Owning a car ain’t cheap and since the pandemic, prices are only going up. One way to ease the pressure on your wallet may be to look into buying a used car.
Pros of Buying a Used Car
· Less Expensive: According to Experian, a credit reporting agency, the average monthly payment on a new car at the beginning of 2024 was $735. Leasing a new car was a bit more economical at $595 a month. Average monthly payment for a used car was the cheapest option at $523. Type of car and model year will have an impact on the cost, but shopping around may help you find the best deal.
· Lower Insurance Costs: Forbes Advisor reports that the used car full coverage insurance is 37% cheaper than for a new car. This is because the car is usually lower in value than a new car and comprehensive and collision insurance pay outs are less if a car is damaged in an accident. However, liability-only insurance is usually similar between new and used cars since it is coverage for damage that you cause to another vehicle only.
· Reduced Depreciation: A new car loses 20% of its value during its first year. Over the next five years, the depreciation goes up to 60%. That means you could buy a one-year-old car for 80% of what its initial price was. Not a bad deal.
· Better Availability and Variety: When you aren’t looking for a brand-new car, you have more options on offer across colors, make, and model.
· Vehicle History Reports: Many used cars have maintenance and accident reports available for your peace of mind.
· Certified Pre-owned Programs: These programs are backed by the manufacturers and help reduce the risk of buying a used vehicle. Vehicles covered under a CPO standard have a bumper to bump inspection, verified service history, and secure factory warranty. Each manufacturer has a different program, so do your homework to know what is available.
Cons of Buying a Used Car
· Higher Maintenance and Repair Costs: As we are dealing with an older car, it is likely that it will need maintenance sooner than a new car would. It is also more likely that normal wear and tear will require some repair. There is no way to truly know how the previous owner maintained the car and that is a risk.
· Limited Warranty: Although some cars may still be covered under the manufacturer’s warranty, there may be limited warranty coverage or no coverage at all. This can lead to higher repair costs.
· Lack of Technology: A used car may not have the newer technology and safety features you would like.
Do Your Research:
Shop Around. Check into used car locations, classified ads, and look online. You never know when you may bump into a great deal.
Check out the book value. There are many websites to determine the book value of a car to make sure you aren’t paying too much. Kelley Blue Book is a good place to start.
Look at the vehicle’s history and title. You want to know about any accidents or criminal activity before you buy. www.vehiclehistory.gov has a list of approved websites.
Get a pre-purchase inspection by a mechanic that you trust. This will help give you an idea of what shape the car is in and any repairs that may be coming up. Schoen Auto does these!
Try to pay in cash if you can. Consumer Reports has found that almost 11% of costs during the first five years of car ownership are due to interest on the loan.
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