It’s my goal to ensure you have all of the information you need to make the most out of your finances and help you reach your goals. One major part of everyone’s finances is your car.
Your car is probably your main source of transportation, and it can also be one of your biggest frustrations if it’s costly breaking down or always in the repair shop.
I recently wrote about the benefits of buying a new car, but often, used cars are actually the better deal.
Should you Buy a New or Used Car?
When it comes time to buy a car, there are going to be a lot of decisions you’ll need to make. You will need to decide between car, truck, or SUV and you will need to decide the make and model, the color, and much more.
One of the biggest decisions you’re going to have to make is deciding between buying a new car or purchasing a used car.
When you’re going through the car buying process, it can be exhilarating. It’s easy to get wrapped up in all of the bells and whistles of a new car, but buying a car is a huge investment, and it’s vital you make the best decision.
According to Kelley Blue Book, Americans spent around $33,000 on new vehicles in 2015. On the other hand, they spent around $20,000 on used vehicles.
This a huge difference.
Even with the drastic price difference, there are still millions of people who buy new cars instead of buying a used one, but is it a good decision for you? There are a lot of people who have doubts or fears when trying to buy a used car.
Used Cars Are a Better Deal than New Cars
Depreciation: Most cars depreciate 20-30% during the first 2 years of ownership. Why should you spend your hard earned money when you can let someone else take the loss instead?
More bang for your buck (and I don’t mean backfiring!): You can often afford to buy a better car with more options than you would be able to buy if you bought a new car. For example, let’s say you have a $20,000 budget for a car. You can buy a decent new car, with few options. But if you are willing to buy a 2-3 year old used car, you can generally get a model higher with more options – some of which would normally add hundreds or even thousands of dollars to the tab on a new car, such as a moon roof, 6 disk changer, alloy wheels, heated seats, etc.
Quality is always improving: A couple decades ago, “used car” was synonymous with “junk.” Cars were disposable objects designed to last 10 years at most. Today’s cars will last a lot longer if you take care of them. There is no reason you can’t buy a 2-3 year old car and not expect to drive it for at least 7-10 years before you trade it in because you are tired of it – not because it is falling apart.
Extended warranties: More and more manufacturers are offering certified used cars and extended warranties. These options may add a few extra dollars to the upfront costs, but can potentially save you hundreds or thousands of dollars down the road. They also give you the peace of mind to know if something under warranty goes wrong, you won’t be on the hook for the total cost.
That new car smell goes away: In 6 months, you probably won’t know the difference anyway. After a few months the new car smell is gone, you will have spilled your coffee on the floor once or twice, your shoes will drag dirt into the carpets, and your kids… well, they will be kids! To be honest, you probably won’t mind as much if these things happen to a used car because it is expected. But if they happen to your new car… well, it just causes stress! In fact, many people who buy new cars are so paranoid about things happening to their car which they don’t enjoy them as much as they should. It’s a car; not a museum piece. 😉
Car insurance rates: Not only is a new car going to be more expensive when you drive it off the lot, but you’re going to pay more for your car every month when you have to send in your auto insurance premiums. In just about every case, a new car is going to cost more to insure than a used car. If you want to save money on your auto insurance, buying a safe used car is going to be a more affordable option.
Should you Pay with Cash or Should you Finance a Used Car?
Not only do you have to decide if you should buy a new car or a used car, but you will also need to decide how you’re going to pay for that car. The most common way to buy a car is to finance the vehicle, but this isn’t the best option for a lot of people.
There are a couple of ways you can finance a car, either through the dealership, through a bank, or through a personal loan company. Regardless of the way you finance the vehicle, you’re still going to be paying for the car plus the interest of the loan.
On the other hand, if you decide to pay for cash, you can cut out the bank or the lending company. Not only can use avoid having to pay monthly payments, but you’ll also save money by not paying interest on the car every month. In just about every case, paying cash for your car is going to be a much better idea than financing your vehicle, regardless if it’s new or used. If you have the money saved up to buy a car, then you should always pay cash, and if you don’t have the money, consider waiting and saving the money before going to the car lot.
Buying a car with cash instead of financing is going to save you thousands of dollars throughout the course of the loan. Every person is different, and everyone has different needs and finances, but buying used and paying cash are the best idea in 99% of situations.
Which should you buy? As I already mentioned, I wrote about the benefits of buying a new car, now I’m telling you to go buy a used car. Which should you do? I think you should research your options and choose the best decision for your situation. 😉
Regardless of which decision you make, it’s important you do all the proper research and buy a safe and reliable car. It can be an overwhelming process, but it doesn’t have to be. With a little research and planning beforehand, buying a new or used car can be a simple process. Don’t let a new or used car wreck your finances or leave you stranded on the side of the road.
Hopefully, this article answered any questions you have about buying a used car. If you have any more questions, please feel free to contact me at any time.