In the car buying world, it seems a lot can go wrong, and it does. That is unless you take certain steps that, if followed, will result in a great experience. Most people begin the process of buying a car with a sense of fear if not outright dread. It’s hard to feel good about something that you do only once every 3-5 years. The sense of fear is very real and appropriate when you take into consideration your choices. You either have to go to a dealer, who is in the business of taking your money (in very slick ways) or buying from a private party, which can lead to some unsavory experiences, to say the least.
Should I Buy New or Used?
When choosing between a new or used car it pays to consider everything that is involved. The most cited reason for buying a new car is that there is very little risk. True, the new car will have a full factory warranty that you will have for a number of years and there is something to be said about the peace of mind that a warranty brings. However, that peace of mind that you are getting in a new car will cost you a lot of money in the form of heavy depreciation in the first years of ownership. In fact, as soon as you drive off the lot your “new” car will become a used car and it will lose 10% from the total you paid for it. And that is just after you drive off the lot!
Each year thereafter it will continue to lose, especially in the first 3 years. Assuming you put on 15,000 miles a year, your car will have depreciated nearly 20% after the first full year of ownership, or 1/5 of its value. Presuming you bought a car for $23,000 and then after taxes and registration you paid $25,000, your now “used” car will be worth a mere $20,000. You just lost $5000 in one year of ownership! Of course, not all cars depreciate at the same rate. The example cited above is for a relatively low budget purchase. The more expensive the purchase, the bigger the loss.
There are of course other factors such as better financing on new cars versus used, but registration will be more for a new car as well as slightly higher insurance premiums, so the savings gained on better financing for a new car is basically neutralized.
Buying a Used Car with Confidence
In short, buying used is almost always the better value proposition. Cars are built so well these days that a 2-3-year-old car is still looking, driving and behaving as though it is new. But what about the warranty that is set to expire? Isn’t that the problem you ask? Well, that problem is easily overcome with buying a “Certified Pre-Owned” from a dealer. A certified car will often have a high-quality factory warranty attached with it. Whether you are buying from a private party or a dealer you will want to use the video and text tutorials that I call the “10 Easy Steps”. This is where I combine my 37 years of car buying experience in easy to follow steps so you can buy like a pro!