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

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

Comments

[Larry]

Did you include the higher price for insurance in your 5 year numbers? In VA the yearly property tax is crazy high for a new car vs an older/ less expensive car.

[BreakawayHondaWasGreat(Greenville, SC)]

This article is very accurate, probably one of the most productive and advantageous articles that CR has produced in several months. I recently purchased a 2009 Honda Civic. During my initial search I was looking for 2006-2008 models. What I found while searching was that the automotive market has been so bad the manufacturers finance companies were and are offering fantastic interest rates, much better that banks and private finance companies.
While looking at the cars I found that the sticker price was a little higher than that on a used one but after a little negotiation the prices came much close. In my case I bought a brand new vehicle for $1500-$2000 more than a car that was 1-3 years old with 12000-20000 miles on them. I also got a interest rate that was at least 4% less than I was able to get one a used car. Overall my monthly payments are between $5-$15 dollars off of what they would have been with a used car and I have the piece of ming to know that the car has not been abused. I also contacted my insurance company and my price was no different from a 2007 model to a brand new one.
Good Luck and remember not to rush into a five year decision and take the time to do your own math. Dont let the sales person do it for you. (P.S.{FYI} Most of the time Sales Persons get more commission on a used car)

[david]

I wonder who buys these used cars that are priced higher than new ones. A couple of months ago, one could have gotten a brand new 2008 Mazda Miata GT with suspension and premium package cheaper than a used comparable 2006 model at Carmax prices. The new car low price was featured in an article by the Wall Street Journal. It wasn't an isolated incident either - you find several such stories at Miata.net.

[Hoopdi]

This article is right on the money. Right now all of my dealerships contacts are paying a premium price for used cars at the dealer's auctions. This translates to higher used car prices. With the incentives on new cars you almost always can buy a brand new vehicle for about the same as a late model used. But the buyer's mentality is still "the economy is bad better buy a used car".

[Jim in Texas]

It's time to buy American folks and stop sending our money overseas to Japan. This is why the economy is failing - Americans keep up a huge trade deficit and don't buy our own products.

I just bought a 2009 Mercury Milan with a MSRP of $23,600 for $17,850 after all rebates and incentives. It's a better car than the Honda Accord or Toyota Camry, and most importantly it keeps Americans working.

[Dima]

@Jim in Texas,

Jim, no offense to you personally or to Ford in general, but it's a material fact that Fusion/Milan/MKZ lineup is assembled (actually made with more than 70% local content including engine and transmission) in Mexico. Again, no offense to our Mexican friends, since the general consensus is that the quality is very good, may be even better than Camry/Accord.
If that is so, then why I'm bringing it up? Because you said that buying Milan vs Camry/Accord keeps Americans working. It definitely does, the only question is - which Americans?
Since it's understood that Milan/Fusion lineup was designed by Ford globally based engineering force we can assume that some American engineers participated in this. Also, management and CEO do indeed owe it to the Mexican operations for the part or the whole of their fat bonus, indeed. Who is left out - your fellow working class assembly workers, UAW or not. Make no mistake, I like UAW no more than the other guy, but that's what we've got and if they give up their most ridiculous benefits/entitlements and borrow some work ethics from Japanese/Mexicans, they (UAW) will be competitive again.
Lets look at opposite corner now - American Honda Accord is a vehicle which was developed exclusively for American market (in the rest of the world Honda Accord is what is known to us as Acura TSX) by American engineers in Honda USA eng offices and assembled on American soil with most of the components sourced locally. Small fraction of total production is being imported from Japan to meet demand. Same applies to Camry, except that it's a global model, so most likely it was developed by Toyota global engineering including American engineers.
So, here is the main question one must answer - do you want to support MBA driven, cost cuttin', quarterly earnings obsessed bunch of damagers (sorry, managers) and CEO and a little bit of engineering left waiting to be outsourced to cheaper locales (read about Ford Indian operations) OR the companies such as Honda/Toyota/Hyundai which design and assemble their cars right here in the US of A. Sure some of the profits find their way back to the respective shareholders wherever they are (not to the home countries as some people mistakenly believe, those are public companies and if the majority of shareholders are concentrated in any one country, then so be it) but as long as it employs our fellow American white AND blue collar workers I'm OK with that. Nuff' said...