pick up a Daewoo Nubira on the second-hand market for next to nothing, but that means it is merely cheap,
not a bargain.

So what’s the best nearly new of them all? If you're a passenger, not a driver and don't care about performance,
the 2004 Oldsmobile Alero is now a great bargain.

As a $ 30,000 new car, you should have kept as far, far away from it as possible.

But now,  just one year after it disappeared, you can pick up the same, comfortable, refined and lavishly equipped executive
sedan for a lot less than half the money.

That is what I call real value.