5 Smart Reasons Why You Should Buy a Used Car
Buy a used car and save money
If your goal is saving money, buying a used car rather than a new one can save you big bucks in several ways.
“I am a big fan of buying used,” says Philip Reed, Edmunds.com senior consumer advice editor. “I think it’s an extremely important way for a family on a budget to save money.”
Jack Nerad, Kelley Blue Book’s executive market analyst, is another cheerleader of buying used. “Used cars are a great value,” he says. “Cars today are really good and really last a long time. They have longer useful lives than in the ’50s and ’60s when I was growing up.”
Minimizing Depreciation
The moment you drive your new car off the lot, it will depreciate by as much as 11 percent of its value. Most cars will lose another 10 percent in value during the first year. That’s a 20-percent loss in value during the initial year of ownership. You can avoid that hit by buying a one-year-old used car. He cautions that one-year-old used cars are hard to come by, but it’s becoming easier to find two- and three-year-old used cars.
Additionally, with the “right” used car, it’s possible for an owner to buy it, drive it and sell it with little loss in equity. According to Reed, depreciation flattens out, usually after a car’s second year when the rate of depreciation dips before increasing again around year five.
Still, Nerad says buying something that is two years old and driving it until you can’t drive it anymore is the most cost-effective way to own a car.
Reducing Insurance Cost
Nerad says a key factor in determining the cost of carinsurance is the value of the car. Because a used car has less value than a newer version, the cost of insurance should be less. Reed says even more money can be saved because some elements of car insurance can be dropped.
“Collision and theft: Once a car is old enough, you can do away with those if you choose,” Reed says.
Reducing Registration Fees
As with car insurance, the fee that states charge to register a car is often based on the car’s transaction price, Reed says. And many states are increasing registration fees in an effort to generate more revenue. Buying used is an effective way to stunt those increases.
Getting More Bang For Your Buck
Stretching your car-buying dollar is another benefit of buying a used car. You can buy more car by purchasing used rather than new. You may not be able to afford that new luxury car you’ve lusted for, but one that’s two or three years old may fit your budget.
“We used to think that a 100,000-mile car was done,” Reed says. “Now they are running to 200,000 miles. That’s like a second life.”
Nerad says because carmakers no longer redesign their models every year, buying used doesn’t carry the same stigma it once did. “When a three-year-old BMW shows up in your driveway, your neighbor doesn’t have to know you didn’t buy a new car. It looks pretty much like a new one,” Nerad says.
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