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Saturday, 7 March 2009

Decision Time: New vs. Used Cars

by Peter Valdes-Dapena

Used cars are still a better buy over new, but with all the incentives on the table, the value gap is closing.

The sharp car buyer's advice has long been that a well-cared-for, late-model used car is always a better value than a brand new one.

Used cars are a smart buy because of depreciation, which is greatest in the first year or two, which means someone else gets stuck with the biggest value-drop. And you aren't giving up very much in return - these days, cars last a lot longer, so a car with 20,000 or 30,000 miles can still have plenty of life.

But weak sales have led to heavy incentives on new cars. While a used car is still cheaper than a new one, in some cases the price difference will be surprisingly small, according to researchers at the automotive Web site Edmunds.com.

"Certified pre-owned" cars are another option. CPOs are selected low-mileage used cars that have been inspected, refurbished as needed and certified as being in top-notch condition, according to criteria laid out by the car's original manufacturer. Most importantly, they have added warranty coverage. CPOs cost more than non-certified used cars, but the quality can make the extra cost more than worth it.

"If you really want to make the most educated decision, you need to look at all three alternatives," said Jesse Toprak, an analyst with Edmunds.com.

Here are some examples of new, used and certified pre-owned costs for various cars. With new car sales so slow, there are still some 2008 model year cars left on dealer lots, so we've included prices for those as well. All prices reflect Edmunds.com's estimated real customer costs, not manufacturer's suggested retail prices.

Toyota Camry

New 2009: $19,787
New 2008: $18,665
Used 2007: $14,713*
Certified used 2007: $18,114

Toyotas tend to hold their value relatively well, which means that a late-model used Camry doesn't offer huge savings over buying new. Plus, a new 2008 Camry has $1,500 in incentives, narrowing the gap even more.

Honda Civic Hybrid

New 2009: $21,808
New 2008: $20,190
Used 2007: $18,163
Certified used 2007: $18,952

Hybrids hold their value very well, at least over the short term. That's good news for owners, but it means that used hybrids don't usually come with huge discounts compared to new ones.

Cadillac CTS

New 2009: $37,920
New 2008: $32,784
Used 2007: $23,304
Certified used 2007: $27,892

The CTS was redesigned for the 2008 model year. While the previous version is still a well-regarded car, the redesign meant a big drop in used prices. So you'll get a lower price with the used CTS, but the car isn't quite as good.

Honda Odyssey EX-L

New 2009: $28,721
New 2008: $25,773
Used 2007: $20,583
Certified used 2007: $21,756

People who have minivans usually have kids, and kids are messy. So, while Hondas tend to hold their value very well, minivans just don't. While it's not as cheap as other used minivans, a used Odyssey is a relatively good deal, if you don't mind a few ice cream stains on the seats.

Chevrolet Malibu LTZ

New 2009: $22,715
New 2008: $22,625
Used 2007: $13,906
Certified used 2007: $14,678

The Malibu was completely redesigned for 2008, so buyers of the 2007 model aren't getting the award-winning car shown here. That's why used prices are so much lower.

Chrysler 300C

New 2009: $33,894
New 2008: $32,811
Used 2007: $19,215
Certified used 2007: $22,157

Resale values for Chryslers have been poor for a long time, and the carmaker's recent financial distress isn't helping things. That means a used Chrysler can be had at a deep discount to a new one.

For customers considering a new car, Chrysler is offering an interesting incentive that's not reflected in these numbers. Customers paying cash, or at least financing their purchase through someone other than Chrysler Financial, can get a $3,500 rebate.

Mini Cooper

New 2009: $20,950
New 2008: $20,450
Used 2007: $16,291
Certified used 2007: $17,776

The cute little Mini Cooper has always been a resale value champ. That's helped by a design that's hardly changed despite a recent redesign. Almost no one will know you didn't buy a brand-new car.
Copyrighted, CNNMoney. All Rights Reserved.

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