New versus used: What should I buy into?

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Gentlemen: I fear my formula has stopped working and would appreciate your assistance. My formula is this: I buy used cars only - sporty, premium used cars. I buy them coming off-lease or off-fleet at either 24 or 36 months and I take good care of them and then sell them exactly two years later. I've had a string of Mercedes C-Class and BMW 3-Series, a couple of Infiniti G35s, a couple of Lexus models and an Audi or two. I like switching brands every two years just to have something different to drive. I have only made money once doing this, but let me tell you it has cost me very little to drive some nice cars. But here's my problem; used car prices are sky high at the moment and all my favourite manufacturers are just throwing money at their new cars. Is the gig up? Should I abandon the formula and buy new for the first time ever? - Clark in Ottawa

Cato: Clark, the other day we were talking with Chrysler Canada president and CEO Reid Bigland about what auto analyst Dennis DesRosiers calls the "massive" amount of incentive money in the market.

Toyota dealer Kevin Baxter, in a different discussion, wondered if consumers have become numb to all the deals: Honda will give you $6,000 in cash to buy a 2010 Odyssey; Mercedes has $15,000 for a cash buyer of the S400 Hybrid; Ford has $6,000 for the buyer of a 2010 Edge. And on and on.

Bigland, in fact, lamented all the months Ford of Canada keeps pounding away with its Employee Pricing promotion; Chrysler struggled to keep pace with the deep Ford discounting.

Vaughan: Clarkie, this formula of yours ain't rocket science, but it's a good one, though as Cato points out, all the discounting is sure to cause you problems.

On top of that, a lot of other people have figured out your formula, too. I thought that with the loonie soaring again, we'd be swamped with good, cheap, used stuff from the USA. If we are, it's getting soaked up fast.

On top of that, fear of a double-dip recession has people counting their pennies and the great deals in off-lease cars aren't easy to find.

Cato: What Vaughan fails to mention is the fact dealers and manufacturers don't want you to get a killer deal on a good, clean off-lease vehicle. They want to make the good money in two- and three-year-old rides.

In fact, many service them well, dress them up for the lot and sell them as "certified" rather than sending them off to the auction. That way, the good used cars stay within the dealer/manufacturer funnel, which in turn keeps prices higher.

Vaughan: Clarkie, I guess you've had good luck with these cars of yours, but I've heard used-car horror stories from smarty-pants like you. Have you paid for a full brake job on a Mercedes or a Bimmer lately?

Cato: Here's what's going on. They deny it, of course, but Mercedes and BMW are in a struggle to the death to see who sells more cars in Canada this year.

Bimmer has owned first place for going on nine years by selling lots of the all-important 3-Series. It's still selling pretty well, but it's getting old. Which means several thousand in sales incentives are in play for buyers of the 3.

Mercedes is throwing lots of incentive money into the marketplace, though not all of it is as obvious as the $15,000 on the S400 Hybrid.

Yes, the battle is engaged.

Vaughan: A wheeler-dealer like Clarkie probably knows this, but when you buy used, always try to find a sportier model that some rich kid will take off your hands in a couple of years.

So check out the BMW 3-Series Coupe - $53,400, with at least $1,000 in factory-to-dealer discounting. One of the best Bimmers ever and will certainly hold its value.

Cato: Lexus doesn't sell a coupe, but the IS 250 C is a slick hardtop convertible and, at $52,100, it's cheaper than the BMW coupe.

Vaughan: Infiniti does make a coupe, the G37i.

It starts at $46,300, but you can take $3,000 off in cash-buyer incentives. A steal of a deal in a coupe you'll think came from Germany.

Cato: Clark, you'll find other rich deals from Acura; if you can get past the funny looks, there might be something there for you in, say, a TSX.

Vaughan: Just don't bother even visiting Audi; they're giving away nothing, other than lower interest rate deals. Outrageous.

Cato: Clark, for the time being, you may want to give up the formula and take the new-car deal of your choice - and drive worry-free under warranty for a change.

Go to globedrive.com to get more specifications on these three cars.

Jeremy Cato and Michael Vaughan are co-hosts of Car/Business, which appears Fridays at 8 p.m. on Business News Network and Saturdays at 11:30 a.m. on CTV.

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Source: Car manufacturers