Everyone wants a new car, right? Well, a new car is certainly the ideal purchase as it comes with the latest features, a warranty and that prized new car smell. Then again, with new vehicle prices now averaging just above $30,000, such a purchase can be beyond your budget. Instead of buying new, choose a car that is one or two years old, and enjoy the advantages a late model used car offers.
1. Price and depreciation. Within the first year or two of car ownership, your vehicle’s value will drop significantly, losing perhaps one-third or more of its value. That depreciation can be avoided if you purchase a used car instead of buying new. You’ll get the same vehicle that may have cost $30,000 new for $20,000 and with perhaps with fewer than 30,000 miles on the odometer.
2. New car warranty. Vehicle warranties on new cars typically are for three years or 36,000 miles, whichever comes first. Powertrain warranties may be for up to 100,000 miles and all vehicles offer rust and protection coverage for at least five years. You’ll take over the remainder of whatever warranties are offered, typically having these warranties transferred to you at no fee.
3. Vehicle financing. The lowest rates on vehicle financing are typically on new cars. But, even late-model used cars can be financed at a low rate. Your dealer can arrange financing as can your bank or credit union. Shop around for the lowest rate and you may come away with a loan deal that nearly matches a new vehicle loan.
4. Your cost of ownership. Besides depreciation, the cost of car ownership includes taxes, tags, insurance, financing, maintenance and repairs, and fuel. Your insurance costs will come in lower than a new car because your car’s value is lower. You’ll pay less for sales tax and your overall financing costs will come in lower. Overall, you can save thousands of dollars by choosing a late-model used car instead of new.
When buying a late-model used car, track its worth by visiting Kelley Blue Book, Edmunds or a related site. Negotiate your best price and come away with a like-new car that can give you years of driving satisfaction. When buying a car from a dealer look for one with a “certified used vehicle” label. These cars typically include an extra warranty such as vehicle maintenance coverage that goes beyond the new car warranty.