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The Biggest Rip Off: New Cars

Updated on May 15, 2011

Money Trap

New cars, or even used cars when they come from a dealership, are one of the biggest rip offs that exist in our society. Yet time and again, most consumers turn to dealerships to buy new vehicles, instead of putting some light labor into a private deal.

When you think about it, it's easy to see how dealership cars, and specifically new cars, are such a rip off. First, they price them at a minimum of three times the amount that they spent to actually manufacture the vehicle. Which means that if you are spending $20,000 on a new car, it probably only cost them around $6,000 to make it, and probably not even that much.

On top of over pricing, dealerships are experts at trapping people into loans, leases and payment agreements, which make it so that you pay even more for your over priced vehicle. They do this even though they know the value of any vehicle drops by 50% once you drive it away from the lot.

Made to break

On top of over-pricing, many manufacturers have been instructed to build vehicles that will not last as long as they could. You can purchase a classic car in mid condition that can get you more than 400,000 miles, while nearly any vehicle purchased after 1986 will play hell trying to even get to 200,000.

There are exceptions to the rule here and there, but as a mechanic I can testify that there are not many newer vehicles that will go that far. To add trial to tribulation, because newer cars are purposefully created to give less then they could be capable of, you are looking at owning a brand new vehicle that will never give you back the money you put into it. Especially since newer parts are generally more expensive then parts for older models.

Even if you manage to get through your warranty without any problems, it's only a matter of time before that vehicle will start to need all of it's main parts replaced. It will need even more care and repairs if you are not the tip of driver to be proactive about your vehicle maintenance.

To make matters worse, if you are not mechanically inclined, you will find repair costs at professional shops, much higher then they would be if you owned an older model. Much of this is because the technology in vehicles is constantly changing, but most of it is because manufacturers are continually trying to keep out non-dealership mechanics. So they add in unnecessary parts and make it necessary to use specialized tools on otherwise un-specialized parts.

More for less

In the past 10 years, I have never paid more than $600 for a vehicle. I've owned vehicles as new as 98 and as old as 76. Some of them have been junk, while others have been in prime condition. I can tell you that it's not just a matter of finding the right deal, it's a matter of knowing what a vehicle is worth.

For me, a vehicle is worth as much as you can get out of it without having to spend the vehicles lifetime putting gobs of money into it. It is rare when I have found newer vehicles that could give you more than 5 to 10 years tops, even if you cared for them with the utmost compassion and skill. Whereas older vehicles can continue to give, with regular care and maintenance.

Newer vehicles also tend to be subject to more experimentation then older models. This is both good and bad. It's good because eventually (I hope) we will come to a point where vehicles can last a long time, cost less to repair and be better for the environment. It's bad because driving experimental vehicles means you will pay more, spend more and be subject to more defects and driving hazards (such as with the current pruis incidents).

When I go to purchase a vehicle, I take into consideration what it will cost me to bring that vehicle back to it's prime, and how long it should stay in the condition before more maintenance or repairs are needed.

If you buy a new vehicle, it will need continuous maintenance while you wear it in, then it will need more maintenance to keep it in a close to prime condition and then you will spend the rest of it's life trying to avoid a complete break down or you will spend the money fixing it once it's broken down. This could cost you an upwards of $5,000 per year just to keep up with, and that's on top of whatever you paid for it originally.

With an older vehicle (between 1960 and 1985), you could spend $500 to purchase, and between $500 to $1000 to bring it to a prime road worthy condition. From there, it will need light maintenance for a few years, with an occasional major repair. Unless of course you beat the crap out of your car, in which it could cost a lot more. Though this is not specific to newer or older vehicles. If you don't care for it, it won't care for you.

So when you consider that you could put less money and a little more effort into a private party deal for an older vehicle and get way more out of that vehicle, it just makes it seem pointless to even consider purchasing a vehicle from any dealership. Especially when you consider that most of the costs are simply there to inflate your dealers wallet.

Hmmm...

Does this mean that new cars or cars from dealerships are all junk?

No, not at all. What is junk, is the price a person has to pay for them, relative to what that person will get back from the vehicle.

Many older vehicles can be kept up for generations, so that their original driver could easily pass them on to their children and grandchildren. Newer cars will not get you as far.

What I suggest, if you must go with newer vehicles, is to wait until they are no longer the newest things on the market. At least then, you aren't being ripped off as badly as you would have been, had you bought your vehicle brand new.

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