If you’re in the market for a new car, you’ve already committed to making a significant purchase. But if you shop smart or are willing to consider a used car over a brand new one, you could save some serious coin. But is a used car right for you? Are the savings worth the risks of buying a pre-owned vehicle?
To help you make that decision, here are four ways used cars can save you money over new models.
Up-Front Costs and Depreciation
The most obvious way used cars save you money over new cars is their up-front cost. New cars simply cost more than similar used models.
That isn’t the whole story though. New cars also lose value faster after you’ve laid out that larger amount of cash. As soon as you drive the car off the lot at the dealership, it loses value because it’s no longer considered brand-new.
Worse, new cars depreciate—or lose value over time—at a faster rate than new cars. Cars depreciate at a greater rate during their first five years or so, as you can see below in the normalized car depreciation curve over twenty years. The longer you own a car, the less value you lose each year.
Credit: João Pimentel Ferreira via Wikimedia
Used Cars = Lower Insurance Costs
Another way used cars can save you money is through your auto insurance. New cars cost more to buy, which also means they cost more to replace. That means it also costs more to insure them in case something should happen to go wrong, at least when compared to used cars that are just a few years old. Very old cars, however, can also be expensive to insure due to the greater risk of problems.
Certified Pre-Owned Programs Minimize Risks
One reason some buyers prefer new cars is that they’re under warranty, which minimizes their maintenance and repair costs. However, you might still be able to get those perks with a used car if you take advantage of a certified pre-owned program, which many manufacturers offer.
Certified pre-owned cars are put through a rigorous inspection process and then backed by the manufacturer with an extended warranty. With an extended warranty, owners of used cars can still be able to use the dealer’s award-winning service. Depending on the manufacturer, cars in these pre-owned programs might also offer other perks usually associated with new car purchases such as roadside assistance and rental coverage.
Getting More Car for Your Money
Another important consideration when deciding between new and used cars is exactly how far your money can stretch. If you have a set budget in mind, you might find that you can only afford a basic model of a new car, while you may be able to afford luxury models and features that are just a few years old with a used car.
Buying used vs. new cars is always a matter of personal preference. But, if you want to get more car for your money, lose less value as soon as you drive a car off the lot, save money every month on insurance, and still possibly get warranty coverage, a used car might be the perfect affordable option you’re looking for.