financing | The Silo

The car shopping market is presenting drivers with the same classic dilemma: should you buy new or used? But, there are modern-day considerations as several factors and current events shape this debate, including depreciation trends, interest rates and price shifts in both new and used car markets. Making the right choice requires a close look at your financial situation and ownership goals.

Our friends Zach & Ray Shefska, Co-Founders of CarEdge, offer an easy-to-understand breakdown to help consumers make this all-important decision that will impact them for years to come.

When to Buy New:

You plan to keep the car for 5+ years and want the latest features.
You qualify for low APR financing and want predictable monthly payments.
Manufacturer incentives significantly reduce the cost.
To avoid depreciation altogether, consider leasing a new car.

When to Buy Used:

You want to avoid rapid depreciation and pay less upfront.
You’re willing to shop for 3-5 year-old vehicles in good condition.
You don’t mind driving a car with fewer bells and whistles.
You’re prepared to negotiate a great used car deal.

Here are details on some of the key considerations to help you determine whether buying new, buying used, or leasing makes the most sense for you.

Financing Deals Versus Depreciation Risks

New cars are known for their steep depreciation. A new car can lose 20-30% of its value within the first two to three years of ownership. However, buying new has its advantages, too. Manufacturer incentives are sweetening the deal for buyers with attractive lease offers, low APR financing, and cash incentives that simply aren’t available for used car buyers.

Why Buy New?

Incentives Galore: Automakers are offering competitive promotions to attract buyers, including 0% APR financing and cash-back deals.
Peace of Mind: New cars come with full warranties, the latest safety features, and no concerns about wear and tear from previous owners.
Custom Orders: Buying new allows you to select the exact trim, color, and features you want. However, custom orders can come at an even higher price.

Drawbacks of Buying New:

Higher Initial Cost: Even with incentives, new cars come with higher upfront prices compared to used options.
Depreciation Risk: If you plan to sell your car in less than five years, you’ll likely face a significant financial loss due to depreciation.
If you’re considering a new car but worry about depreciation, leasing may be a better option for you. It allows you to enjoy the benefits of driving new without the financial impact of resale value losses.

Interest Rates Matter – New Cars Have Lower Rates

Interest rates are a defining factor in the new versus used car debate. While borrowing costs remain high, automakers make it easier to finance new cars by offering low APR financing. Used car loans, on the other hand, often come with higher interest rates from banks and credit unions.

Why New Cars Win on Interest Rates:

Lower APR Offers: Many manufacturers are advertising rates as low as 0% APR for new car buyers, helping you save thousands over the life of the loan.
Better Loan Terms: Lenders tend to offer more favorable terms for new cars compared to used, including longer loan periods and lower down payment requirements.

Used car loans typically come with interest rates about 5% higher than those for new vehicles. Over a five-year loan term, this can significantly increase the total cost of financing a used car. If monthly payments are a concern, financing a new car with low APR may actually make more financial sense.

However, NEVER negotiate monthly payments – always negotiate the Out-the-Door Price to avoid add-ons and ripoffs.

New Tools Make Negotiating Easier Than Ever

The days of guessing what to pay for a new car are over. Today, buyers have access to tools that provide insight into dealer pricing, invoice costs, and manufacturer incentives.

How to Save Big When Buying New:

Use Dealer Invoice Pricing: This allows you to see what the dealer pays for the car and giving you leverage in negotiations.
Keep Up With Local Market Trends: Today, any car buyer in America can see the ins and outs of their local car market for each make and model..
Compare Offers Across Dealers: With free online tools, you can easily master the art of negotiating. A big part of this is learning how to effectively cross-shop between dealerships. Always compare prices and incentives from multiple dealerships to ensure you’re getting the best deal.
Leverage Manufacturer Incentives: Research available incentives to maximize your savings before heading to the dealership. We gather the best incentives in one spot for you.

These tools make it easier than ever to negotiate confidently and secure the best deal on a new car. That said, deals can still be hard to come by without the right negotiating tools.

Why Consider Buying Used?

Lower Upfront Costs: Used cars are more affordable than their new counterparts, making them a better choice for budget-conscious buyers. Saving $100 or more on monthly payments over five to six years really adds up!
Avoid Steep Depreciation: Buying a 3-5 year-old used car allows you to avoid the steepest depreciation period, saving you thousands. If you decide to sell in a few years, you won’t feel the heavy depreciation that a new car buyer in a similar situation would experience.
Used Cars Are Negotiable: As competitive new car incentives remain, fewer car shoppers are heading to the used car lots. A slump in demand is good news for those willing to negotiate used car prices.

Challenges of Buying Used:

Higher Interest Rates: As mentioned earlier, used car loans often come with higher APRs, which can offset some of the savings. The average used car loan rate in North America is nearly 14% APR.
Limited Incentives: Unlike new cars, used vehicles don’t come with manufacturer promotions or warranties. However, you can get a fair deal on an extended warranty.
Condition Concerns: Always get a pre-purchase inspection to avoid surprises with hidden issues.
Despite these challenges, buying used is still the go-to option for many drivers who prioritize affordability and don’t mind sacrificing the latest features.

For many car buyers, a 3-5 year-old used car strikes the perfect balance between affordability, reliability, and long-term value. This “sweet spot” in the used car market offers significant benefits that make it a smart choice for budget-conscious drivers who don’t want to sacrifice quality or performance.

Here’s why a 3-5 year-old used car could be the ideal option for you:

Avoid Steep Depreciation – New cars typically lose 30-40% of their value within the first three years, making depreciation one of the biggest hidden costs of buying new.
Lower Upfront Costs – Compared to buying new, 3-5 year-old used cars are significantly more affordable.
Modern Features Without the Premium – A car that’s 3-5 years old still comes equipped with many of the features found in today’s new models, such as advanced safety systems and driver assistance.
Remaining Warranty Coverage (Depending on Mileage) – A 3-5 year-old car is typically well within its prime and often covered by a portion of the manufacturer’s original powertrain warranty. If coverage is about to run out, get an Extended Warranty quote for peace of mind.
Better Financing Options Compared to Older Cars – While interest rates for used car loans are higher than those for new cars, lenders generally offer better rates for late-model used cars compared to older vehicles. This makes financing a 3-5 year-old car more manageable and less risky.

How to get the best of ‘both worlds’

By choosing a 3-5 year-old used car, you get the best of both worlds: modern features at a lower price, and the ability to avoid the financial pitfalls of buying new. It’s a smart compromise for car buyers looking for value and reliability. To ensure you’re making a wise investment, always research market trends, request vehicle history reports, and schedule a pre-purchase inspection before buying any used car.

Founded in 2019 by father-and-son team Ray and Zach Shefska, CarEdge is a leading platform dedicated to empowering car shoppers with free expert advice, in-depth market insights, and tools to navigate every step of the car-buying journey.

Take this 2005 Porsche Carrera GT for example:

Lot 214 |Monterey Jet Center 2024 Thursday, 15 August 2024

2005 Porsche Carrera GT Lot 214 Estimate: $1,100,000 – $1,300,000 USD/ $1,509,000 CAD- $1,704,000 CAD
Illustrative Hammer: $1,100,000 USD/ $1,509,000 CAD
Illustrative Purchase Price*: $1,215,000 USD/ $1,667,000 CAD
Down Payment: $500,000 USD/ $686,100 CAD
Amount Financed: $715,000 USD/ $981,000 CAD
Monthly Payments**: $7,299 USD/ $10,015 CAD

Highlights of this supercar include:

A desirable single-owner example offered with less than 23,643 documented miles at the time of cataloging
One of just 477 produced for the U.S. market in 2005
Finished in classic Communication Colors of GT Silver exterior over Ascot Brown leather interior
Unmodified and offered with four pieces of its factory luggage set and other delivery accessories
Features servicing and maintenance by a single authorized Porsche dealer
One of the most collectible Porsche models ever produced

Chassis No. WP0CA29875L001120

Porsche seldom exits a motorsports arena without a taste of triumph. Yet, in 1991, an exception proved the rule as Porsche ventured into Formula One, supplying engines to the Footwork-Arrows team with their newly developed 3.5-liter naturally aspirated V12. This engine, essentially a combination of two TAG-Turbo V6s from Porsche’s McLaren days proved cumbersome and prone to reliability issues. Midway through the season, Footwork-Arrows terminated their contract with Porsche due to these setbacks.

Undeterred, Porsche embarked on a solitary path of refinement over the subsequent three years, nurturing the engine’s potential through advancements in technology and engineering. Eventually, they succeeded in transforming it into a robust and potent V12 powerplant. This worthwhile endeavor of internal engineering spurred Porsche to further explore Formula One’s evolving regulations, resulting in the development of a 3.5-liter V10 engine—purely as an educational pursuit. Later iterations saw this V10 engine grow to 5.5-liters and find application in Porsche’s LMP2000 sports racing prototype, codenamed Typ 9R3 and conceived for the prestigious 24 Hours of Le Mans. Despite its initial promise, the LMP2000 project met an untimely demise, leaving the formidable V10 engine temporarily abandoned until a pivotal turn of events.

Porsche’s engineers were fervently engaged in another ambitious project—the Carrera GT prototype, internally referred to as SCM (Super Car Millennium).

Housed in Huntington Beach, California, a select team of designers undertook the task of bringing SCM to life. In a nod to its showpiece stature, the decision was made to equip this extraordinary prototype with the same 5.5-liter V10 engine originally developed for the 9R3 project. So fantastic was the reaction to the prototype driven along the Champs-Élysées to the 2000 Paris Motor Show that the approval of a production version was a foregone conclusion.

Commencing in 2003, the Carrera GT swiftly became the quintessential analog supercar of its era. Embracing a back-to-basics philosophy, in stark contrast to its technologically intricate predecessor, the 959, the Carrera GT boasted a raw engineering ethos. Its naturally aspirated 5.7-liter V10, renowned for its rapid revving capability, paired seamlessly with a six-speed manual transmission nestled within a carbon fiber monocoque chassis. Eschewing electronic driving aids, the Carrera GT epitomized a driver-centric experience, delivering unrivaled auditory and performance thrills akin to those found on the racetrack. Produced for a short two years, just 644 Carrera GTs were sold through U.S. Porsche dealerships

This 2005 Carrera GT was constructed in the final year of production and was delivered new to Howard Cooper Porsche of Ann Arbor, Michigan with a purchase date noted in the service book as 22 December 2004 with 15 delivery miles/ 24 kms. Selected with XT Bucket Seats and finished in the Carrera GT’s official Communication Color of GT Silver Metallic over an Ascot Brown leather interior, this fantastic single-owner example features a clean CARFAX and, at time of cataloging, less than 24,000 miles/ 38,624 kms. GT Silver was a long-held bespoke color for the Carrera GT and certainly one of the most popular, echoing those giant-killing RS Spyders of the late 1950s and ’60s.

According to its CARFAX and ownership records, this Carrera GT features servicing while under single ownership by the consignor at Howard Cooper Porsche, later known as Germain Porsche and now Porsche Ann Arbor. One of the many benefits of a single-owner super sports car such as this is the familiarity between the official Porsche dealer and owner and the expected elevated level of trust between the two. Twenty visits to the selling dealer over the 19 years have ensured that this Carrera GT has remained in regular hands during those service visits, remaining at the ready for those special Michigan days that offer the most to both car and driver. Partial service records on file show a Major Maintenance in 2009 with a new windshield at 10,739 miles and two recorded maintenance visits in 2015 and 2017, the latter being a two-year service visit. Furthermore, it should be noted that all services have been conducted at the original selling dealer, Porsche Ann Arbor.

Offered with service records on file dating from 2007 to 2020, this single-owner Carrera GT is accompanied by an impressive number of delivery items including its original window sticker, owner’s manuals, hard top panel bags, centerlock socket, tools, and factory fitted indoor car cover. Furthermore, all Carrera GTs were delivered with a set of factory fitted luggage by Ruspa of Italy, color-coordinated to the selected interior color of the car. Over the years many of these sets have become disassociated with their cars, yet this Carrera GT retains a nearly complete set in Ascot Brown—an additional, and welcome benefit.

Created by specialist teams with a narrow focus and cloaked in secrecy, with little interference from the corner offices, the Porsche Carrera GT is an exquisite example of race-honed engineering brought to life on the road. Never before offered for sale, this single-owner Carrera GT, number 455, should make an enjoyable addition to those in search of the finest motorsport-derived super sports car of the 2000s. Just as Porsche intended. For the Silo, Jakob Greisen.

Internet bidding is not available for this lot. Please contact [email protected] for more information.

The Silo

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