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Old 03-21-2006, 03:00 PM   #4
TD
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Join Date: Oct 2003
Location: Maryland
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Well, to be fair you should compare new versus used of the same model car. That way, the "appeal" and "meet-my-needs" factors don't really come into play. Sure, there are always changes between model years, bu for the sake of argument, let's assume they don't exist.

Making the above assumptions, you'd want to compare total cost of ownership. The major component of cost of ownership is depreciation. Depreciation is itself based on two components, age (time held) and mileage.

Mileage contributes to depreciation pretty much the same regardless of whether a car is new or older. However, age impacts a new car's depreciation much more than it does an older car. As we all know, the biggest hit occurs when a new car becomes no longer new. But three years at the beginning of a car's life will yield a much greater depreciation amount than the same three years on a three year old car.

So, overall, the cost per year will be lower on an older car assuming you don't also incur other expenses on the older car that you wouldn't need to incur on the newer car. Namely repairs and maintenance.

This is where the amount you intend to drive comes in. All things being equal, a car driven only a little will require less maintenance (on average) than a car driven a lot.

So, I'd have to speculate that, in your described situation, the older car would be cheaper. Assuming you can find what you want used and in good condition.
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