Opting for a used car instead of a new one is a wise choice for numerous drivers. As inflation rates in the United States reach historic highs, Americans are experiencing its impact on their grocery bills and fuel expenses. Considering that the average cost of new vehicles was approaching $47,000 in early 2022, as reported by Kelley Blue Book, now seems like an opportune moment to economize by purchasing a used car.
Buying used will save you money
Opting for a used car instead of a new one can lead to substantial savings in several ways. Firstly, a used vehicle typically comes with a lower initial sticker price, but the cost benefits don’t end there. You’ll also find yourself opening your wallet less frequently when it comes to fees, insurance premiums, and vehicle depreciation compared to driving a brand-new vehicle.
As per Experian data from the first quarter of 2023, the average monthly payment for a used vehicle is $528, whereas drivers financing a new vehicle paid an average of $729 per month. These savings of over $200 monthly can accumulate rapidly, potentially resulting in thousands of dollars in overall savings when you choose a used car over a new one. While the lower purchase price for the same car model from a different year is the most evident reason to opt for a used vehicle, there are additional compelling advantages to consider as well.
5 advantages to buying used
Not all used cars are alike. It’s essential to conduct thorough research before determining whether a used car is in good or poor condition. Keeping that in mind, here are five compelling reasons to consider when contemplating the purchase of a used car.
1. Less vehicle depreciation
Vehicle depreciation is an inevitable aspect of vehicle ownership, but the rate of depreciation is significantly lower for used cars compared to new ones. New vehicles often experience a depreciation of approximately 20 percent the moment they are driven off the dealership lot. In the first year, most cars lose an additional 10 percent of their value, resulting in a total depreciation of 30 percent during the initial year of ownership.
Conversely, used vehicles undergo depreciation at a considerably slower pace than new ones. This is primarily because the most substantial depreciation occurs before you take the wheel of the vehicle. Unlike brand new cars, which begin to depreciate immediately upon leaving the dealership, used vehicles exhibit a more gradual rate of depreciation, leading to a more stable loan-to-value ratio.
2. Lower insurance costs
Insurance costs are subject to variations based on factors such as your age, driving history, credit score, mileage, and location. Generally, in line with the lower vehicle price, insurance for a used car tends to be more economical compared to that of a new car. The vehicle’s value is a critical determinant of insurance expenses. As used cars have lower values than newer models, the insurance costs associated with them are typically lower.
Concerning recommended coverage, if your vehicle is older, you may want to contemplate liability coverage, provided it’s permissible in your state, as opposed to including comprehensive and collision coverage, which is more relevant for newer vehicles. However, insurance rates can be inconsistent, so to optimize savings, it’s advisable to compare rates and conduct thorough research on your anticipated auto insurance expenses before driving away from the dealership.
3. Lower dealership fees
Similar to how insurance costs differ by ZIP code, the anticipated fees linked to your used vehicle are not uniform across all 50 states. However, these fees tend to be lower compared to those associated with a new vehicle, primarily because the initial vehicle cost is lower. This holds especially true for potential sales taxes that might apply.
To equip yourself for the supplementary expenses related to owning a used vehicle, it’s advisable to consult your state’s DMV website for precise information regarding title taxes, registration fees, and documentation fees.
4. More bang for your buck
Maximizing the value of your car-buying budget is another significant advantage of opting for a used vehicle. When you choose to buy used, you can acquire a more substantial and feature-rich car compared to purchasing new.
If you’re eyeing a luxury vehicle but find the current year’s model beyond your budget, a two- or three-year-old version may align better with your financial constraints. Additionally, it’s worth noting that automakers no longer introduce comprehensive model redesigns each year, meaning that differences in technology and style between newer and slightly older models may be less pronounced.
You can assess these potential savings and even make a direct comparison by using a new versus used car calculator to determine which option best suits your needs.
5. More peace of mind
Historically, driving used cars was often associated with a certain stigma, and many drivers perceived it as a risky choice. However, the introduction of vehicle history reports has transformed this perception. Nowadays, drivers have access to comprehensive information about a car’s ownership history, accident records, title status, mileage, and more.
Before finalizing your decision to purchase a used vehicle, make the most of resources available on websites like Carfax and AutoCheck to obtain detailed history reports for the vehicle. These reports, accessible via the car’s vehicle identification number (VIN), provide a wealth of valuable information, including mileage verification and whether the vehicle has ever been declared a total loss by an insurance company.
Certified pre-owned option
If you still have concerns about potential hidden issues in a used vehicle, considering a certified pre-owned (CPO) car could be an excellent choice. By opting for a CPO vehicle, you can still enjoy cost savings associated with buying used while gaining added assurance regarding the vehicle’s reliability. Certified pre-owned programs vary from one manufacturer to another, but in essence, CPO cars are vehicles that meet the manufacturer’s established standards and come with some form of warranty against defects, akin to a new car’s warranty.
To explore this option, browse dealership inventories to find the certified pre-owned vehicle that suits your requirements. Keep in mind that each dealership may use different terminology for pre-owned offerings, so it’s beneficial to conduct online research before visiting the showroom. Additionally, most of these vehicles include supplementary warranties, so carefully assess the duration and coverage to understand what’s included.
Purchasing a used vehicle is a fantastic approach to getting on the road without the hefty price tag of a new car. It means experiencing lower vehicle depreciation, reduced insurance and registration expenses, all while having the assurance of a well-maintained vehicle.
When it’s time to secure financing for your used car, it’s important to review the prevailing auto loan rates to ensure you’re securing the most favorable deal. Additionally, calculating your potential expenses associated with financing is a prudent step to take.