While it can be exciting to buy a new car straight off of the lot, the truth of the matter is that you can save a whole lot of money by purchasing a used car instead. The reason for that is straightforward and consists of a single word: depreciation.
What is Depreciation?
When considering cars, depreciation refers to how much value a car loses over time. You might be surprised to learn that only driving a brand spanking new car off the lot leads to it losing 20% of its value. In those few seconds, your car loses thousands of dollars in value. By the time you consider wear and tear over a year, your car can lose up to 30% of its value.
An example of this follows:
You choose to buy a new car for $30,000. Three years later you decide to sell it to someone else, gaining you $15,000. In only three years, your car will have lost half of its total value.
On the other hand, consider being the person who buys that three-year-old car. You buy it for $15,000 and again, keep it for about three years. You then decide to sell it and get $10,000 for the car. In this case, you lose only $5,000 in depreciation costs.
That’s why used cars are a better deal in nearly 100% of cases.
Reliability and Maintenance
Many people think that a used car is a bad deal because you’re essentially buying a vehicle that already has issues. However, in today’s world, that’s not true. Cars are more reliable overall at this time in history. Major repairs are less frequent, and it takes more time before you run into significant issues in most cases. Also, while maintenance is necessary for any car and will cost some cash, it’s less often needed nowadays. Components just work better and last longer than they have ever done in the past.
Advantages of Buying a Used Car
Let’s go over a few of the other benefits that come from choosing a used car, rather than a new car.
- Better quality vehicle for a lower price. Because you save a significant amount of money by choosing a used car, you can shop for a higher quality vehicle than you might be able to when choosing a new car.
- Save on car insurance premiums. Cars that are worth a bit less cost less to insure when purchasing comprehensive and collision coverage. Dropping the comprehensive and collision insurance will save even more if you go that way.
- Renewal costs fall. The cost when registering a used car goes down every year, saving you even more money.
- Less anxiety about dings and bumps. With a new car, a single scratch might be enough to stress you out. With a used car, a new ding isn’t that big of a deal.
Advantages of Buying a New Car
While there are many benefits to the purchase of a used car, it’s worth considering the other side of the coin. Below are some advantages that come from buying a new car.
- Technology features are more advanced. You likely won’t get the most modern safety features, performance, and comfort in a used car. Instead, a new car gives you everything you want immediately.
- Shopping for a new car is simple. There isn’t a lot of inspecting needed with a new car, as it’s assumed to be perfect. It’s also easier to determine what the appropriate price is for a new car, something that can be frustrating with a used car.
- More options for financing. New cars often have incentives associated, such as rebates. Also, new car s often have better rates. This isn’t possible with a used car.
- Less stress in general. A new car is going to be more reliable than a used vehicle, even if a pre-owned vehicle is more dependable than ever before. Also, a warranty takes care of many issues if they do crop up.
Whether you choose a new or used car, it’s worth knowing that depreciation quickly brings the value down for the former. If that’s something you’re okay with, go with a brand new car. But, if like many people, you want a great value for the money you pay, it may be time to seriously consider going with a used car.