While buying new cars is enticing, buying a used car can save you serious money over time.
by Doran Vandenberg
According to Nerdwallet, “The average person owns 13 cars in a lifetime, each costing an average of $30,000, according to a report by the National Automobile Dealers Association. If each of those cars was 3 years old, instead of new, you could save nearly $130,000 during your lifetime.”
That’s a shocking realization. And if you finance a car loan, you pay even more with the interest on that $130K. If you invested that money, the interest you earn would make the gap even wider.
Depreciation is Your Enemy
A car loses up to approximately 30% of its initial value within the first year. Your $30,000 car depreciates by $6,000 the minute you drive off the car lot. That’s 20%. If your mileage is average along with the wear and tear, take off another 10% after a year of driving for a total reduction of $9,000 in value.
Second-hand cars not only help you in saving money for the future but also help you get your dream car within your budget. Used vehicles have already lost the depreciation value and create lower asking prices. Understanding how depreciation works can save you trunkloads of money over your lifetime.
Let’s Compare Two Cars: 1 New, 1 Used
New Car: Buy your dream vehicle for $30,000. All things average, sell it three years later for $15,000. The car has cost you $15,000.
Used Car: Buy the exact same car, but it’s 3 years old. You pay $15,000. Three years later, you sell it for $10,000. The car has cost you $5,000.
If you’re savvy and disciplined, invest the $10,000 and get your money working for you instead of against you. But that’s another article.
You have a choice to make.
Driving a brand new car is great! I mean, the new-car smell alone is almost worth the $10K. There are no wrong decisions here, only informed decisions. If driving a new car means that much to you, go for it. After all, every used car buyer needs a new car buyer.
Used Car Advantages
Back in the day, used cars had a stigma – they came pre-loaded with problems. But that’s generally just not true anymore.
Dependability: Cars have never been more reliable than they are today. The warranties reflect that with some covering things up to 100,000 miles.
Maintenance: What makes cars last longer these days is the components that they’re made of. Car parts are much more reliable and longer-lasting which means the car will run better longer.
Lower insurance rates: A car that is worth less, costs less to insure. You can drop certain coverage such as collision and comprehensive coverage which saves you even more.
Higher class of car: Get more car for your buck and move up to luxury class when you by used.
New Car Advantages
Used cars cost less, but a new car still has its advantages.
New car shopping is easier: The car’s condition isn’t a factor. No need to wonder, stress, or take it to a mechanic.
Incentives: Dealers offer incentives upon incentives to encourage customers to seal the deal. Rebates, low financing rates, and service deals are all meant to take the sting out of the sticker price.
Latest technology: New features are introduced in new cars every year. You’ll need to wait several years to get them in used cars.
Prestige: Everybody likes to be seen in a new car. Everybody who has a new car finds a way to work it into the conversation.
Its Your Call
Be informed. Make your choice. Avoid the depreciation monster by getting yourself a nice used car. Or, treat yourself to the latest of everything automotive and give everyone a ride.
Either way, enjoy the ride!