While buying new cars is cool, nice, awesome, and all that stuff, lol, you really should take a long hard look at how much you could save over time by buying used cars instead.
According to a report by the National Automobile Dealers Association, the average person owns an average of 13 vehicles over their lifetime. The average cost of each of those vehicles is $30,000. WOW! Now that’s wasting tons of money! Trust me, I’M GUILTY! (New cars was once my weakness but I’m over it.) If each of the 13 cars was three years old instead of brand stinking new, you would save over $130,000 over your lifetime! What a wealth killer!
One word describes why buying used is really SMART. That word is DEPRECIATION.
Understanding how depreciation literally sucks money out of your wallet, will teach you how to save bookoos of cash over your lifetime. You often hear that a car loses 20% of its value as soon as you drive it off the lot. True, in just the blink of an eye, a $30,000 car will lose $6,000 the very second you leave the lot! By the end of the first year, mileage and wear and tear could bring that to 30%, or $9,000! Why don’t you feel this big hit? Because it takes effect much later, when you sell or trade in your car.
Take a look at two similar cars, one new and one used.
New depreciation: If you purchase the car for $30,000 and sell it three years later for $15,000. The car has cost you $15,000 in depreciation. Wow!! $15,000 is a TON OF MONEY! Imagine investing that $15,000! Food for thought.
Used depreciation: Now let’s say you buy the same car, but it’s 3 years old when you buy it. You could buy the car for $15,000. Three years later you could sell it for $10,000. So the used car depreciation cost you only $5,000. It’s still five grand but much better than 15K! Big difference.
I know, I know, driving new is cool and you MUST keep up with the Joneses right? Driving USED makes you look poor and pitiful, right? After all it’s just hard earned money. Hour after hour of your grueling job. Prison is actually what it is! Lol so, if driving a new car is worth an extra $10,000 to you, go for it. You obviously earn six or more figures per year. But for the rest of us in mortal land don’t say I didn’t warn you.
People putting down used. Hmmmm?? Really?
It use to be common for people to put down used cars by saying that it was just a way to buy someone else’s problems. That’s not true anymore.
Reliability: Cars have never been more dependable than they are today. It’s not uncommon for some cars to deliver more than 100,000 miles before needing major repairs. Many go for 200-300K miles if taken care of with basic maintenance.
Maintenance: All cars require regular maintenance such as oil changes, tire rotation, brake jobs, etc. But you can drive today’s cars much farther in between these scheduled maintenance visits. Even tires and brake pads last much longer than before. Definitely a win win!
More used advantages
So it’s pretty clear that buying a used car is much cheaper and that cars in general are more dependable. But take a look at these other advantages:
Carfax report: always make sure you get a complete history of the vehicle you’re purchasing. If this is not offered, move on. Carfax is a wonderful thing!
Lower insurance rates: When a vehicle is worth less, it costs less to insure it when you’re buying collision and comprehensive coverage. You can also drop collision and comprehensive coverage, which pay for repairs to your car, and save even more.
Registering is cheaper: The cost of registering a used vehicle goes down every year.
Move up to a luxury car: Because you can save 30% or more, you can shop in a higher class of cars.
Less stress: So you’re shopping at Costco, come out and notice a shopping cart up against your fender. Result: small scratch. Who cares? But when it’s the first scratch in your new car, it’s a huge deal.
While nearly everything about used vehicles costs less, buying a new car has its advantages as well. Situations are different for everyone so really think your situation and purchase through. The goal is to optimize your purchase to get the absolute most out of your money while being smart.
New is easier: all new cars are assumed to be perfect, so evaluating the condition isn’t a factor. No need to take it to a mechanic. Also, it’s easier to figure out what you should pay for a new car, even if the negotiation process is still a PAIN IN THE ASS .
More financing options: Automakers offer plenty of incentives designed to lure buyers, such as cash rebates. New car loans have better interest rates. This means you’ll likely pay thousands of dollars less than the frightening sticker price once you negotiate a final price and apply the incentives. Unless you get hosed of course. Do your homework!
Advanced technology: New features for comfort, performance and safety are introduced in new cars every year. You’ll need to wait several years to get them in used cars. Lol, does this even matter? Well I guess it does if you’re a Jones or someone trying to keep up with him LMAO!
Peace of mind: A new car will likely be more reliable than a used one, even though used cars are much more dependable than in the past. If a new car breaks down, you can have it fixed for free under the included factory warranty, at least for the first 36,000 miles or three years that most automakers offer. And remember, you can always buy a problem child regardless of new or used.
Bragging rights: Let’s put it this way: You don’t hear many people bragging about the used car they just bought. But they are definitely smiling in the wallet!
An exception to the rule
Not all cars depreciate at the same rate. Some brands are known for holding their value exceptionally well. When you add in possible new car incentives and low interest financing, there are times when buying a new car doesn’t cost much more than buying a 1- or 2-year-old car. And to make the math work you should drive this vehicle at least a decade.
You can find how much cars depreciate on several automotive websites, such as Kelley Blue Book’s 5-Year Cost to Own or Consumer Reports’ Cost of Vehicle Ownership. ALWAYS check this out. Great information to know. Knowledge is POWER.
What does all this mean?
Depreciation is a silent killer to your automotive budget. But by buying cars that hold their value, you can minimize the effects. If you’re still on the fence, use the NerdWallet car loan calculator to see how much less your monthly payment would be if you bought used instead of new.
Sources: National Automobile Dealers Association, $aving George, and NerdWallet. Pics: Gates Hyundai Richmond Kentucky.
Thanks for reading,