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Thinking of getting a car but can’t decide whether it’s better to buy a used one or a new one? Let me help you by listing the pros and cons of getting a used car versus a new car in eight different ways:
The price differences between a new car and a used one is shocking. For a brand-new car, you’re paying a mark-up price of about 2% – 5% added to the sticker price or the invoice price.
Let’s take a look at getting a Kia Sorento:
|2018 Prices||Used Prices|
|Los Angeles – $34,350||Los Angeles – $11,995 (2012 model)|
|Wichita – $32,895||Wichita – $9,000 (2012 model)|
|Detroit – $38,260||Detroit – $5,995 (2010 model)|
|Raleigh $42,850||Raleigh – $7,990 (2012 model)|
So, getting a Kia model that’s only 6 years old saves you about $22,000 to $34,000! That is a considerably good down payment for a house.
Some people don’t like getting used cars because they believe that they can’t get as much value from it later on when they trade it in or sell it.
There are good used cars out there that are sold lower than their blue book value.
For example, the 2012 Kia Sorento offered in Wichita from a dealer for $9,000 actually has a blue book value of $9,688 – $11,800. You could turn around and sell it later for about a $600 – $2,800 profit.
If you buy a brand-new car, it depreciates as soon as it leaves the car lot – about 20% of its cost.
So, if you bought the 2018 Kia Sorento for $38,260 and go home, when you pull into your driveway that car is now valued at $30,608. You just lost $7,652!
Not only that, that car will lose another 10% in its first year. In 2019 that Kia will be valued at $27,547. You’ve lost another $3,060 dollars.
Do you really want to blow almost $11,000 in one year? On the other hand getting the 8 year old one for $5,995 saved you $32,265.
3. Personal Credit
Being able to purchase a car can depend on your personal credit score and your ability to get financing for it. Financial lenders look at your score to determine what interest rate to charge you.
If you want a new car your score needs to be around 715, while its only required to be around 655 for a used car.
The interest rate charged for a credit score of 715 is 3.59% for a new car and 5.12% for a used one. A score of 655 is charged 6.39% for a new car while it’s 9.47% for a used car.
4. Length of Payments
Although it may look cheaper to finance for a new car (with only 3.59% interest), you need to remember the length of payments are much different.
Let’s compare the two different Kia models again:
- The new $34,350 2018 Kia, you paid $4,350 in cash and now are getting a loan of $30,000 at 3.59% for 5 years. That’s a total of $32,818 with a monthly payment of $547.
- The used $11,995 2012 Kia, you paid $1,995 in cash and now are getting a loan of $10,000 at 5.12% for 2 years. That’s a total of $10,542 with a monthly payment of $439.
You’ve successfully paid off the used car 3 years faster than the new version and still had a lower monthly payment to boot.
5. Car Insurance
The insurance offered on newer cars is considerably cheaper. The main factor in this is that the newer models have more safety features, GPS features, and some even have anti-theft devices installed.
Even though car insurance may be more expensive to cover your used car, it can still be cheaper. If the car is paid off in full you can drop the collision coverage for your car.
If it gets in a wreck, you won’t owe any payments on it. Besides, the chance you’ll need to file an accident claim with insurance is about once every 17.9 years. Much longer than the life of most cars we have owned.
It may seem that insurance companies claim that getting a new car would be better insurance-wise – it does not state two large factors:
- how used the car has to be. Getting a car that’s only 5 years old can still make a comparative difference and still have the “new car” commodities
- the original price. A cheaper priced car will always be cheaper to insure.
If you want even cheaper insurance for your car plan on getting one of these 20 vehicles that ranked in the top 20 for “cheapest insurance”.
You may think that getting a new car means having less repairs needing done on it. This is absolutely not true, if you find a good car and maintain it well and regularly, it shouldn’t need frequent repairs.
You could have a top of the line 2018 luxury model and it’s in the shop weekly.
If you do your homework well and bring someone who’s knowledgeable in car repairs and car maintenance with you when car shopping, you can find a great used and reliable car.
Think about what’s your reasoning for getting a certain kind of car?
A car should only be for transporting you and your family from Point A to Point B.
If you’re wanting a brand-new car to represent you – wealth, status, coolness – you’re getting it for all the wrong reasons and your bank account will suffer.
You should be picking a car model that fits your real lifestyle – not the one you want to project to the world.
But an advantage of getting a used car is that you have the ability to upgrade. Since used cars are considerably cheaper, you can still get that Cadillac you wanted – just an older model.
The difference between getting a new car and a used one can also be dependent on your stress levels.
Does driving make you stressful, are you a “little” reckless? Worried about accidents? Have a teen driver? Consider getting a used car in these situations as you’ll worry less about that door dent and other minor mishaps as the car is “old”. Another advantage is that it will quickly be paid off too.
Here’s a final fact for helping you decide whether to get a used car or a new one:
The average person owns 13 cars in a lifetime, each costing an average of $30,000. If each of those cars was 3 years old, instead of new, you could save nearly $130,000 during your lifetime. ~ National Automobile Dealers Association.
Let’s do the math for clarity:
- 13 new cars x $30,000 = $390,000 spent!
- $130,000 saved ÷ 13 = $10,000 cost per used car
- $20,000 not being spent on each used car purchase.
As you’ve read all the pros and cons, the facts lean more towards getting a used car as a better financial value choice. But ultimately, the decision is up to you.