If you are considering buying a new car, it may be because you are reaching a crisis in your life. We are not necessarily talking about the crisis that is reached when you reach 40, but about the financial crisis in which you will find yourself in your 40s if you buy a new car.
Apart from your home, a car is one of the most expensive purchases you will make in your life for something you use daily. It is up to you to determine if you can buy a new car or if it is better for you to buy a used one. We help you weigh the scale: buy used!
Maybe you think you can justify your new car purchase with the personal satisfaction, security, or status it can provide. But there are actually many more reasons, especially financial, that justify buying a used car. For example, did you know that a used luxury car also depreciates pretty quickly? Also, only 1/10 of used luxury cars manage to maintain a sales value of $ 35,000 or more.
Here we discuss some of the most common reasons used to justify buying a new car.
People say that new cars …
«… They are equipped with the latest technology»
We agree that new technology is always a spectacular addition to the things we use every day, especially if they make our lives easier in some way. And as humans, we love new, shiny and modern.
But is a protective coating on paint or a subscription to satellite radio really worth what you pay extra?
The answer is probably not. Some of these extras do not influence the resale value of the car, and the truth is, perhaps they are not as necessary in your daily life as the seller would have you believe. A better option is to look for used cars that meet your requirements such as a GPS or sunroof. Chances are, you can have those extras without the additional dealer fees.
«… They are more reliable.»
Obviously a new car is more reliable than a used car that is full of problems. However, there are many used cars that can qualify as “near new.” Some people buy a new car, don’t like it, and decide to resell it immediately.
As a buyer, it is your responsibility to investigate and determine if your used car will become a “problem” car. A good option to ensure that you are making a good investment is to be guided by the 4-year rule.
This means that you should not look for a car that is more than 4 years old. This way, the car is relatively new, has few miles, and will have less depreciation in the long run. So when you go to sell it, you can do it for a figure quite similar to the one you originally paid for it, assuming it remains in the same conditions as when you bought it.
«… They are safer and cheaper.»
Maybe yes, but if you follow the 4-year rule, you may be able to make a purchase that guarantees safety and economy similar to that of a new car, fresh from the dealer.
Some new technologies like car blind spot detection sensors or sophisticated airbags have already been on the market for a few years. Maybe you can buy a used 2012 car that meets those specs. For example, there are cars from before 2012 that have few miles for their age (sound like a Toyota Corolla?). So the “mileage” of the car should not be such a concern either.
«… Financing is cheaper.»
This can be a bit more difficult to figure out. Banks sometimes offer lower interest rates on the purchase of new cars. But buyers: be careful!
According to an article in USA Today, banks can trap you in an endless cycle of payments . Receiving a lower APR translates to lower monthly payments. But when you add up all the payments over the years, the total payment can actually be more than the original purchase price. Having a low monthly payment also prevents you from choosing to pay for the car faster and save more money on monthly interest.
And thanks to the inevitable depreciation, that car that you bought and for which you paid more than the bill with interest and everything, has been devalued. And that is money you can never get back. If you are financing a car, do your research and make sure you choose the appropriate financing.
If you still don’t agree that buying a car using financially speaking is the best option, here are more reasons why you should buy used:
Advocating for buying used cars:
Do you remember depreciation?
According to experts, a new car depreciates around 19% in the first year of use. And as we mentioned before, if a car depreciates faster than your loan payments, you are going to be overpaying for a car that is not worth that in today’s market. I mean, you would be losing money.
With a used car, you’ll leave the dealership with little depreciation added to the purchase price.
Get more for maintenance.
A used car probably needs a little more maintenance than a new one. That is unavoidable. But, if you are smart, your pocket can thank you.
You should start by looking for a mechanic who is reliable and who gives you good prices. You can also look for discount coupons that can help you with recurring expenses like oil changes.
Avoid the insurance cost scare.
As well as financing, the monthly payment of your insurance policy also takes into account the age of your car. A new car, as it is more valuable, usually requires higher insurance.
If you decide to get damage or theft insurance, a used car will be cheaper and your premium will also be much cheaper. The deductible will also be cheaper. Again, we reiterate that you inform yourself and compare prices before signing, since each situation is unique and other factors are taken into account such as your credit score.
When it comes to the decision of a new car vs. used, financially speaking, buying new is not worth it. You’re going to face payments all over the place, nasty depreciation, and more expensive insurance.
Used cars are cheaper, have lower depreciation, and take you from one place to another. It is up to you to work hard and dedicate yourself to finding the ideal used car for you.