While buying a new car is enticing, you should take a cold, hard look at how much you could save over time by buying used cars instead.
The average person owns 13 cars in a lifetime, each costing an average of $30,000, according to a report by the National Automobile Dealers Association. If each of those cars was 3 years old, instead of new, you could save nearly $130,000 during your lifetime.
DEPRECIATION: UNDERSTANDING HOW IT WORKS
You often hear that a car loses 20% of its value as soon as you buy it. Yes, in just one minute, a $30,000 car will lose $6,000 as you gleefully drive off. By the end of the first year, mileage and wear and tear could bring that to 30%, or $9,000. Why don’t you feel this big hit? Because it takes effect much later, when you sell or trade in your car.
New-car depreciation: You buy the car for $30,000 and sell it three years later for $15,000. The car has cost you $15,000 in depreciation.
Used-car depreciation: You buy the same car, but it’s 3 years old when you buy it. You buy the car for $15,000. Three years later you could sell it for $10,000. The used car depreciation cost you only $5,000.
There are people that will say “But driving a brand new car is much better!” and they have various reasons for believing so.
FORGET THE OLD USED-CAR STIGMAS
New cars are more reliable. Why buy somebody else’s headache?
It used to be common for people to put down used cars by saying that it was just a way to buy someone else’s problems. That’s not true anymore.
Reliability: Cars have never been more dependable than they are today. It’s not uncommon for some cars to deliver more than 100,000 miles before needing major repairs.
Maintenance: All cars require regular maintenance such as oil changes, tire rotation, brake jobs. But you can drive today’s cars much farther in between these scheduled maintenance visits. Even tires and brake pads last much longer than before.
It’s clear that buying a used car is much cheaper than buying new. We know that cars in general are more dependable than they once were because the quality of automobiles in general has improved over the years. Buying used is an opportunity to get the best car for your money. You can often find a late-model used car priced at less than half the cost of a new one. Pre-certified dealer programs offer strong warranties, often including the remaining balance of the factory warranty, and the opportunity to purchase an extended warranty. For all practical purposes, low mileage, late-model used cars are basically new. If you trade your car in every few years the way many people do, you aren't likely to notice the difference between a used vehicle and a new one because most modern cars will go 100,000 miles or more with few mechanical difficulties. Buying a car that has 40,000 miles on the odometer is likely to result in 60,000 or more miles of trouble-free driving. Some vehicles now offer drive-train warranties that cover the most expensive components of your drive train for 200,000 miles. If savings and reliability aren’t the only things holding you back, here are a few other advantages:
More Car for Your Money
This is where shopping for a used car can be a lot more fun than budgeting for a new one. Your hard-earned money can take you a lot further in the used car market than if you were to buy new. Your budget may afford you only a base trim or entry-level car on the new market, but if you shop used, that same budget can buy you something that is better equipped.
Certified Pre-Owned Options
For many shoppers, having a warranty to protect them against a vehicle’s shortcomings is well worth the premium they pay for a new car. Today, however, virtually all car makers offer some version of a Certified Pre-Owned (CPO) program, making a used-car purchase a much less worrisome endeavor. CPO programs vary depending on the manufacturer, and there is a significant difference between manufacturer certified and dealership certified, with the former almost always offering a more robust package. All manufacturer certified vehicles include some level of warranty (although the mileage and time covered vary) and often additional perks like free roadside assistance or a free loaner car when yours needs to head to the shop.
Every year, roughly 350 models are offered for sale on the new-car market in the United States. Three hundred fifty models may sound like quite a few, but that number is positively dwarfed by the number of models available on the used-car market. We all have different tastes, and maybe the car you want isn’t made anymore. Luckily, the used market has you covered. There aren’t many truly small pickups made today, but for example, the used market will deliver Ford Rangers and Chevy S-10s.
We have the ability to access more information on both new and used cars, than ever before. This gives us the ability to research every aspect of purchasing a new or used vehicle. Knowledge is power and there’s just no excuse to be uninformed.
Lower Insurance Costs
Your car’s value is the primary item your insurance company considers when determining rates. That makes sense; the more valuable a car, the more money they’ll potentially have to shell out in the case of a wreck. It’s understandable that a BMW purchased used will cost less to insure than one purchased new, and that all comes back to depreciation. You might not notice the difference between your 3-year-old BMW and a brand new one, but rest assured, your insurance company will.
Cheaper Registration Fees
It depends on where you live, but older cars often cost less to register. Some states vary based on a car’s age, weight, or even power. On top of registration, many states charge yearly taxes, which are also often based on a vehicle's age.
Cars Last Longer Now
There’s a reason nobody sells cars with 5-digit odometers today. The option of a CPO warranty should mollify many used-car doomsayers, but the mere existence of these CPO programs lends credence to a decidedly convenient truth: Cars last longer than ever. In terms of mileage, 200,000 may not be the new 100,000, but nonetheless, automakers have taken impressive strides. Used-car shoppers should still be sure to have potential purchases inspected by a mechanic, but often concerns about a used car’s remaining lifespan deserve to be put to rest.