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Buying a car is one of the top investments that you will make in your life – perhaps the second most significant one after purchasing a house. After all, when you cannot afford to purchase the vehicle outright, you are also committing to a number of years paying off a loan. One of the primary decisions that you need to make is whether you want to buy a new or used car. Buying a used car is a smart choice for the following reasons:
- Affordability – when you buy a car that is just slightly used, there is a substantial cost savings. Cars depreciate the most in the first couple of years, according to Bankrate. The moment you drive the car off the lot, its value declines by thousands of dollars. Once it’s off the lot, it is only worth the dealer’s wholesale price; a fast depreciation from the retail price that you paid for it. This is because the dealership would not offer you anymore than the wholesale price if you decided to return it.
- Certification of their condition – you can get used cars that are a year or two old that are in nearly new condition. These are a great value compared to what you’d pay if you purchased a brand new vehicle. Some cars maintain low mileage when they are used as a secondary family car, or when used strictly to commute to a train or bus station. If your used car is purchased from a dealership, you know you are not getting a lemon as these vehicles must pass re-selling requirements. They can even be certified as pre-owned, meaning that are under warranty with the manufacturer.
- Warranties are available – you can take out extended third-party warranties on used cars, however, a certified pre-owned car comes with a warranty backed by the vehicle manufacturer. The manufacturer would not extend the warranty on a used vehicle that doesn’t meet their standards. So you already have a quality guarantee, with additional insurance in case maintenance or repairs are necessary after purchase.
- Car insurance on a used car is cheaper – with a brand new vehicle, you need complete coverage (particularly if your purchase was funded with a loan). With a used car, you have options that determine how much or how little your monthly premiums cost. Some drivers choose to skip taking collision insurance on a used vehicle if the replacement value of the car is not high enough to justify it. Since the cost of a used car is also lower, the insurance premiums are typically cheaper as well.
Overall, when looking to add a vehicle to your life, a used vehicle is a smart financial investment.
Photo courtesy of Rich Nacmias/Flickr.com