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One of the oldest pieces of wisdom that people have passed around about buying a car is that it’s always better to buy a used car. In fact, nearly 70% of Americans say they would consider buying a used car, according to Cision. Is this age-old wisdom always true when it comes to used vs. new cars? What about in a strange year like 2021?
Today, we’re going to take a look at several factors that influence the new vs. used car buying decision, including factors that are unique to 2021.
When we compare used vs. new car values, we’re comparing equivalent vehicles that vary primarily based on model year. We all know that a 10 year old car will cost less than a brand-new car, so we need to compare equivalents (the same make, model, and trim) to honestly address the question, “Should I buy a new or used car?”
What’s Unique in 2021?
We all know that 2020 and 2021 have presented the world with unique problems. One of these problems is a semiconductor shortage. Semiconductors, also referred to as integrated circuits, ICs, and “chips,” are used in nearly every electronic device, which means there is a generally constant (and increasing) demand for them.
When the pandemic hit in 2020, semiconductor manufacturers had to shut down and then re-open with new safety restrictions. Doing so hurt productivity, along with the productivity of the entire supply chain.
Since it takes so much time to produce a semiconductor, it has been a slow struggle to catch up to the demand that multiple industries are placing on chipmakers.
The second issue is related to other inputs that are required to manufacture vehicles.
Earlier in 2021 there was a severe winter storm that hit Texas and knocked their power grid offline. This storm resulted in oil refineries halting production, including the production of byproducts. One of these byproducts is used in foam seats in cars. Because of this, many automakers were struggling to secure foam so that they can continue to produce new cars.
More recently, we’ve seen automaker struggle securing other raw materials, such as resins and steel.
All of these factors have made 2021 a unique year in which to purchase a car. Keep these factors in mind as we proceed to examine which is better value; new or used cars.
Used vs. New Car: Comparing Current Value
Let’s begin with the most important attribute: Value. What is the current value of the car that you’d like to buy? You must understand the current value to decide whether to buy new or used.
We recommend using our Market Price Report to help determine the value of the car that you’re after. Our report will compare actual sales prices from various dealerships in your area to determine what a fair price might be for the car.
Run a Market Price Report for the target car that you have in mind. The price that we suggest as a fair price isn’t the entire story. To understand the full price that you can expect to pay, you’ll need to click through to the website of the dealership selling the car. Read through their listing and look for any manufacturer or dealership incentives.
You may discover that there is a $3,500 rebate on your car or some sort of dealer incentive for financing that will impact the purchase price. There may even be credits or rebates that apply to certain people, such as first responders and members of the military.
Deduct the dealer incentives from the price that we’re telling you is fair and you’ll have a great idea about the current value of the car.
You’re not done yet! To truly compare apples to apples for a used vs. new car, run another Market Price Report for a used car variant of the same make and model. For example, if your new car was a 2021 Honda Accord, you might run a new report for a 2019 Honda Accord.
Do the same thing and click through to the dealership website. Notice how there are no added discounts, incentives, or credits? Used cars generally do not have any added discounts.
Now, you have an excellent idea about the true value of both new and used cars for the make and model you’re interested in. Even though you can now answer the question about which one is a better value, there’s much more to consider before you make your purchase.
Used vs. New Car: The Negotiability Factor
The price that someone is asking for a car is hardly ever going to be the actual price that someone else pays, something that’s true for both new and used cars. As such, to truly answer the question at hand, you need to consider how much you can negotiate with the seller.
When you run a Market Price Report, you’ll see a negotiability score towards the top. This score is calculated based on how long the car has been on the lot as compared to the average in the region. If a car has been on the lot for 70 days and the average in the area is 20 days, you’ll likely have some great luck negotiating for that car.
As such, when you’re comparing new vs. used car values, you need to keep in mind how much you can potentially negotiate off of the vehicle. There’s always plenty of room to negotiate with a new car, but the attitude with used cars is often “the price is the price.” Keep this in mind as you determine whether to buy a new or used car.
Negotiating doesn’t just happen when you’re haggling down the MSRP, it also happens when you’re seeking financing. Speaking in generalities, you’ll receive better financing offers when you’re buying a new car, along with having more room to negotiate on those offers. Used cars are usually a bit more cut and dry.
Used vs. New Car: Comparing Warranties & Condition
What difference does a warranty make in the used vs. new car battle? Your new car is going to come with some type of warranty to protect you from manufacturer’s defects. It may even have another warranty for powertrain components. Additionally, the car will be in factory-perfect condition, so you won’t need to worry about a pre-purchase inspection.
On the other hand, a used car is going to have whatever may be left on the warranty from when the car was initially bought. In many situations, that means there will be no warranty or that you only have a year or two left. Plus, you’ll absolutely need a pre-purchased inspection to make sure that you have a solid understanding of its condition.
Should you buy new or used? How important is the warranty to you? If it’s vital, then new cars are the way to go.
New or Used Car: Which Way Should You Go?
You should do the leg work to determine whether a new or used car is better in your exact situation. Our tools will do most of the hard work for you, but you still need to use them to determine whether a new car is better than a used car for the make and model you’re investigating.
When it comes to 2021, our conclusion is that buying a new car is generally the way to go, due to the material shortages that are impacting the industry. These shortages have raised the prices for used cars, which are more in demand, although this may change as the year goes on. While you may not have as much room to negotiate with a new car, you’ll still find more value with a new car than with a used car that has a temporarily inflated price.
Anyone looking to buy a car, whether it’s used or new, will benefit from using our Market Price Report. You can run three searches for free, which allows you to compare cars and make your ultimate decision. Head on over to theMarket Price Report and run one today!
Most people don’t look forward to buying a car. While the act of owning a new car is enjoyable enough that some people can power through it, it’s just not worth it to everyone. That’s where car brokers come in.
Car brokers can help you to navigate the automotive world on a personal level to help you buy your dream car. They can even help you to find a rare or specific vehicle.
Today, we’re going to examine what a car broker is, when you should use one, and how you can find a quality one.
What is a Car Broker?
What is a car broker? A car broker, also known as a car buying service, is basically a professional car buyer. The goal of a car broker is to level the playing field between you and the car dealership.
An auto broker is familiar with car dealership’s sales tactics, strategies for negotiating, and profit margins. They know how and where to save money throughout the entire process. They won’t fall for some of the numbers manipulations or specific strategies that might work on other customers. Instead, they’ll see these tactics coming and have a rebuttal already prepared.
Some auto brokers work for themselves or a small company, while others are part of a concierge service at a bank or credit union. An auto broker will often work for dealers and customers, helping to connect the two.
There are two ways that car brokers make their money: As a flat rate or as a percentage. An auto broker might charge everyone a flat rate, ranging from $200-$1,000. Other brokers opt to charge a percentage of the money that they saved you on your purchase. Expect to pay a retainer of approximately $100 once you decide to use an auto broker.
Car brokers can help to negotiate deals for new and used cars with dealerships.
Reasons to Use a Car Buying Service
Now that we’ve answered the question “what is a car broker,” we need to discuss the reasons that you should use one. People typically decide to use a car buying service to save time and money. Car brokers know exactly how to navigate the sales process to find any opportunities to save you money. You also won’t have to waste your time negotiating and spending hours at a dealership.
Other car buying services might be used when you’re looking for a rare or vintage car. Specialists hunt down these cars and buy them for their clients. This is a much more high-end service than the kind offered by the average car broker.
Using a car broker is similar to using a real estate agent. They help you to minimize mistakes and maximize your savings. For those looking to skip the whole car buying process altogether, this is a great way to go.
How Do You Find a Car Buying Service?
There are several things that you need to do when you want to hire a car buying service. You should begin by asking about options available through your favorite warehouse club store or the credit union that you bank with. Many types of brokers that offer car buying services may even have their fees included with your memberships.
If you don’t have a free option, it’s time to head online and look for a well-reviewed auto broker. Some attributes to look for are:
A flat fee that varies based on the quality of the car being purchased
A fee structure based on a percentage of savings under MSRP
Not taking any form of payment or kickback from dealerships
Offering services like trade-in brokering or delivery to your home
You will need to make sure that the auto broker is licensed to sell cars in your state and that they are able to abide by any other regulations that may apply to your specific transaction. Research any potential auto brokers on review-based sites to see how other customers have felt about working with them.
Deciding to work with an auto broker might well be worth your time. If you don’t care to learn the ins and outs of car buying in order to score a great deal, auto brokers are an excellent alternative. Keep in mind the requirements that we’ve outlined above and do plenty of research before deciding which one to work with.
Of course, if you want to learn how to negotiate and handle the work yourself, we’ve got a deal school that’s designed just for you.
If you’re looking for a new car, you might be tempted to investigate a new or used electric vehicle (EV). An EV is powered entirely by electricity that charges your battery at charging stations. There are a number of unique factors that must be considered as a result, such as the lifespan of the battery and the location of charging stations.
There are many aspects to consider when you’re looking into buying, selling, and trading EVs. Today, we’ll take a look at everything that you’ll encounter as you start shopping around for electric vehicles.
Is Owning an Electric Car the Right Decision?
Buying an electric car might be the right purchase for you, but it’s also not for everyone. Instead of simply heading off to the nearest Tesla dealership to check out the latest models, it’s important to take some time to consider a few unique factors that will bring entirely new variables to the car buying equation.
Just like buying a traditional car, buying an EV requires plenty of time and research before you head to the dealership. In this electric car buying guide, we’re going to go over some of the prime factors that you need to consider before you buy this type of car. We’ll cover home charging, the importance of range, and whether an electric vehicle really saves you that much money.
Is Home Charging an Option?
One of the biggest perks of an EV is also its biggest downside: No gas. While this does mean that it will have a cheaper cost-to-own, it also means that you can’t fill up on your way to work in the morning when you need a boost. You will need to be able to charge your car either at home or somewhere that’s conveniently close to your home.
If you are on a standard 120V electric circuit, it would literally take days to charge your vehicle. These breakers aren’t even rated for the number of hours it would take to charge your car fully. Instead, they are most commonly used to run your standard appliances and electronics in your home.
The other option is a 240V electric circuit. On these breakers, you can have a Level 2 charging station installed that will most likely fill you up — or at least get you close to full — every single night. Your electric oven, dryer, and central AC run on 240V.
Either option comes with a home charging setup that can be purchased and installed by a number of companies. Exact prices will vary, but as a general rule for this electric car buying guide, set aside about $1,000 to $2,000 to install a home charging station.
How long do EVs take to charge? The exact answer will vary based on the vehicle, charger, and amount that needs to be charged. On average, most vehicles take about eight hours to charge fully.
The latest and greatest charging stations put out enough power to easily stop a heart. Keep in mind that your car has an inherent charging capacity that will restrict how much power can flow between the charging station and your car. This can matter greatly when you’re buying an electric car.
You need to keep electricity rates in mind for your home, as well. Electric vehicles are measured in kilowatt-hours per 100 miles, notated as kWh/100 miles. In order to figure out how much it’ll cost to have a given car charge at your home, multiply your vehicle’s kWh/100 miles rating by the rate you’re charged for electricity at the times that you’re most likely going to be charging.
Does Range Matter to You?
In reference to EVs, range is used to describe how far a car can go on one charge. For quite some time, the lack of a comprehensive charging network was a large deterrent to the adoption of EVs. While it will certainly depend on your area, this problem has been resolved for much of the country.
You’ll need to consider where you usually drive if you plan to charge at home. You will also want to consider how often you take road trips to decide if the range limitation is even an issue for you.
For anyone looking for a nice easy daily-driver, the range might not be that big of a deal. Even people who take regular road trips should look up the network of charging stations before being deterred, since the network has grown substantially in recent years.
Electric Car Buying Guide: Cost to Own an Electric Car
Some people are drawn to EVs for their environmental friendliness. You won’t be chugging gas every time you head to the grocery store, so many people also assume that this will directly translate into saving money. However, with other maintenance purchases taken into consideration, does this assumption hold true?
Consumer Reports recently found that the average EV owner saves over $800 to $1,000 per year on fuel costs over an equivalent gas-powered car. We assumed there’d be some savings in this arena!
Maintenance and repair were also found to be about half of the amount necessary for gas-powered vehicles, with an average savings of approximately $4,600 over the life of the car.
Depreciation has traditionally hit EVs harder than gas-powered cars, but newer reports are indicating that the new lines of EVs are on par with gas-powered cars for depreciation. Teslas also tend to hold their value well, making a strong case for buying a Tesla.
Ultimately, the true cost of ownership will be different for everyone. There will be variance in how quickly your car depreciates, what you can expect costs for repairs and maintenance to be, and fuel costs.
Based on Consumer Reports, the cost to own an electric car is generally lower than a gas-powered car; however, that isn’t necessarily true of all-electric vehicles. You’ll need to research your exact cost and be satisfied with those prices before you buy an EV.
Our electric car buying guide wouldn’t be complete without mentioning that insurance rates for electric vehicles are often higher than their gas-powered equivalents. This means you need to remember to get insurance quotes while you’re shopping around.
Should You Buy a Used or New Electric Car?
Deciding between a new or used EV is a tough choice to make. Much of the traditional advice applies here, such as obtaining a pre-purchase inspection and considering a CPO if possible.
One of the main unique aspects to consider is the life of the electric battery that powers your entire car. Replacing this battery is akin to replacing an engine in a gas-powered car. This means that when you buy a used EV, you will often have fewer miles on your electric battery.
EV cars also have the potential to make you eligible for a $7,500 tax credit. Assuming that you are eligible for this credit, this can significantly offset the cost of a new EV. Only 200,000 credits were given out to each manufacturer to provide as an incentive for buying a new EV. However, many of these credits have already been awarded, and the number of credits available will need to be increased at the federal level.
Depreciation is also a factor to consider. The value of new cars depreciates once they trade owners. If you buy a new car, you’re guaranteed to lose money on depreciation, but the trade-off is that you’ll get a brand-new electric battery and the latest technology in your vehicle.
There’s a great opportunity for a flexible buyer in the used electric vehicle market. After three years or so, many electric vehicles are traded in or sold out of the desire to buy something new. Many EV owners want the latest and greatest cars out there, especially when they know they’ve been piling up mileage on their batteries. As such, there is an excellent market of used EVs available.
Leasing or Buying an Electric Car
We can’t talk about buying EVs without bringing up leases, too. There are two main points that need to be addressed when you’re considering leasing or buying an electric car.
Drained Batteries
EV batteries can cost about the same as a new engine when they need to be replaced. As such, never having to replace them can be quite advantageous. This is a major benefit of leasing a vehicle over owning an electric car. Once your lease is over, simply trade it in for a car with fresher batteries.
Outdated Technology
This point is technically true for any lease, but the technological differences that EVs have between model years are more significant. A few years of EV evolutions could greatly increase charge speed, expected distance of travel on a single charge, and battery life. Leasing to constantly have the best technology in each of these categories is well worth considering.
Look Beyond Buying a Tesla
Tesla didn’t invent electric vehicles, but its impact on the marketplace cannot be understated. Their success launched EVs into the spotlight, and now, there are EV options from many major automakers.
Let’s take a quick look into the ways that major automakers are adapting and evolving with their EVs:
General Motors: Aiming to sell one million EVs by 2025, GM has gone all-in.
Ford: This automaker already offers a handful of EVs and continues to keep developing more.
Nissan: With over 500,000 Nissan Leaf EVs sold since 2010, Nissan is still pushing to sell one million EVs by 2022.
Honda: Honda is looking to have two-thirds of all of its auto sales become electric by 2030, including hybrids, plug-in hybrids, and EVs.
Toyota: They got an early lead on the hybrid market and they’ve carried it over to the EV market with a goal of 5.5 million EVs by 2030.
Volkswagen: Over the next five years, this automaker is going to spend $85 billion in EV development.
BMW: With a few EV models currently available, BMW aims to have EVs account for 15% of its sales in the coming years.
Hyundai: This automaker has goals to sell 1 million electric vehicles by 2025.
Kia: The goal for Kia Motors is to have EVs make up 25% of global sales by 2029.
With plenty of money being invested into EVs and a large amount of these vehicles currently in operation, we expect to see EV sales soaring throughout the next decade.
While Tesla is more like buying an iPhone, other manufacturers sales are similar to their gas-powered counterparts. See our guide to buying a car in 2021.
Is an EV Right for You?
Is buying an electric car the right move for you? As with many questions that relate to the car buying experience, the answer is: It depends.
As you’ve seen in our electric car buying guide, there are unique factors to consider at every step of the way. While many aspects of buying an electric car are the same as buying a gas-powered car, there are some unique points to consider. Put in plenty of time into researching charge locations and electricity prices, along to your standard car research if you plan to buy an EV.
Car-buying myths seem to be just as common as urban legends. Nobody knows how these myths get started. We’re willing to bet they get started when someone misunderstands the terms of a deal or when they misunderstand car buying in general. First-time car buyers can start their experience off right when they don’t let these common myths get in your way!
We’ve gathered five common car-buying myths that you may have heard at some point in your life. We’ll take a look at each myth and pull it apart to find out why it’s incorrect. Let’s get started.
Myth #5: Buying a Car in the Rain
For some reason, buying a car in the rain has become a rock-solid piece of car-buying advice for some people. Every first-time car buyer beware: The rain has no impact on car sales! This idea is based entirely on the belief that car dealerships will be slow on rainy days, so they’ll be desperate for sales.
In truth, this myth has been around for so long that some car dealerships have reported being busy on rainy days. Let’s put this myth to rest and stop flocking to car dealerships when it rains.
Myth #4: Buying Cash Will Get the Best Price
We’ve all heard that “cash is king,” and while that’s true in some areas, car buying is not one of them. This myth implies that you’ll receive a better price if you walk with a briefcase full of $100 bills and offer to buy your dream car using cash.
It might seem like a car salesperson would be all over that, but in actuality, you may get a worse deal than the next customer who is financing their purchase.
When you finance a car, the car dealership is able to bake in some profit into your loan. Financing is one of a dealership’s main profit streams. As such, dealerships are more motivated to make a deal with someone who is going to finance their car than someone who is going to pay in cash.
If you want to pay for a car using cash, finance it at the dealership and make sure there is no prepayment penalty. Then, pay it off in full a few weeks later. It’ll work in the same way as it would if you had bought the car with cash, but you’ll receive a better deal.
Myth #3: Buy Now or the Deal Will Disappear
One of the main pieces of car-buying advice that we always tell first-time car buyers is to walk away if you don’t feel comfortable with a deal. As strange as it may seem, buyers can get stuck in the mentality that walking away means they’ll lose out on the car. That’s why this car-buying myth has been around for so long!
Yes, walking away from a deal will mean that you won’t get that specific deal. But next week or next month, chances are that you can get an extremely similar deal. That’s why we always recommend talking to multiple car dealerships.
The only exception to this myth comes when you’re after a limited make and model. If there’s a chance that the dealerships will run out of the car you’re after, then this myth may actually be true for you.
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Myth #2: Buying Used Will Save You Money
One of the most popular car-buying myths is that used cars are the best way to buy. The idea comes from the fact that the value of the car has already depreciated, so you’ll be buying a car that’s closer to its true value.
While there is some truth here, you shouldn’t rule out buying a new car in total. You also need to consider the cost of maintenance and upkeep that comes with a used car.
Most importantly, you’ll have far more lending options if you go for a new car. Because dealers are incentivized to reduce the time on the lot for new cars, they may be more willing to negotiate on the price of a new vehicle.
Myth #1: I Don’t Know Enough to Negotiate
Some first-time car buyers think that negotiation is a matter of knowing specific key phrases that will turn the tide in their favor. While knowing what to say and when to say it does help, knowing the value of the car that you’re buying and being confident and firm is actually the thing that is the most important.
There’s no knowledge threshold to keep you from being a skilled negotiator. Use our member solutions to determine how much you should be paying for a new or used car and confidently remain within the realms of the deal that you’d like to land.
Unraveling common car-buying myths can help you to win in negotiations. While some of the myths have nuggets of truth in them, others are legitimately bad advice. Stick with the sources that you can trust for quality advice about how to score a great deal.
Whether you’re buying a Ford F-150 or a Ford Explorer, knowing the invoice price that a Ford dealer paid for the vehicle is important for negotiations. Knowing the Ford employee pricing plans can also be valuable. Car dealers make the most money on customers who are ill-informed. Well, here at CarEdge we’re determined that make sure every customer is informed. That’s why we’re excited to share our repository of all Ford invoice prices for 2021.
If you have an invoice from a Ford dealership and you want to submit it to be added to this page, please email me directly: zach (at) yourautoadvocate (dot) com. Please put “FORD INVOICE” in the subject line.
Now on to the fun stuff …
How to read a Ford invoice
Ford’s dealer invoices are relatively simple to comprehend. There are four things we want to look for on a Ford factory invoice:
Those are the four critical pieces of information you’ll want to know before negotiating a deal on a new Ford. The spread from the Ford invoice price to the MSRP can be calculated by looking at the middle of each dealer invoice. The dealer holdback is labelled “HB” at the bottom of the invoice. Floor plan assistance is labelled FPA. Advertising association assistance is AA.
Ford employe pricing (A & Z plan, D plan, and X plan) are all listed on the invoice as well. The A & Z plan pricing is what a Ford employees (and retirees) pay. For X plan pricing is what you’d get if you went through Costco, or another affinity group. D plan is what dealership employees pay.
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