Why Your Next New Car Should Be a Used One

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AMTD88 College age female shops for a used automobile and looks at the sticker price of the car on a used car lot College; age;
Alamy

By Holly Johnson

The decision to purchase a car shouldn't be just about finding your favorite shade of blue and driving it home. There are a variety of factors to consider: How much do you want to spend? Do you need a warranty? Can you pay cash or need financing to seal the deal? But first, you need to decide on one of the most important issues related to your car purchase -– should you buy new or used?

Everyone loves that new car smell. Then there's the way the interior has been carefully covered with plastic. The stickers still on the windows. The odometer that reads zero. And a smooth-talking sales person can convince you that you can afford the car of your dreams without a shadow of a doubt.

But with all the talk of low monthly payments and cash back, there are a few things your crafty salesman or woman won't tell you. And unfortunately, those tiny gems of information are perhaps the most important things you should know. You know the saying, "The devil is in the details?"

1. New Cars Face Instant Depreciation

A growing body of research shows that a new car may not be the best way to spend your hard-earned cash. According to Edmunds.com, your new car could lose as much as 9 percent of its value the minute you drive off the lot. That means your new $30,000 ride might be worth as little as $27,300 by the time you get it home to show your spouse. And one year later? Your car might now be worth as little as 81 percent of what you paid for it or $24,300.

The news only gets worse from there: Your car is worth as little as 40 percent of its retail price five years after you buy it.

2. New Cars Bring Higher Costs

Your monthly payment isn't the only way a new car will assault your wallet. People forget that new cars (especially those with a loan) sometimes require higher levels of collision and liability coverage. The manufacturer suggested retail price also weighs heavily on the overall costs to insure it. What this means is that a new, expensive car might cost significantly more to insure than an older, used model.

But that's not all. Depending on where you live, the cost of license plates and vehicle registration are often commensurate with the retail value of your vehicle. In other words, your expensive new car will cause you to pay more for the privilege of parking on the street – sometimes a necessity if you live in a large city.

3. Buying a Used Car Offers Psychological Benefits

So now you know you'll likely save some cash by buying used instead of new, but what about the emotional aspect of your purchase?

Sure, you might feel slightly deflated when you drive off the lot with a used car instead of new. However, you might also feel a psychological boost from not having to worry too much about the upkeep of a brand new car.

Think about it. As we all know, life happens. That sweet little old lady at the grocery store is bound to slam her cart into whatever you're driving at a certain point. And we all know what birds do. In our complicated world, not having to stress over the elements or a little ding here or there is worth something.

The bottom line: It's your car and your decision, but it's important to understand what having a new car really means. Of course, it feels good to buy something new and show your friends and neighbors that you're doing well, but that new-car smell might cost far more than you ever realized.


Drive Off With a Deal on a Used Car


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80 Comments

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irnmk50

Yup, buy one thats been in a flood...!

August 05 2014 at 7:32 AM Report abuse rate up rate down Reply
bdyftns

Just what I want to do. Buy someone else's problems.

August 05 2014 at 7:30 AM Report abuse rate up rate down Reply
toosmart4u

Next vehicle for me will be a Chevrolet Volt. First of all because I am an American and will always buy American and second of all to get away from the oil companies.

August 04 2014 at 4:23 PM Report abuse rate up rate down Reply
1 reply to toosmart4u's comment
Tom Wilson

You can't afford a Chevy volt, htf do you think you're kidding?

August 04 2014 at 8:11 PM Report abuse -3 rate up rate down Reply
1 reply to Tom Wilson's comment
gfy.gfy

He can with the wwlfare credit.

August 04 2014 at 10:04 PM Report abuse -2 rate up rate down
Terry and Mandy

The best used cars to buy are those just coming back from a 2 or 3 year lease. The depreciation has been factored into the lease payment for the previous owner. Since you are going to get a good price on a low mileage, well maintained vehicle, spend the money to get an extended warranty for an additional 2 years. You still end up with a great deal. As for the "new car smell", you can buy it in a spray can at the carwash.

August 04 2014 at 12:27 PM Report abuse +3 rate up rate down Reply
rockyglen70

Funny...no matter what used car is on the dealers lot.....it always is the one just traded in by the family of a little old lady. Needless to say, the dealer is always cutting his price close to the bone to give you the best deal. BS!! When you buy used...you get somebody's problems. You never know how the car was driven, by whom, or how many. I hate doing it....but I now buy "new". Yes, it falls in value the minute I drive it off the lot......but how many used cars are priced so close to what they were new. I'll lose the money rather than pay it to a dealer for second hand.

August 04 2014 at 12:02 PM Report abuse +1 rate up rate down Reply
pjchilds

I learned from my Dad years ago that the best used car to buy is a leased one. People have a tendency to take care of a leased car because they don't want to be hit with additional fees at turn in if the mileage is over what was specified in the lease or if the car shows wear and tear. Also stay away from rental cars, because though they may look new many have been abused by renters living by the motto "Nothing parties like a rental".

August 04 2014 at 11:47 AM Report abuse rate up rate down Reply
dembaitnswitch

You want a used car, buy it. You want a new one buy it. What's the problem?, this is America and so far you are free to choose which one you want.

August 04 2014 at 10:16 AM Report abuse +1 rate up rate down Reply
jpfmtka

To each their own. In late 1997 I bought a same year Grand Cherokee 4WD with about 1000 miles on it from a dealer. The price reflected appropriate depreciation and I paid cash. Today, I am still driving the same vehicle. It looks and runs great having always been properly maintained and in a garage. The annual registration, as I recall, is about $30 and full coverage with 500000/1M liability coverage runs me about $300. a year. I hope to drive it until they take my license away .

August 04 2014 at 9:57 AM Report abuse +3 rate up rate down Reply
vince

You've just provided an excellent argument for leasing the new car! AND.. since the vast majority of buyers are payment shopping... The fact is the majority of buyers now consider leasing the better choice and a better bang for the buck than a retail purchase. In my store it's nearly 70% of the sales are leases! A new car every 3 years, LOW initial out of pocket expense if any. (many just sign and drive ) Minimal maintenance expenses if any. Never buy new tires or deal with any repairs. Always have the latest technology and safety equipmet. No depreciation ( because you don't own it ) and the opportunity to buy the car at the end of the lease for what amounts to wholesale pricing if you really love the car. Oh. let's not forget GAP insurance is included just in case. Let's face it.. new cars don't go up in value.. they go down ( as you have said up to 20% the first year ). So why own a depreciating asset? Leasing.. Sounds go to me.. and to many many others.

August 04 2014 at 9:42 AM Report abuse -6 rate up rate down Reply
coastalwave

Sounds like good advice, BUT...
In 2008 my car simply croaked and I needed another one ASAP. This was during the time when they were not writing leases, so I bought a 2005 Honda Accord, certified from a Honda dealer, with 18,000 miles on it. Took good care of it, but it rapidly turned into a jalopy. The maintenance costs became huge, and I was thrilled to sell it at CarMax for $9k in 2011!! Never again will I buy a used car.

August 04 2014 at 9:09 AM Report abuse +1 rate up rate down Reply
1 reply to coastalwave's comment
rgkarasiewicz

It most likely had some serious intermittent electrical/mechanical problems, and it was probably why the original owner traded it in.

August 04 2014 at 10:27 AM Report abuse rate up rate down Reply
1 reply to rgkarasiewicz's comment
thomashollman19

THE BULL PIN JUMPED OUT OF THE HEIFER SHAFT

August 04 2014 at 9:41 PM Report abuse -1 rate up rate down