Why you should buy a used car instead of new
Should you buy a new car or a used car?
Which one is better?
Buying a vehicle is one of the biggest purchases we make in our lifetime so it’s important to know some of the key differences between buying a new or used vehicle. While each has its advantages and disadvantages, we have put together some information that should help you make the best decision for your finances.
When considering a new vehicle one of the biggest downsides is the depreciation that occurs right when you drive the vehicle off of the dealership lot. Add some miles to that vehicle and you’ve got a fast depreciating asset. Within no time at all, most passenger vehicles depreciate thousands of dollars leaving you owing much more than what the vehicle is worth right out of the gate. The average down payment, manufacture rebates, or incentives will cover the difference of this depreciation, which means, you’ll likely spend years trying to get into a positive equity position. This positive equity position usually happens towards the very end of the loan term.
The average time consumers have their vehicles before trading them in is around 3-4 years. In many cases, this doesn’t allow enough time for drivers to get into a positive equity position. This means that when they do buy another vehicle, they’re going to roll in their negative equity (if they’re lucky) into their new vehicle loan. The customer may get that new vehicle they wanted, and even though their payment is agreeable, they’ve only increased their debt. Scenarios like this are extremely common, and this doesn’t put the car buyer in a smart financial position.
Most people enjoy buying a new car because, it’s, well…. NEW! There is something special about being the first to own a brand new vehicle. New vehicles often have the latest and greatest when it comes to aesthetics and technology. You don’t have to worry about any cosmetic damages as well. When buying a new car, the purchaser doesn’t have to be concerned about dents, dings, or anything wrong with the interior or exterior. Mechanically, there aren’t many things to stress about either since everything will be covered under a manufacturer’s warranty. Those who desire the latest and greatest will often opt for purchasing a new vehicle.
The materials needed to build vehicles continue to rise and therefore, so does their price tag. The price of new vehicles continues to rise. The average price of new vehicles in 2021 rose to nearly $40,000 according to this article from Financial Samurai. With the average used car price being around $23,000, there is a big difference in the wallet when buying used vs new. Lending options also vary when buying used vs. new but everyone’s financial situation is different so you’ll have to do some research before you decide what option is best for you.
BUYING A USED VEHICLE IS A BETTER CHOICE FINANCIALLY
The price point will always make more sense on a used vehicle. Finding a well taken care of vehicle is not hard to come by at all. Most people tend to take care of their vehicles so they’re not hard to find. Many shoppers will be able to get a gently used vehicle for a much lower price than they would if they had bought that car new. In many ways, it makes a lot of sense to deal with a little wear and tear as opposed to eating all the cost of the depreciation in buying a new vehicle.
Warranties can be purchased on new vehicles as well and they’re completely worth it. If there’s any doubt in your mind about the moving parts, a warranty will put that to rest. Banks usually like this too. Finding a used vehicle that makes sense financially, and that will last you a long time is a sound decision economically. If you were to buy a new vehicle at $30,000, in ten years at the average depreciation rate, that vehicle would be worth around $6000. In just 4 years, that vehicle is only worth about $15,000. In other words, that vehicle loses half of its value within the first 3-4 years, and then the depreciation begins to level out a deprecate more steadily over time.
When deciding whether buying used or new is right for you, we hope that this information gives you some things to think about so that you can make the best decision for yourself. At RightDrive, of course, we want to sell our customers the car that they want, but we also want to help put them in the best financial position possible when they purchase their vehicle. No one is happy when they go to trade in their vehicle only to find out they’re way too buried by their negative equity to get into another vehicle. This is why we educate our customers throughout the process so there are no surprises. We want to make sure that they not only feel good about the vehicle they purchase but, that they also feel good about the price and payments. Making sure our customers are happy for as long as they have their vehicle is what it’s all about. When you purchase at RightDrive, you’re family, and family is forever.