Drive a 1 year old Audi A4 for less than a Nissan Sentra!
December 15, 2009
– Comments (10)
About 10 months ago, I managed to snag a 1 year old mint-condition 2008 Audi A4 with 12,000 miles for just under $19,000 (plus 7% tax... total financed was $20,262, with about $500 down for title etc). After looking around the internet, I've determined that the trade in value for a 3 year old Audi will land at approximately $17,000. So next year, when the car hits 3, i'm looking to trade it in and get my next 1 year old.
My payments are currently $380.05/month at 4.75% interest over 60 months. After two years of payments, I would have paid $9,121 out of pocket. But, after factoring in the amortization and the $17,000 residual, I would get back approximately $4,272 in equity at disposition. So I really would've only paid $4,850 to drive the A4 for 2 years, which works out to just over $200/month.
My girlfriend got a new 39 month lease on a Nissan Sentra. She's clipping away at $220/month.
Of course, this isn't magic. It's just taking advantage of the depreciation curve of cars. As everyone surely knows, there's a huge value drop after driving the car off the lot (20%?) Then the car retains value pretty well in years 2-4, and falls off a cliff after year 5. I wondered to myself, huh, why doesn't everyone do that?
It's definitely not an original thought. See: http://www.edmunds.com/advice/strategies/articles/77147/article.html. But I don't think people are really taking advantage. At 1 year old, any major defects would have been uncovered, recalls have made their way out, and the engine is broken in. It'd be tough for the previous owner to cause unnoticeable damage to the car in 1 year (without obvious evidence in the odometer). Most factory warranties are still in place, and there's little maintenance to do between years 2-4. And with the number of websites now available for car shopping (I found mine off cars.com and got it from an Audi dealership) you can passively look throughout the time that you have your car until you find a good deal.
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