As soon as you drive a new car out of the dealership, it loses value. This is called depreciation. If you plan on driving your car until it doesn’t run anymore, then you may not care about depreciation.
Another option is to buy a fairly new used car. If you plan to keep it for only a few years, it should still have some value when you resell it. Using an automobile identification number checker is essential for you to know all the details and specifications of the car you want to own.
So when your inner voice says: “it’s time to sell my car,” you can feel that your decision to buy fairly new instead of totally new was a good idea.
This is pretty obvious. New costs more than used.
Besides the obvious, you also need to know that new cars depreciate quickly. Even if you purchase a new car, take it for a short ride around the block and bring it back to the dealership, it is now considered a used car.
If you tried to sell it back to the same dealership you literally just bought it from 30 minutes earlier, you wouldn’t get back the same amount of money you paid for it.
You also pay less for sales tax on a used car. Your insurance will be less, and in some states, registration for used cards is less expensive than for new cars.
When you buy a new car, it loses its value immediately due to depreciation. In addition, some new cars can lose as much as 40% of value after the first year.
What if you decide to sell your brand new car one year after you purchase it? You will get so much less for it than if you were to sell a used car one year after your purchase.
Between the immediate depreciation of a new car and the loss of 40% of value after the first year, you will make significantly less on your sale and might wish you had decided to purchase a used car instead.
Knowing these facts up front might help you make your decision when purchasing a car. In general, if you know you will want to keep your new car for the lifespan of the car, buying new can be a good decision.
If, however, you are not sure how long you will be keeping your car, buy a used one instead.
Pay Less in Fees
Beware of hidden or extra costs when purchasing a new vehicle. You are usually in the car dealership for a really long time when buying a new vehicle. By the time all the paperwork is completed, you are exhausted and so happy when you can finally leave, that you might forget to ask about certain basic things, like floor mats.
Yes, some people get home with their new car and realize they don’t have floor mats. And sometimes, when they go back to the dealership to get their floor mats, they are told that the mats are “extra”.
If this happens to you, do not pay for those mats. Stand your grand until the salesman gives them to you for free.
There are often other “hidden” costs that you are not told about until you look at your total bill. Sometimes dealerships will charge you shipping, destination, and dealer preparation fees.
Most states will base their registration fees on the value and model year of the car. The newer the car, the higher the registration fees.
Paying For Something You Don’t Need
When buying a new car, there might be add-ons that you don’t really need or want but have to pay for because they are part of the package.
For example, maybe you don’t need or want a sunroof or fancy pinstripes, but because they are included as an add-on for the car you do want, you have to pay for it.
You have more negotiating power when dealing with a private seller of a used car and can always just walk away.
Chances are a private seller is going to be more interested in the deal going through and will work with you to settle on a financial agreement that benefits both of you.
Some car dealers don’t have a bad reputation for no reason. They tend to be sketchy and figure if you walk out the door, someone will walk back in right behind you.
Lower Insurance Premiums
Insurance costs are higher for a new car than they are for a used one. In addition, if you have an accident with a new car, your insurance company will pay you what the car is worth at the time of the accident.
Now, remember, your new car lost some of its value from depreciation as soon as you drove it out of the lot.
This is what gap insurance is for. Gap insurance covers the difference between the cost of your new vehicle and the depreciated value.
If you purchase a used car, you won’t need gap insurance because much of the depreciation occurred before you bought it.
Driving the point home
There are many benefits to buying a used car. Namely, you can save money on upfront costs, incur less depreciation costs, you pay less in transaction fees, you have more negotiating power with a private seller, and lower insurance premiums.
Remember, cars will depreciate. So don’t invest too heavily if you’re thinking of changing cars in the near future.
Have you ever bought a used car? What are the benefits of having a used car over a new one? Please share your experiences with the rest of us in the comments below!