Best Car Deals: Some New Cars Are Cheaper Than Used

Last Updated Sep 7, 2010 6:16 PM EDT

Your Dad probably told you that if you can't afford a new car, you should look for a good used one. But with tough economic conditions pushing many people in that direction, Dad's advice doesn't always hold true anymore. After running the numbers, it turns out that new cars can be the cheapest choice.
Rising used car prices have caused this change. The latest data from auto information site Edmunds.com show used car prices 10% higher than one year earlier, with some used SUVs up by 30%. "A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles," says Edmunds analyst Joe Spina. Plus, fewer new-car sales means fewer trade-ins to sell as used cars.
The new-used tradeoff depends on the age of the used car you are considering. "One and two-year-old used cars are no longer radically cheaper than new cars," says Mark Scott of AutoTrader.com, the largest online site for advertising new and used cars. "If you get models older than two years, it is still cheaper to buy used." Financing costs figure into the math. Used car loan rates -- 6.49% recently according to Bankrate.com -- will cost you more in interest than the low-interest promotional loans you can get on many new cars if you have a good credit score. And, adds AutoTrader's Scott, with a used car you may need to buy an extended warranty, which can cost $800 to $3,000 (on luxury brands) for three years of coverage.
Taking financing costs into account, Edmunds has compiled a list of new cars that cost less overall than the same model as a one-year-old used car. Analysts assumed all loans were for five years at average used-car rates. Five-year new car loans used any available 0% or low-rate financing.
Here are four of the most striking deals. The comparisons are based on 2010 vs. 2009 models. While some differences in monthly payments are small, having a new car instead of a year-old one gives you a big advantage in its future value. (See New Cars: Best Deals on 2010 models).

BMW 1 Series-For drivers who crave performance and agile handling, this smallest BMW delivers. The straight 6 engine will power you from 0-60 mph in about six seconds but still is rated at a respectable 18 mpg in city driving and 28 on the highway. The two-door coupe 128i sells at an average price of $27,882 according to Edmunds. But reviewers note that you can drive that number up quickly by adding lots of options. Even without incentive financing, Edmunds calculates that your monthly payments for the new car would be $496 a month vs. $508 for the $25,250 year-old version -- savings of $720 over the five-year loan.

Dodge Ram 1500-The Dodge Ram pickup has the most comfortable ride and best storage compartments compared with its Ford and Chevrolet competition, reviewers say. Its main drawback is lower predicted reliability. The ST crew cab four-wheel drive version is selling for an average of $27,424 including a $3,000 rebate, according to Edmunds. That makes monthly payments for the new pickup $509 vs. $525 for the $26,110 used model-a savings of $960 over the five-year loan. If you need hauling or towing and can live with the thirsty V8 mileage(13mpg city, 18 highway), have a look at the Ram.

Honda CR-V-Redesigned for 2010, the CR-V rates with reviewers as the top small crossover SUV vs. competitors such as the Toyota RAV4 and Ford Escape. Test drivers praise its car-like road manners. The slightly beefed-up 180 horsepower, four cylinder engine is rated for 21 mpg city, 28 highway. The ability to hold its resale value works in favor of the new CR-V buyer. For the EX all-wheel-drive version selling at an average of $24,538, Edmund figures monthly payments for the new car at $436 per month, given the promotional 2.9% financing for five-year loans. Payments for the $22,031 used version are $443 a month -- a total savings with the new vehicle of $420. For a practical, economical family vehicle, the CR-V is a good choice.

Mazda CX-9-The CX-9 is crossover, which makes it different from all its large SUV competitors, which are building on truck platforms. That means reviewer-pleasing car-like handling and zippy performance. Its 273-horsepower V6 delivers smooth power and is rated at 16 mpg city, 22 highway. For the Grand Touring two-wheel drive model selling at an average $30,447, Mazda's 0% financing on five-year loans keeps the monthly payments at $507 vs. $525 for the $25,780 used version, for a total savings of $1,080. With seating for up to seven, the CX-9 is a good choice for a large SUV used mainly to haul kids, their friends and gear.

Photos courtesy of the manufacturers

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    Jerry Edgerton, author of Car Shopping Made Easy, has been covering the car beat since Detroit companies dominated the U.S. market. The former car columnist for Money magazine and Washington correspondent for Business Week, Edgerton specializes in finding the best deals on wheels and offering advice on making your car last.

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