Would you buy a 2-year-old used car or a brand new car that is 15% or more expensive?Here's the math I'd use to figure out the answer if I were you.
1. A car lasts 11 years or 160k miles (on average, based on what's on the road today). That's probably a worst-case scenario for whatever it is you're looking at, as cars have continued to improve in terms of quality.
This also assumes about 15k miles of driving per year.
2. Depreciation is only a considering if you're going to buy and then trade/sell the vehicle in the short term. The typical vehicle is worth 40-50% of MSRP after 5 years, and beyond that it's all about condition.
Calculate the percentage of vehicle life left both in terms of mileage and years. Then, compare that to the discount you're getting.
..UNLESS you plan to get rid of the car in 3-5 years. If you're not going to keep the car long term, take the discount now. :)
Well, don't know if I'm rich, but I do almost always buy low mileage used cars. The only new cars we've bought over the years are maybe the family hauler, that were almost exclusively leases.
15% more expensive is an arbitrary amount I understand. But late model, low mileage used cars, are nearly identical to new cars most of the time, and can be had at a substantial discount. Our Mercedes E550 Cabriolet (2012) was purchased in 2014 with 20k miles in it, for a.. wait for it.. 45% discount over sticker, and that was as a CPO car with a very long warranty. The car was like new, well cared for, and has been perfect.
Same with our Audi A3 (20% discount), same model year it was bought in, with 6K miles on it. Mustang GT, 1 year old and a 30% discount with 18K miles on it, and so on and so on.
New cars have one distinct advantage though, which is warranty coverage. Most CPO (certified pre owned) programs are total BS, and not worth the paper they're written on. There are notable exceptions, including Audi, Mercedes, Porsche, and Ford (yep, especially with their phenomenal extended warranty).
The only liability to buying used, is that you can have an expensive repair out of warranty, and it ends up costing way more than you'd have expected. But most cars are pretty reliable today, so the risk is low.
I now almost always buy 1–3 year old used cars, especially if I'm impulse buying to satisfy my car OCD. We have 11 cars now, only 2 of which were purchased new, which are a pair of Jeep Cherokees (16 and 17), mostly because they were so ridiculously cheap after incentives, that it was a better deal than buying used.
As Kevin Spinks points out, you can sometimes achieve a decent discount on a new car. But keep in mind, the dealer won't and in many cases can't take money off the price. BUT, the big but, the manufacturers are always promoting one particular model or so each month, to move inventory. One of the Jeep Cherokees (which is an awesome small sport ute) ended up costing 24K BRAND NEW, after incentives from Chrysler, off a 34K list. Not kidding. I actually paid 18K with a 6K trade on a Nissan Rogue, but my cost before the trade was in fact 24K. All Chrysler incentive money, and other programs they had. Dealer made full boat.
Theres no perfect answer. But I almost always buy used these days, as the market is so competitive, and so flooded with used cars, that finding a decent deal is usually pretty easy if you are patient. If you rush, or succumb to pressure, then you will pay more.
Depending on the car, we either buy used car or lease new.
You should run the numbers and make your own decision. Companies like to do one-pay executive leases. You can easily find a 1-year-old lease-return with just a few thousand miles on it. With a reasonable CPO program, you may be able to get a better warranty than on a new car.
On the other hand, some manufacturers have excellent lease programs at certain times in certain areas. You need to find all the loopholes and get the best deal.
To answer your question, 2-year-old is too old. I would pay the 15% premium on a new one. But I will see if there is a good lease or financing program. Some car companies will give you a special discount if you lease or finance. This is because people who make payments have better brand loyalty. You can always pay off the entire amount after a month and avoid the interests.
The rich do not buy used cars. They may buy used jets or used superyachts, but car purchases are too small to deserve their attention. (Unless it is the launch of a new exciting supercar, then a rich car enthusiast might even personally attend the event.)
Most publications have a twisted definition of what "rich" is. Making $100K-$5M a year is middle-class to upper-middle-class.
I am what many people would describe as rich, but I almost NEVER buy new cars.
I have bought 2 in my life, out of more than 100 cars. The first one I regretted immediately, and it spent more time getting repaired than getting driven.
The second was for my wife (2013 Mini Cooper S), and it was because it came with a 3 year maintenance, 4 year warranty, tire and body warranty and cost only $2k more than a 3 year old one with 40k miles. It would have cost more money to run the 3 year old car for 3 years than the new one.
I usually buy cars that are around 8–10 years old, or Porsches that are of any age.
By doing my own maintenance, my total driving costs are almost always profitable, ie cost of the car plus all running costs during ownership are lower than my resale price.
I'm 76 and have bought exactly one new car: a '98 Suburban.
Never again. .. .. That thing stranded me more times than my 20+ used cars put together.
I have always figured a vehicle's worth to be the price paid divided by the miles left in it - subject to repairs and consumables.
My ideal vehicle has always been one with less than 40k on it, older thsn most with that milage, and somewhat over-priced consudering it's age in years.
That being said; and getting increasingy paranoid about not having side air bags - and not wanting my survivors to have too much fun - I recently violated that principle in the form of 2015 Silverado with 5k on it.
I paid through the nose, but it is obviously my last vehicle and at least it isn't new.
The discount on a 2 year old car will be a LOT more than 15%.
A car that is only 2 years old, with what, barely 20,000 miles on it, provided it has been serviced by the book (and by an authorised dealer), will is not going to cost you in repairs, what it cost the previous owner in depreciation.
Members of my family and I have bought and run many second hand cars into old age and high miles. To my knowledge we have never had any real horror repairs or failures, and most of the vehicles were passed on and ran well past 160,000 miles.
The difference is that we always maintained our cars meticulously and were sympathetic when driving them.