Buy American, Or Korean, Or Japanese

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Read another article about GM and their cost structure versus Toyota and noticed some interesting facts for the cheapskate in us all.  Seems GM has been squealing recently about their high medical and pension costs due to prior management entering into stupid union contracts years ago.  They point out that Toyota does not have these costs.  So we are supposed to feel sorry for GM.  As one financial analys pointed out this is nothing new--GM has been unsuccessful at going bankrupt for years.

But the article had two facts that caught my eye.  Comparable GM models are cheaper new than Toyotas by an average of $1,500 AND GM resale values are less than Toyota by about 10%. 

So comparable GM cars are cheaper new and cheaper to buy used.  Hmmm.  Perhaps an opportunity here for the cheapskate and people who want to be rich someday.  Or at least less poor today.

So Uncle Bill did some homework until he got a headache and said enough is enough.  Here are just some facts to get you started and then you take over.

First Toyota.  An entry level Toyota Corolla, new, has a MSRP of $14,105-$17,880.  A 2002 Corolla has a sales price in a private sale of $8, 925 -$10,050.  On the site I used (which I can't remember right now.  Just google used car prices and reliability) the 2002 model had a safety rating of A which is not like A in school but A like ok.  The best rating is G which the Corolla got in 2003 and later years.

Then I went to GM and couldn't find much of anything because a lot of their models get discontinued which is another reason they are having trouble in the market place.  But found an entry level car--the Aveo.  Buy American.  Not really, the Aveo is made in Korea but sold by GM and sold with a MSRP of $9,350-$13,050.  Doing the math that is a discount off the Toyota of $4,755-$4,830.  Put more simply the Aveo costs 34% LESS than the Corolla.  That's a chunk.

What about used?  I picked 2002 and 60,000 miles and you can pick up your basic Corolla for between $8,925 and $10,050.  You can't pick up your basic Aveo for anything because they weren't around in 2002 but you can pick up a 2004 for between $7,900 and $9,475.  So you get a car that is two years newer for a 12% discount. 

But I wanted to compare apples with apples so went looking for a 2002 GM model and found the Prizm.  Prizms were around in 2002 but they aren't now because they were, you guessed it, discontinued by GM.  But you can pick up a 2002 Prizm for between $8,000 and $8,875. 

Plus I found out that Prizms were made in the same plant that makes Corollas.  And the plant is in California which is a long way from Japan. 

Finally all the used cars had a owners reliability rating of 8.7 out of 10.

Should you buy an Aveo?  Or a Prism?  Or a Toyota?  We haven't even talked about Hondas.  I don't know and I don't care because I'm not buying a car but you may be and you should investigate before you pass up a one third discount. 

Peter Lynch said that people should spend at least the same time researching a stock before buying as they do a refrigerator.  The same goes for cars.

Comments

[Dave]

For the record, the Prism is a clone of the Corolla. Hence the high reliability ratings. Check Consumer Reports and you'll note that the Prism is one of (maybe 1?) a few American cars that they recommend to buy used.

Yes, the Corolla is recommended.

I know it wasn't the point, but a better match for the Aveo is the new Toyota Yaris. The savings will be less drastic. Researching cars isn't that difficult. Unlike stocks, car performance (reliability) is remarkably predictable and it can all be found inside the annual Consumer Reports auto issue. Edmunds.com is another good resource.

[Henk]

Just for the record, I don't think the Aveo can be compared with the Corolla !
The Aveo is about as cheap a car as you can get. I had one when I visited the US recently on a business trip.
The part that strongest impressed me was the trunk. Why is it just a piece of metal without any plastic on the inside to make it look nice ? How much does a bit of plastic cost ??
This car is CHEAP ! I really don't want to crash in this thing !
Not to mention how the engine performed.
The word performing should not even be used here.
This car is just a risk !
(Ok, I'm used to drive a BMW which is indeed a much more expensive car, with an engine that can pull a bloody tractor, so my judgment is somewhat flawed ...)