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July 4th deals make some new cars cheaper than buying used

Consumer Reports News: July 01, 2009 03:53 PM

There’s no shortage of sales incentives available on new cars these days. And by comparing deals you can find some new vehicles that are as affordable as late-model used versions. In some cases, you can even buy a new car for less than a one-year-old model, when considering purchase price and interest on a five-year loan. For example, when we looked at Honda’s special low-interest financing offer, available through the 4th of July weekend, we found that a new 2009 Honda Accord LX-P would cost less and have lower monthly payments than a similar used 2008 model. The 2009 Accord would have monthly payments of $308 vs. $314 for a 2008 model, which would save you about $340 over five years. The offer is in conjunction with a dealer sales incentive of $1,500.

Similarly, you could save $13 a month, or $815 over the life of the loan, by buying a new Honda Odyssey instead of a used 2008 model. And a new Acura RDX SUV could save you almost $10 a month, or $600 over the five-year loan term, compared with a 2008 version. The new Odyssey and RDX also include dealer sales incentives of $2,500.

In some cases the price of a new car with interest isn’t much more than that of a similar two-year-old car. For example, a new 2009 RDX would cost just $555 more to buy over five years than a two-year-old RDX with 24,000 miles on it. A Chevrolet Silverado 1500 Crew Cab Pickup would cost just $38 more a month than similar a used 2008 model, or a total of about $2,300 over five years.

If you’re cross-shopping between new and used cars, you could make similar comparisons yourself by using the calculators in the “Car Buying Advice” section.

Usually, buying a late-model used car is a better overall value than buying a new one. But with a new car, you don’t have to worry about how the car has been maintained. And having the benefit of the full new-car warranty gives you greater independence from repair bills for at least three years, and longer with many automakers.

Moreover, you can take advantage of new government programs when buying a new car right now. For instance, you can deduct any state and local motor-vehicle sales taxes. And if you’re driving an old gas-guzzler and don’t mind waiting until July 23, when the Car Allowance Rebate System (aka “cash for clunkers” bill) takes effect, the savings from buying a new car could be even greater. Neither program covers used-car purchases.

It’s important to remember that any deal is only as good as the vehicle you're buying. We recommend that you thoroughly research the performance, reliability, safety, owner cost, and owner satisfaction of any model you're considering. Subscribers to ConsumerReports.org have access to our Ratings in all of those areas.

As mentioned, these calculations are based on a model’s purchase price and financing interest. ConsumerReports.org subscribers can also compare a model’s total owner cost for 3-, 5- and 8-year periods. Our owner-cost estimates include depreciation, fuel costs, insurance, interest, maintenance and repair, and sales tax.

All our calculations assumed vehicle financing for a 60-month term and 10% down payment. We used average new- and used-car financing rates from Bankrate.com, except where manufacturers offered lower rates on new cars that would be readily available to consumers. Used car retail values assumed average mileage of 12,000 miles driven per year.

You can get the latest retail and dealer incentives in Consumer Reports’ New Car Price Reports or through the New Car Buying Kit. These also include CR’s Bottom Line Price, which factors in the dealer invoice price and any incentives and holdback amount to give you a good starting point for your negotiations. This frees you from relying on the word of the salesperson for the best price. For used car values, check out CR’s Used Car Price Reports.

  Price Monthly payments Total 5-year cost
Model name MSRP New CR Bottom Line Price 2008 2007 2009 2008 2007 2009 2009 2009
Acura RDX $33,895 $28,457 $26,600 $25,675 $470.52 $479.95 $461.26 $28,230.97 $28,796.89 $27,675.53
Chevrolet Silverado 1500 4x4 Crew Cab $34,295 $31,689 $24,800 $22,825 $475.34 $437.05 $397.15 $28,520.40 $26,223.00 $23,829.00
Honda Accord LX-P
$21,905
$18,641
$17,400
$13,825
$308.22
$313.90
$241.67
$18,492.94
$18,833.88
$14,499.97
Honda Odyssey EX $29,455 $24,313 $23,000
$20,250
$402.00 $415.58 $360.02 $24,119.89 $24,935.04 $21,601.27
Toyota Prius base $23,375
$22,040
$17,625 $16,025 $355.55 $311.58 $279.25 $21,332.77 $18,694.58 $16,754.94
Toyota Tacoma  4x4 Access Cab V6 5AT $25,475 $23,916 $21,100 $20,500 $395.43 $378.00 $365.87 $23,726.04 $22,679.84 $21,952.47

Note: All financing calculated on 60-month term with a 10% down payment. Honda special finance rates good through July 6. Used vehicle financing using average from Bankrate.com of 7.206%. We assume used vehicles have been driven 12,000 miles per year.

Cash vs. low-interest financing
Sometimes automakers offer consumers a choice of incentives between a cash rebate or a low financing rate. You should calculate the purchase both ways to see which would give you the better deal.

When we looked at current incentives offered on two Toyota models, for instance, choosing the low-interest financing rather than a rebate could save more than $1,000 over the course of a five-year loan.

For the Prius hybrid, buyers can choose between $1,000 cash back or 2.9-percent financing for the Prius hybrid. Choosing the financing would save $19 a month, or $1,150 over five years compared with taking the cash back.

On the Tacoma compact pickup, buyers can choose between $750 cash back or 3.9-percent financing. Taking the lower interest rate would yield a savings of $18 a month, or $1,070 over five years.

Model Incentive MSRP Down payment Cash incentive Interest rate CR bottom Line Price Monthly payment Total 5-year cost
Toyota Prius base financing $23,375
$2,204 $0 2.90% $22,040 $355.55 $21,332.77
 
cash
   
$1,000
7.19%
$21,040
$374.71
$22,482.43
Toyota Tacoma Access Cab 4x4 V6 5AT financing $25,475 $2,391.60 $0 3.90% $23,916 $395.43 $23,726.04
 
cash
   
$750
7.19%
$23,166
$413.26
$24,795.73

However, leaving the cash on the table would mean you may have to come up with more money up front, for taxes at least, and possibly a larger down payment if your bank bases the down payment on a percentage of the loan amount.

Either way, this summer looks like a great time to get a good deal on a new car. If your old one leaves you wondering whether you’ll ever make it to work and back every day, a reliable set of wheels could mean real freedom over this Independence Day weekend.

--—Eric Evarts

   

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