You are a smart person. You budget your money. You save where you can. You even took a defensive driving course to lower the premiums on your car insurance. So, when it comes to making a big investment like buying a car, why would you pay thousands more for something just because it is brand new? Naturally you would like to get as much for your money as you can. When buying a car there’s an effortless way to do this–it’s called buying a used car or pre-owned vehicle.
If you are like most people you can’t stand it when you buy a pricey HDTV or computer only to find it selling for hundreds less a week later. It’s the same exact item, but offered for a discount simply due to a sale or other event. It’s the idea of having paid WAY more than you had to that really bothers people. When it comes to cars, this is exaggerated even more because used cars can sell for thousands less than new ones. You get the exact same thing for much, much less.
One of the biggest reasons to buy used is called price depreciation. This means that the price of a car goes down as time goes on. It’s a simple concept yet many people forget about this in all the excitement. They get caught up in the idea of owning something brand new that’s all yours and no one else’s. But a new car can lose so much value once it is driven out of the car dealership. Some estimate new cars lose up to 20% of their value the second they are driven off the lot. They can also lose another ten percent after a year. That means buying used is like getting a car at a big discount! Almost as much as what you can save from the New Jersey auto insurance discount.
Price and value are too different concepts. Value can be thought of as how much you get for the price you pay for something. A used car can return more value to an owner over the long run because the loss in equity is less over the course of ownership. Let’s say you pay $30,000 for a new car and in two years you want to sell it. The resale value may only be $20,000, for a whopping $10,000 in equity loss. Chances are you are way underwater on the loan, due to interest. So, you lose money when it is time to sell.
A used car will lose less value initially, so you have a better chance of making money when you go to resell it. Or, at least you won’t owe so much money when it is time to sell it.
Cost of Ownership
Some people are afraid a used car may cost more to own due to maintenance costs. However, today’s cars are built to last longer than ever, and even though parts and labor are expensive, most major parts are still covered under manufacturer’s warranty. If you take care of your car and treat it right, it will treat you right. New cars on the other hand are just as expensive to repair. The cost of insurance, plus the added expense of higher interest payments and the loss of equity after you drive it off the lot erase any savings you may have in terms of repairs.
Consider these benefits to buying a used car and it is plain to see that buying used or pre-owned vehicles really saves you money in the end, and gives you much more car for your hard-earned dollars.