Why it’s getting so easy to buy excellent used cars

, , Leave a comment

If you’ve been looking to purchase a used car, I bet you spend a lot of time on Craigslist. Luckily for you, so do I!¬† As someone who tracks the market for fun and enjoys finding new cars to drive, I’ve spent enough time chilling with Craig that I’ve been able to start to identify some key trends in pricing that are applicable to almost every standard model of car.

If your only requirements are “runs and drives,” or you just want the best value possible when purchasing a used car of any kind, I have a few good tips to help reframe your buying process. First, let’s talk about the recent history of the automotive market in general, and something that I call Trickle-Down Autoeconomics. Trickle-Down Autoeconomics is a collection of events that have taken place over the last 30¬†years that have allowed excellent cars to be massively cheap, and I promise it has nothing to do with Reagan.

A Massive Democratization of Tech

I don’t mean ‘tech’ in the literal sense like Bluetooth connectivity or blind-spot warnings. Surprisingly, those do very little to increase the value of a used car over its lesser-equipped counterpart. I mean drivetrain technology; the furthered development of goodies that improve the performance of your engine, transmission, and other things that you don’t typically think about day-to-day. While fuel injection has been popular for about 30 years (replacing the need for a spraying carburetor with more efficient fuel rails), iterative development of this and similar tech over the past 25 years have made efficient, powerful, and reliable engine technology available for basically dirt cheap. You just have to know where to look.

Iterations on iterations

The best marques are those who push the envelope. They are constantly innovating, and are therefore iterative in nature, learning from their mistakes and building on their successes. Lexus is a good segue from the previous topic, because they are also famous for democratizing much of the technology found in the Mercedes S-Class in the late 1980s, but are also highly iterative. They consistently stick to the same models, with a little variation (to some degrees of success and some failure), so it’s easy to use them as clear illustration for the point. My favorite example of this is the Lexus ES300.

The second generation, produced from 1991-1996 [Insert hyperlink: why the 90s produced the best cars ever], was built on the Camry platform. It received standard V6 engine and leather seats, and was a prime slab of 1990s Japanese over-engineering. Just decadent enough for the affluent, growing American luxury market. It was sold alongside the venerable LS400 as an entry-level luxury model to welcome a buyer ready to trade in their aging Camry, but not ready for the big leagues. It was (and still is) a truly excellent car. It’s also consistently one of cheapest ‘nice’ cars that you can purchase, typically even cheaper than a Camry or Accord of the same vintage. There are two, intertwined reasons for this: iterative design, and continuous development.

High resale value has a shelf life

This is the important part. This is where the concept of iterative design becomes integral to you getting a good deal. As great cars become better, their MSRP typically doesn’t increase by too much, other than to compensate for inflation. For example, in 1997, the MSRP of the ES300 was $30,800. 20 years later, it had increased by a mere $8,000. Small potatoes for 20 years worth of inflation. So what does this mean!? Let’s make a hypothetical in bullet points, this write-up is getting long anyway.

  • In 1997, ES300 sells for $30,800. It’s estimated that cars depreciate by as much as 20% when they drive off the lot.
  • In 2001, the fourth generation ES330 comes out. It has tons of new technology, better fuel efficiency, etc.
  • Three more generations and over 50,000 units per year make for a flooded market with over 16 years and 800,000 pre-owned Lexuses (Lexii?) to choose from, just made after the year 2001. And keep in mind, their MSRP only increased by about 26% over that 16 years.
  • So what does that mean for each years depreciating value? It goes down, and down, and down.
  • On top of that, their value competes with IS250’s and LS450’s of a comparable vintage, which will also drive down their price. If you can’t tell, ES300s are some of my favorite cars to recommend to people. It’s a little more fun than yelling “CAMRY!” at anyone who asks.

That’s it, but be careful.

Really, that’s all there is to it. Buying a car is not rocket science, but it’s intimidating and it can be easy to feel like you’re in over your head. I have a few recommended steps that you can follow, along with your own outside research about the specific car you’re interested in, you’ll be just fine. People get great deals on cars all the time, and you can be one of them. Please reach out to me on twitter or in the comments with any questions that you have and I’ll do my best to help! I don’t do this for a living, but I’d sure like to.

 

Leave a Reply