If your goal is saving money, buying a used car rather than a new one can save you big bucks in several ways.
New cars typically depreciate about 20 percent when they are driven off the lot. Most cars will lose another 10 percent in value during the first year. That’s a 30-percent loss in value during the initial year of ownership. A $30,000 car loses roughly $9,000 in value during that period. You can avoid that hit by buying a one-year-old used car. One-year-old used cars are hard to come by, but it’s becoming easier to find two- and three-year-old used cars.
A key factor in determining the cost of car insurance is the value of the car. Because a used car has less value than a newer version, the cost of insurance should be less. As with car insurance, the fee that states charge to register a car is often based on the car’s transaction price. Many states are increasing registration fees in an effort to generate more revenue. Buying used is an effective way to stunt those increases.
Stretching your car-buying dollar is another benefit of buying a used car. You can buy more car by purchasing used rather than new. You may not be able to afford that new luxury car you’ve lusted for, but one that’s two or three years old may fit your budget.
Companies such as Carfax and AutoCheck produce vehicle history reports. Based on the car’s vehicle identification number, or VIN, these reports provide an array of valuable information including verification of the mileage and whether the vehicle was ever declared a total loss by an insurance company. Consumers worried about a used car’s potential hidden problems can also buy a certified pre-owned car. Certified pre-owned programs vary from manufacturer to manufacturer, but in essence, certified pre-owned cars are vehicles that meet a manufacturer’s established standards and carry some form of guarantee against defects similar to a new-car warranty.