When choosing between a new or used car it pays to consider everything that is involved. The most cited reason for buying new is that there is very little risk. True, the new car will have a full factory warranty that you will have for a number of years and there is something to be said about the peace of mind that a warranty brings. However, that peace of mind that you are getting in a new car will cost a lot of money in the form of heavy depreciation in the first years of ownership. In fact within the first one-minute of ownership, your car will lose 9% of its value. Each year thereafter it will continue to lose.
Assuming you put on 15,000 miles a year, your car will have depreciated nearly 20% after the first full year of ownership, or almost 1/5 of its value. Presuming you bought a car for $23,000 and then after taxes and registration you paid $25000, your now “used” car will be worth a mere $18,000. You just lost $7000 in one year of ownership. However, if you plan on driving the wheels off your car, then depreciation has no effect on your purchase. But if you do intend to trade it in or sell it at a later point, you need to be smart about the losses involved. Of course not all cars depreciate at the same rate. The example cited above is for a relatively low budget purchase. The more expensive the purchase, the bigger the loss.
There are of course other factors such as better financing on new cars versus used, but registration will be more for a new car as well as slightly higher insurance premiums, so the savings gained on better financing is somewhat neutral.
Buying used is most always the better value proposition. Cars are built so well these days that a 2-3 year old car is still looking, driving and behaving as though it is new. But what about the warranty that is set to expire? Isn’t that the problem you ask? Well that problem is easily overcome with buying a “Certified” car. Certification on a slightly used car adds valuable warranty to the original warranty, and in most cases exceeds it. Most gently used cars will be certified by the dealers upon sale. The certification process has limitations such as how old or how many miles a car has so you might want to have that information available when you shop. Generally speaking if a late model car is not certified then I would stay away from it.
Of course the whole trick behind buying a used car is to make sure you bring along a qualified expert to help determine if the used car you want is accident free, gently driven, dealer maintained and of course a trade-in and not something the dealer picked up from an auction house. That is my job and I take it seriously and so should you.
However there will always be people who insist on buying new for reasons that go beyond money. If you are one of those people make sure you get expert guidance on How to Negotiate the Best Deal. Also know the Best Time to Buy a Car.
Greg Macke- Your Car Angel
Greg Macke is a car blogger and author of “My 7 Secrets to Buying a High Quality Used Car”. He is a professional car buyer and consumer advocate working closely in the industry to improve the buyer’s experience. His high quality car buying tutorials offer help to the car buying public. – See more at: http://yourcarangel.com/
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