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TLStockPicks (94.83)

Drive a 1 year old Audi A4 for less than a Nissan Sentra!

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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. 

 

10 Comments – Post Your Own

#1) On December 15, 2009 at 5:27 PM, SweetMircha (92.05) wrote:

It's a great deal in 1 way but do you know if the car had been babied or bullied by the original owner? I agree with the philosophy but I bought mine Brand New from Mitsubishi. I love my '07 Outlander model year end closeout.

Yours is just as Great.

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#2) On December 15, 2009 at 5:38 PM, TLStockPicks (94.83) wrote:

I think that's it's an overblown risk Mircha, and it's the perception of that risk that I think allows you to get a good deal.  I'd mitigate it by asking for service records and using the strategy with those "higher end" cars (they use high grade synthetic oil, so even if the old owner never changed the oil, your engine probably won't blow up after 12K miles).  Then you have the balance of the warranty as well as the knowledge (hope) that most wear and tear damage only shows after accumulated years of bullying, so it'll likely be more of a problem for owner #3.  But I'll never get that new car smell again!

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#3) On December 15, 2009 at 6:40 PM, SweetMircha (92.05) wrote:

I agree with you on most levels.  I also understand how much depreciation erodes value in Brand New.  That's why I refused to trade-in or sell privately my previous "04 Mitsu-Galant. I kept it & swap back & forth between my 2 Babies. Yes TL, I know its a Dumb move but, oh well for now. Maybe 1 of my grown kids will inherit the '04 loaded Galant. It's my thought.

Yes, you're smarter & more savvy than me. I'm pampering myself at +50.

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#4) On December 15, 2009 at 8:01 PM, sentinelbrit (85.17) wrote:

I bought an Audi A5 about 18 months ago. I love it! My wife let me buy it as a 50th birthday present. When I drove in to the garage to get it registered the mechanic said to me "wow, that's some mid-life crisis you're going through"! I have had so many people stop and look at the car, one guy even took a picture of it with his cell phone while I was waiting to go through a toll. He said it was for his friend who is an audi fanatic. Buying the car was very extravagant but I've never regretted it.

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#5) On December 15, 2009 at 10:36 PM, GenericInvestor (87.16) wrote:

2009 Pontiac G5 during the C4C deal. I paid $8.9k + tax.

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#6) On December 16, 2009 at 9:20 AM, TLStockPicks (94.83) wrote:

Micha... definitely has nothing to do with smarter and more savvy.  Try "frugal beyond repair" and "bargain at any cost".  Cheers :)

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#7) On December 16, 2009 at 9:39 AM, catoismymotor (51.71) wrote:

That is a wonderful bargain for the Audi A4. Good job. You've probably heard this before but I think it would be good to say it again: It would be better for your finances to pay off that car note ASAP and keep the car for ten years. Audis age well and you'll save a ton of cash.

I have not had a car note in five years. And I am determined to never have another. The monthly repair cost of my vehicle is roughly $125. To replace my car with a new version of what I drive would cost approximately $380 in monthly payments. I'll gladly pocket the $255 difference until the time comes where I can pay cash for my next car.

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#8) On December 16, 2009 at 9:45 AM, OneLegged (< 20) wrote:

I would take the Nissan.  I have nurmerous friends (5) with new or newer Audis.  When we get together they spend a large amount of time comparing notes on who repaired what most recently.  They are treat to drive, but don't seem to be all that reliable.

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#9) On December 17, 2009 at 10:04 AM, tgarci2 (69.24) wrote:

I passed up on a 2009 A4 with the prestige plus package (crazy headlights and all) for $25,000...I have no idea what the deal was with it, but it only had 4k miles on it and it was being sold by as a certified preowned.  I have an old corolla that I've been pampering for the past 10 years and was so close to buying but I decided against and some other guy bought it the next day.   Woe is me

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#10) On January 23, 2010 at 1:34 AM, BrandonPaulChevy (< 20) wrote:

Nice blog man. I love the Audi more than the nissan. Audi parts are a lot more durable than that of the nissan especially on the exterior.

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