Interesting. I made more money when I stopped working altogether, thanks bull market.
BTW: buying a used car is bad business because the seller has an information advantage. That makes it impossible to reach at the optimal price. I buy new cars and then drive them for 20+ years. My actual car is 22 years old and thanks to my maintenance runs better than a new one.
I also only buy company shares at an IPO ⊠
Source needed. I would expect the prices to be depressed because of this fact. The one paying the difference would be the one buying a new car and selling it used later.
I think it was the underground economist. And he was right!
Even with a new car, itâs nearly impossible to find the optimal price, as there are many negotiable aspects to buying a new car (not like 1l of milk in Migros).
Letâs say you buy a used that is half a year old and drive this car for 22 year. Assume the vendor paid Fr. 40â00 for the new car. If you bought the car new, you would pay 1â981 p.a. for a total of 22 years. If you buy the car used after 6 months, you will most likely pay less than 39â090 (40â000 - (40â000 / 22 / 2)). So itâs cheaper to buy a slightly used car because there is a significant drop in price as soon as the car changes from ânewâ to âusedâ.
?!
I meant to say:
you will most likely pay less than half a year depreciation over a total of 22 years. So you would pay less than 39â090 (40â000 - (40â000 / 22 / 2)).
True, but you also miss out on half a year of no-maintenance costs (or within warranty etc.).
But I agree, even when including this, you likely will spend less money overall by buying a 6month car than a brand new.
The information balance with a new car is way better than with a used one, even if it is only 6 months old. I think that was explained in great detail as example for information unbalance in âthe underground economistâ.
The information advance for a used car is at the side of the seller. The one using the car knows the car. If it is a lemon or not would go into the optimal price, but the buyer does never know that. He may be lucky or not, but luck is probably not the best strategy.
You can always negotiate everything, that is in our nature. Has nothing to do with the information balance.
I donât get it. Imagine two owners of cars, they know the real condition though: the owner A knows that the car is perfect and owner B knows that the car is in terrible condition, but given the assimetry of the information to the public appear exactly of the same condition.
Then necessarily they will be sold for the price price, wonât they? Because the buyers can not see the difference so they will not offer a discount/premium to one seller. How does the insider info helps the sellers here if the price does not change?
The seller with the broken car could sell if for more than what itâs worth in the current condition.
So if the information was public, the car would need to be sold cheaper.
Isnât this used car discussion a red herring? Just buy the used car from a reputable dealership. The dealership doesnât have any interest in selling you a lemon.
Sure, the dealership will take away the spread (of buying a pristine used car from an individual), but you know that experts will have inspected the car and IIRC you even get some kind of guarantee (not sure itâs called that).
For me the sweet spot is buying one that is about 2-3 years old, maybe even 4. Thatâs when most of the new car premium has evaporated. Plus you can always buy a can of new-car-smell âŠ
That is exactly what happens more or less in this situations. You pay more because you have to pay for a nice place for the dealership so the dealer can proof he wonât run away after selling you a lemon. You pay this premium without getting a better car for it. Or you pay the premium as a seller without selling a lemon.
Health insurance is another example of information imbalance.
Still a red herring, IMO, for those following along but annoyed this hasnât to do anything with the topic of the OP.
Sir, I am not sure if youâre trolling (though, given your posting history, youâre not).
So, youâre buying your new car at a dealership of a car company that has determined their ability to price selling new cars given the local market, brand, willingness of the customer to pay, various features of the car (again multiply by the factors mentioned previously), willingness of buyers of new cars to pay a premium, who accept that the minute after theyâve driven their new car out of the dealership lot that they cannot sell it back to the dealer even with a 1k or 2k or probably even 5k discount of what they paid 5 minutes ago?
How can you compare that to a functioning market of used cars, where seller and (dealer) sellers are confronted by a market that will accept used cars at a market price.
Iâve already said spreads are gone in this kind of used car market, but arenât prices much more market driven than anything new?
Ăfter writing this I feel weâre probably talking past each other.
I really donât get it, as others have said before.
Either admit that youâre into the new car smell or else!
OK, I admit, even my actual cars are 22 and 17 years oldâŠ
Just one last (I promise) point: for an optimal price there cannot be an information imbalance. That is why we pay too much or get too less for trading a used car. And that is probably why you lose 2-5k the moment you drive your new car out of the dealership.
Plus there are plenty of cases where new cars are lemons.
Especially if they are expensive.
But this does not mean that the seller has an edge due to the information they know.
It simply mean that the sellers who keep their car in good condition are at a loss at the expense of the sellers who do not (basically the first subsidizes the second), but the information known to the seller gives it no advantage: the seller who knows their car is perfect and in a better condition than average will not be able to leverage this information, they will still sell below the actual real value
You assume used car are sold with the assumption theyâre defect, thatâs why they are cheap, and perfect used cars are underpriced because they should have a value close to the new ones and so they are the one losing.
well, not really, 
was more like:
Price fits the car market value.
Owner of A has done 10k km/year on autobahn at 100km/h average.
Owner of B spent his weekend drifting on the parking lot, making rodeos and burnouts.
You have no idea on whoâs A and whoâs B. B seller has an edge, cause he could have crashed the car and still sell at market value if it makes it look good on autoscout24, next to A.
Right, A has few ways to value its excellent conditions. But thatâs the deal, you donât know, you miss the info. A new car is supposedly in perfect condition. Thus finding a good deal on a new car can be good business.
Thereâs a lot of bad ones too though.
