Buying Decisions: Used or New Car?

credit: dodge challenger1

Got your eye on a particularly beautiful new car? We probably all have gazed at our brand new dream car at some stage, but if you are also keeping your eye on your bank accounts, then it might pay to head to the used car lot instead.

It’s no big surprise to consider the idea that you will probably save money by buying a used car, but some people are surprised by just how much you can save. The big problem comes with the depreciation cost of a new car.

To start with, as soon as you drive your new car out of the car lot, it is no longer new. You’ve already lost some of its value. A used car doesn’t have this disadvantage - it is already used, and just because you buy it, doesn’t really make it any more used. Combine that with the fact that a new car loses, in total, about 40% of its value in the first three years, and you can see that things are already starting to get expensive.

When you buy a used car, there are other financial benefits too. You won’t pay sales tax, the purchase price will naturally be a lot lower, and because the value of the vehicle is lower, your insurance premiums and registration payments usually will be too.

So what’s the catch? You take more of a risk with a used car. You can’t be sure of its service history, and the new car warranty will usually have run out. But if you are careful and buy a reasonably young used car and get it mechanically checked before you sign, you’ll have a great chance of saving a heap of money over a new car purchase.

Tags: automobiles | Insurance | savings