The purchase of a new car might not be the best investment you’ll ever make. It’s a big purchase. It’s one that costs tens of thousands of dollars, and it’s disheartening to think that it’s also a purchase you know you’re losing money on. No matter what you do, you’ll never recoup the cost of a new car. Statistics show the current rate of depreciation for any new car is around 15% per year, which means you’re spending big bucks on minute and losing big bucks the next. It’s not a happy thought, but it’s not something you must live with. There are other options.
You could lease a new car for far less and with the benefit of buying a new car every few years. But that’s only feasible if you don’t spend much time driving. If you do, you might consider the purchase of a used car. Contrary to popular belief, used cars are not always someone else’s problem. Most new cars are driven for a year or two, turned in for another new car, and they still have factor warranties, low miles, and they’re in great condition. They’re also a fraction of the cost of a brand-new car. That’s a big deal, and it’s worth pursuing. There are additional benefits as outlined here.
Used Cars Already Depreciated
Remember that 15% depreciation we mentioned earlier? If you buy a used car, someone else took that hit and it’s their problem. They’re the ones who financed more than their car was worth the moment it went home with them, but you’re not going to see that problem. Used cars are sold for far less than new cars, and that’s because the depreciation is already accounted for. Let someone else take home that financial issue so you can enjoy their car a year or two later without the financial downfall of driving it home.
Used Cars are Cheaper
You could buy a brand-new car such as a Toyota or a Ford, or you could buy a used BMW or Lexus. When someone drives a car home and it depreciates, it becomes more affordable. Your used car budget includes more vehicle types, since even the most expensive cars depreciate rapidly. You can choose from used cars you might not be able to afford if you buy brand-new.
You Still Get Warranty
The trick to buying a used car is to purchase one with low miles that’s only a few years old. A model year is good, two model years is good, and even three model years is good. It’s the cars older than this that might not have as much warranty, higher miles, and more costs associated with ownership. Another benefit is the ability to check the car’s information from years past. You can see who owned it, how many people owned it, if it was ever involved in an accident, if it was ever maintained, and when it was maintained. It’s called a Carfax report, and it’s invaluable to anyone purchasing a used car.
Other Costs are Cheaper
Cost of ownership for a used car is often considered higher. It has miles on it, warranties might have already expired, and you might need to pay for repairs needed much sooner on a used car than a new one, but this is not always the case. Used cars are a lot cheaper than new cars if you get one that’s not too old. You also get a break on insurance. Insurance agencies charge less to insure a used car since it’s no longer brand-new and as expensive to repair or replace. You also won’t need items such as Gap insurance or new car replacement unless you don’t put money down because you finance 100% of the vehicle’s worth.
It’s a Better Investment
Overall, buying a slightly used car means you’re making a good financial decision. You’re paying less, not taking a hit on the depreciation of the vehicle, driving what you want, and you’re not putting out as much money to drive this car each month. You don’t need an old car. Used doesn’t mean old. It can be a car from this model year that’s been driven a few thousand miles and costs a lot less. It’s always wiser to spend less on cars because they are not considered good investments.
When it comes to buying a new-to-you car, it’s a good idea to spend a little time researching which cars are the best. Which ones are known for lasting the longest, holding up over time, and which ones have fewer miles. Buying used is always safer when you choose a low-mileage vehicle. Don’t discount this option until you’ve tried it. It might be the answer to your financial future questions.