Are used cars better than new cars? Everybody would love to have a new automobile every couple of years but, for most, that’s an extremely expensive proposition — nor does it make much sense. You can’t beat a used vehicle purchased from a private owner; late model vehicles provide the biggest savings. This is primarily because most new autos lose upwards of 50% of their value in the first three years.
The bottom line: Folks who can live without that new car smell, and are willing to pay for occasional maintenance and repair costs, will get maximum value by buying used instead of new. Every time.
Photo Credit: KB35
Well said. Let the first buyer take the hit on the depreciation.
You are ignoring a large factor here – financing. You can often get substantially better financing buying new rather than used.
Really? Did you really type that?
Yes, you can get substantially better financing, but for twice as much, you’re still paying more on interest than for a new car.
A friend of mine is spending more on interest for his new car(still) alone than the total cost of both of my cars combined.
I told him not to buy it.
And you can become substantially wealthier if you avoid the car payment and pay cash. Wouldn’t you rather earn interest on your money than pay someone else interest?
That’s what I do!
It’s crazy how cheap things are if you just pay cash. Non-emergency medical bills included.
Yeah saving on depreciation is huge, and so is saving on interest. I’ve always wondered if the reverse is true for saving on interest. Let’s say instead of buying with cash, you finance a used car at 0% APR, then you should still save the same amount of money. You just have all of your money in the bank earning interest rather than in the car not earning interest. Then you slowly withdraw to make car payments.
Well said.
Where I buy my cars, there are two prices. One is the cash price, the other is the 0% financing price. Of course, the 0% financing price is higher. Maybe you people can find a dealer that will finance a new car at 0% interest for invoice cost, but I can’t.
I have always bought relatively late model used car. It just doesn’t make sense to buy a brand new one. What I do is bring it to a mechanic who does a thorough check and lets me know if there is anything wrong with it.
A guy I have known well for years bought a BMW when he got his first job out of college, many years ago. He soon realized that it was a dumb move, and he traded down…then traded down a 2nd time to Car#3: a very used car, I think it was a beat up old Saab.
The whole reason he probably got the BMW is because he felt cool with it. The funny thing is, he got more attention from the ladies after going from a luxury car to a beater. The attention was good attention:) Who would have thought?
The last car I bought is a new car. I do not like the uncertainty of used car. But I takes good care of it for the last 14 years. If it keeps running, I would not mind drive it for another 14 years. The average annual cost is brought down significant for long ownership.
I’m with you. I’ve owned new and used, and I’d much rather beat a new car to pieces for years than always be wondering about a used car. It’s not the “smartest” financial decision, but it suits my personality better.
I agree – I much prefer to buy new and then keep it forever. Still end up having to deal with problems/repairs in the latter years of ownership, but at least they’re ‘my problems.’
I guess that if I were the sort of person who needed to have a new-to-me car every 5 years or so, it would make overwhelming sense to buy it used, but since I’m buying and keeping the car for a decade+, I like to be able to get exactly what I want, under warranty, and not have to worry about whether the previous seller is offloading a lemon onto me.
Betsy and Carla: Our last two cars, which we still drive, were bought brand-spankin’ new in 1997 and 2001. I ended up relenting and buying them new because the Honeybee feels the same way you do, and I knew we were going to keep the cars for a long time. It’s almost time for me to buy another car, but this one — for me — will most likely be two to three years old when I buy it. 🙂
My cars have been an ’88 Buick Regal and an ’89 Oldsmobile Royale that was over 120k miles when I got it. The Oldsmobile is a piece of junk, but it hasn’t failed on me yet. The Buick burned up due to a bad oil change(filter fell off the next day. That mechanic went out of business a few months later).
If you shop reputable dealers, it’s easy to get a good deal on a reliable, fancy, used car. My mom’s last car was bought at a dealer who flat-out will not sell a car that’s ever been in an accident. Her previous car was bought from a family friend who had probably had it for around a decade, and we had it for almost a decade.
I paid around $400 for my Oldsmobile. Then I got rear-ended by some psycho lunatic in a hit-and-run, and her insurance paid me $450. I win!
You can also always check the car history (free from dealerships) and if you feel the car history isn’t enough, you can pull it yourself for less than $30 a piece from autocheck, carfax, reversevincheck, etc. For less than $100, you can hire an ASE certified mechanic to come onsite and take a look at the used car.
$130 isn’t much of an inconvenience compared to the thousands you’d save from buying used vs new.
I think buying a late model used car leads to the most savings. You also save on insurance. It just makes fiscal sense.
Totally agree, I just bought a used Volvo that will hopefully (fingers crossed) last me 10+ years. I’m planning on driving it until it doesn’t go anymore. Then donating it to charity for the tax write off.
Used cars are a better value for many but if you work for a car company and are willing to be patient you can get a car at employee fire sale prices. Also you are expected to buy a new car every few years assuming you want to get a raise.
I would still go for a brand new car rather than a second hand car.
I believe in buying used also. We bought a SUV last summer that was a little bit more than 1 year old. We saved a lot compared to new and it really looks like them. Plus, it still had the new car smell!
I think you know my opinion on this Len. 🙂 I bought the 2001 Mazda Protege in 2005 for cash, and got a great deal I found online. I barely use it so I don’t have plans to trade it in.
Buying a used car makes a lot of sense especially when it’s less than 5 years old.
Yes and No!! It all depends on your financial situation. I have 2 new high end BMWs a 750 with an M package, and an X5 M , sure i could have bought a house with the amount of money i paid for them, but i work hard and i enjoy driving what i like, sure they depreciate, sure i can drive an old clunker, the way i look at it , if you can afford it do what you like and enjoy, LIFE IS TOO SHORT just to worry and save. Enjoy while you still have your health , travel to places you always wanted to see —
If you have the money, go for it. Money only does anybody any good when somebody is spending it.
However, if you’re taking out a loan to buy a car, or really anything but a house(and even that’s questionable), you can’t actually “afford” that thing. Far too many people these days say “Oh, I can afford that, I just put it on my credit card with a $20,000 credit limit, and I’ll keep paying the minimum until the day I die.”
That’s not affording anything, it’s just stupid.
I’m 100% percent with you on this. Let someone else take the hit when they drive it off the lot!
C’mon Len. Live large and have the best of both worlds. Get the advantages of buying used *and* get the new car smell. Have your newly bought used car detailed so it looks new and then spritz the interior with new car smell.
http://www.amazon.com/Chemical-Guys-AIR_101_16-New-Freshener/dp/B002J7VX4Y
When you pay cash, you are not required to buy full coverage. Full coverage adds approximately 20% to the vehicle cost over 5 years. I think this is a bigger deal than interest.
The best advice I have seen on the subject is to buy a new car and keep it for 10 years or buy a used car and keep it for 5 years.
I buy cars for cash at half-life and drive them until they die. But, I have the ability to do most of the basic maintenance myself. This strategy wouldn’t work for some people.
Spot on. I purchased a used car 1.5 year ago and it has not given me any problems what so ever. I went to the dealer the other day and amazingly my used car has retained most of its value. (I got a good deal from my brother in law who is a dealer)
What about certified pre-owned? I got one and I got a great deal, financing like I would have on a new car and it came with all the assurances that it was clean and reliable. If you’re looking for a used car because new is too expensive, I would definitely recommend looking into a MANUFACTURER certified pre-owned.”
I had no idea that most new cars lose upwards of 50% of their value in the first three years! This definitely something keep in mind when deciding to buy a new or used car. I remember when I bought my first car I wanted to buy a used car because it was the only thing I could afford at the time. On top of that, I wanted something that would keep it’s value later on.