New cars are a tempting purchase for anyone looking to replace their old vehicle or add to their garage. Financing is often easier with new cars, and they typically come with all the latest technology and safety features. However, no matter how you look at it, buying a new car is generally not a financially sound decision for several reasons. Take a look at the reasons why buying used is a smarter choice in the long run.
1. New Cars Depreciate Immediately
If you're trying to decide whether to buy new or used cars, remember that the moment you take your new car off the lot, it goes down in value. Some makes of cars do hold their value better than others, and new cars do last much longer today than they used to. Nevertheless, new cars can still lose as much as 30 percent of their value within the first year.
Also consider that you've most likely borrowed money to buy that new car, and you're already losing as much as 30 percent of its actual value while making payments on it, including interest. No matter how you view it, buying a new car cannot qualify as a good investment when it loses so much money so quickly.
2. Get More For Your Money
The depreciation on a new car can actually be a boon when you're a used car shopper. Your budget for a new car might only get you the base trim of your favored model, but if you shop that model a few years back, you might be able to afford a mid-level or top trim. For example, if you buy a vehicle coming out of a two- or three-year lease, you might be able to save as much as 50 percent off the original sticker price.
3. Certified Pre-Owned Cars Provide Peace of Mind
If you're concerned about not getting a new-vehicle warranty on something used, then it's a good idea to investigate the options available with certified pre-owned cars. Nearly every automaker offers some form of this program to make buying a used car less anxiety-inducing. The CPO system is different with each manufacturer, and it's important to remember that dealer-certified and manufacturer-certified vehicles are not the same.
Manufacturer certified pre-owned vehicles typically offer a much higher level of protection. The program usually includes some type of warranty based on time or mileage, plus extras like roadside assistance or a free rental when your vehicle needs to spend time in the shop.
However, don't buy a CPO vehicle just because you think it's the only way to get a warranty on a used vehicle. Many dealerships and individual companies allow you to purchase a warranty on a used vehicle as a way to buy an extra layer of peace of mind.
4. Used Car Variety is Hard to Beat
Somewhere between 300 and 400 new car models go up for sale every year in the U.S., but the used car market holds even more variety. Carmakers discontinue trims and models on a regular basis, and your perfect car may be lurking a few years back in the trim made for only one year. For example, maybe you're looking for a small pickup. That type of vehicle is harder to find in the current market with crossovers dominating, but if you look used, then Ford Rangers, older Toyota Tacomas and Chevy Colorados and S-10s are everywhere.
5. Used Cars Have Data
Another great thing about buying used is all the data that you can pour over concerning vehicle reliability. Carmakers redesign their models every five to seven years, and the redesign might include a new engine, transmission, electronics or suspension. The previous model's reliability might not be enough to indicate how the new model will turn out. However, with used cars, all the data on reliability and common problems is right there at your fingertips (check with Consumer Reports and J.D. Power). Not only that, but the depreciated value of used cars more easily tracked as well. You can find out exactly how much you should be paying in your area for specific makes, models and trims.
6. Cut Your Insurance Costs
When you're trying to decide to buy a new or used car, insurance cost is another factor to remember. Typically the more value a car has, the more the insurance company has to pay if the vehicle is damaged. A used vehicle is going to cost less to replace than a brand new vehicle.
Depreciation won't mean too much to an insurance company if the new vehicle is wrecked within the same year it was bought. Naturally, the insurance company will pass this potential cost onto you, the driver. However, a model that has already depreciated and is three years old won't cost as much to replace and therefore it won't cost as much for you to insure.
7. Cut Your Registration Fees
This doesn't apply in every state, but many states base their registration fees on the age of the car and/or the value of the car. A car that is worth less money is charged lower registration fees in states that use this system. For example, a state like Massachusetts levies an excise tax on cars that goes down as the car gets older. Once the car is five years old, the tax bottoms out.
8. Cars Last Longer
The basic truth is that cars are lasting longer than ever. 100,000 miles is no longer the end of a car's life without Toyota or Honda in the name. Many automakers have models that can go well past that and several even offer warranties that go up to that mileage. It's always good to have your prospective used car purchase inspected by a mechanic, but 100,000 miles or more on the odometer should no longer be a major deterrent.
9. Vehicle History Reports
If a vehicle's reliability data isn't enough to move you to the used car market, then the easy access to vehicle history reports might do the job instead. Various companies offer thorough vehicle histories to help you avoid pitfalls like salvaged titles, flood-damaged vehicles, fraud and more. The one caveat here is that vehicle issues need to be reported properly in order to reflect on a report, so it's definitely not a substitute for an inspection by a qualified mechanic.
10. The Aftermarket Community is Thriving
Another great thing about buying a used car is the wealth of information available about them. Forums and car sites often have a thriving user base ready to volunteer information about owning certain makes and models. Anything from persistent problems to quirks, recalls and other information.
Buying a used car used to be a major gamble, but with all the pro-car buyer programs and information available, buying a used car that fits your needs can be a very sound investment.