[quote=heywood]A prius is not a good example because of the batterys etc. so may have a large drop in value beyond a certain age.
Your calculation is no good for a general case though. Assume a car depreciates a constant percentage each year then apply that to the purchase price of new vs used and you will get a better idea of the real situation.
i.e.
13k @ 12% year = ~6k loss (sell for 7k)
24k @ 12% year = ~11k loss (sell for 13k)[/quote]
heywood, the highest percentage of depreciation comes off the first 3-6 years of life, depending on the vehicle.
And once a vehicle is officially “old” (15 yrs?), its market value remains pretty constant, say …. $1500 – $4000 for typical mass-produced Japanese models … higher for well-maintained “Limited Edition” vehicles.
So your “constant depreciation” calculations are in error.
UCGal is correct. The “branded” dealers have a $3K+ (per vehicle) used-vehicle markup over the KBB Private Party value on their “Certified Used” vehicles. These “mainstream” dealers do not usually keep trade-ins that don’t qualify for their Certified Used programs unless they are extremely well-maintained. (The buyer won’t get the CU warranty with them, however.) With these rare finds, a buyer can score a great deal at a branded dealer if paying all cash. The same is true if a buyer is purchasing from a 2nd or 3rd tier dealer (of older used vehicles of various makes) who offers financing to the less-than-creditworthy where they carry the notes themselves. Trade-ins are normally taken in by dealers at $7K+ less than the KBB Private Party value.
The lesson here is to sell private-party and then buy private-party (in that order). To obtain the maximum-value replacement vehicle for your money, it involves paying all cash for a 6+ yo vehicle or have your own pre-approval from your bank/CU waiting and taking the seller with his/her title or registration/lien note (if a PP) in there with you to complete the transaction in front of a bank officer.
As everyone knows, in order for a PP seller to obtain the highest price for their vehicle, they must thoroughly clean, detail, possibly make repairs, advertise and show their own vehicle until it sells for a price they will accept. MOST people don’t want to bother with all of this. That’s why the masses get ripped off royally on trade-ins, new vehicles and in dealer “certified used” programs repeatedly throughout life, ESP if they let the dealer finance them or locate financing for them, IMHO.
edit: the above post assumes the vehicle traded in or sold is 6-8 years old and has a KBB PP value of $17K – $25K.
