Buying used is always a great way of saving money, especially so if you opt for the best value propositions. And we live in a time where technology has reached impressive levels, and it’s hard not to think that a 3-year-old car is as good as a brand new one.
But there are a few caveats to buying used. Even though a new car might save you money long-term, if you buy carefully and observe the market on a larger scale, there really is no reason to buy new anymore. Cars have arguably reached a point where innovation starts becoming smartphone-like and unnecessary.
This is especially obvious in the sports car department, and many enthusiasts would argue that we have already reached the peak level of the sports car and that all the newer sports cars are slowly coming to a point of diminishing returns.
Regardless of what you think, buying used is indeed a valuable option. But if you always want the newest, shiniest car on the market, you should consider 3-year financing or leasing deals as they will enable you to always be on the top of the automobile game.
Pros of buying used
Price
On average, a used car costs as much as 50% less than a new one, and most consumers replace their cars on a 6-year basis. This means that if you buy a used car now, and you don’t waste your money on extremely high mileage cars, down the line you will eventually profit.
After all, you are getting a $40k car for $20k, so the value is unmistakable. This would enable you to spend more on your next car, and eventually, you will be able to buy a brand new one after a couple of years. But even then you might realize that the value gap is way too big, and what you get, as a result, is not.
Depreciation
The greatest motivating factor to buy a used car is depreciation as cars car lose up to 10-11% of the original value as soon as they leave the new car lot. A 50% depreciation after 5 years is considered decent, so it’s rather obvious that buying a new car outright is somewhat financially irresponsible.
The great thing about a 3-5-year-old car is that depreciation has already passed, and you are not the one paying for it. Even though a new car smell of a $100k car seems delicious, it does not cost $50k. This is especially so because most car makers tend to refresh a model only after 5 years of production.
Additional costs
Another huge new car buying deterrent is the additional cost usually associated with a new car. Even though the deal seems reasonable, you often have to pay market adjustments, shipping charges, destination fees, dealer preparations, and pre-delivery inspections.
When buying used, there are no such things because someone already paid for that. If you add them up, these costs can slowly pile up to a couple of thousand dollars. At the end of it, the deal does not seem all that tempting anymore.
Insurance costs
Another great reason why used cars are such great value propositions is the insurance cost. The gap between the value of a new car and a used one extends rapidly, and so do the insurance premiums. The bulk of depreciation has already passed and all the niggles and potential defects a model can have are already clear.
There are more spare parts around, car shops are more accustomed to working on older cars and the insurance company is not all that stressed with a cheaper car. New cars are unpredictable in the first couple of years, and insurance companies do take that into consideration.
Cons of buying used
Lemons
Even though a car might seem decent from the outside, you can never be too sure about the mechanical and electrical aspects. Used cars are = used, and this means that there is a higher chance of breakdowns and unforeseen costs in the near future.
And even though a pre-purchase inspection can negate lots of these issues, no inspection is perfect. There is honestly no way to tell for certain that a used car, especially an older one is not going to break down the moment you start using it.
Warranties
Whenever you buy a new product, a new cellphone, a new car, a new refrigerator, you are likely to be covered by a warranty for a couple of years. But when you buy used, all of these are likely to be expired. And this can also end up ruining the new used car experience.
A warranty is the single greatest aspect of new car ownership as it virtually negates all the unforeseen costs you might have if you do take care of your car. You can rest assured knowing that whatever happens in the next few years, you are not the one paying for it.
Service programs
Service programs and warranties go hand in hand, and after your warranty expires, the service programs are likely to expire as well. This means that if your car breaks down, you are the one in charge of finding where and how to fix it.
And the century-old question arises. Should I go through a dealer or an independent car shop? If I go through a dealer, I will pay more, but the value of the car will be better protected. If I go through an independent car shop, the bill is likely to be cheaper, but the value of the car will also cheapen.
Reliability
Used car customers are worried about warranties and service programs mostly because the general reliability is not as good as it once was. After a car accumulates a fair bit of mileage, lots of integral components start to wear out, and they eventually need repairs.
And you can’t negate this, no matter what anyone tells you, a used car is never going to be as reliable as a new one. Some might even argue that the differences in value are reasonable because of the significantly lower reliability.