Used vs. New Car Buying Pros and Cons
Buying a used
car can make a lot of financial sense with a few clauses
interest rates on used car loans and shorter loan periods
can eat away at the up-front price advantage of a used car
over a new one.
usually pay higher interest on a used car loan, in part because
the loan term is shorter. So, its a double tap. Youll
almost certainly pay a higher rate and youll
pay more per month. Even though you probably wont be making
payments as long as you would if you bought a new car on the usual
five-year payment plan, the lower monthly payment may be easier
to bear. Any finance guy worth his salt will tell you to never overextend
yourself if you can possibly avoid it. If financing a used car for
$400 a month for 36 months means that for the next three years youll
have trouble coming up with extra cash to buy the occasional pizza
let alone a new refrigerator if your current one craps out
on you then it might be smarter to sign up for the new car
loan at $250 a month for five years. Keep in mind, too, the very
real possibility that gas prices could increase dramatically at
any time (along with the cost of everything else, courtesy of inflation).
Make sure you have enough cushion in your monthly budget to handle
higher and sooner maintenance costs if you buy a used
A new car will
not need things like new tires, transmission service, a tune-up
or brake work, for several years and the cost of any repairs
will be covered by the warranty while it may be necessary
to buy new tires (or get the brakes fixed) if you buy a used car.
And the cost will likely be covered by you.
require very expensive service at certain time/mileage intervals
such as timing belt changes at 70,000 miles. That job can
be $500 or more.
Be sure to
factor these peripheral costs into your buying decision and set
aside some money for just in case repairs especially
if the used car is no longer covered under warranty. And extended
warranties? Think about it carefully before you buy one of these.
Some cost as much or even more than almost any conceivable repair
short of a complete catastrophic failure of the engine or transmission;
many only cover major stuff thats not likely to fail unless
the car was abused or its a lemon. By being careful
about the used car you pick (specifically, by having it thoroughly
inspected by an independent mechanic you trust prior to purchase,
as a condition of the sale ) you can cut the odds of a major problem
happening down to slim and probably none. Then, instead of
paying $1,500 or more for an extended warranty, leave the cash in
the bank. If you need it for repairs, itll be there. And if
not, youll have it to spend on something else.
If you buy
a used car and buy it outright (no financing) you can choose a lower-cost
liability-only policy that doesnt cover physical damage to
your car in the event of an accident. This can knock your insurance
costs down to maybe a couple hundred per years vs. two or three
times that for a full-coverage comprehensive policy which
youll be required to buy if you finance, whether the car is
used or new.
that you could face having to pay for repairs out of your own pocket
maybe even buy a replacement car on your own if you
do get into an accident. If youre a good driver, the odds
are pretty low, but things can (and do) happen. Here again its
good policy to have some money set aside for just n case
so you can deal with things like having a fender replaced if you
accidentally bag a deer with your Honda without having to
head for the pawn store first.
premium cost for used vehicles tend to be lower, some insurers will
lower their rates for a new car equipped with the latest safety
equipment (such as stability control and ABS) vs. an older, used
car that may not have these features. And of course, rates vary
depending on the type of vehicle. It may cost a lot more to insure
a used Corvette than a new Camry.
good idea to shop insurance quotes before you decide to buy a car
new or used.
car should last longer than an older, used car, which by definition
has already been used. It has miles on the odometer and so,
wear on the various bits and pieces. Even if the car has just been
sitting, the clock is still ticking.
And while a
new car will depreciate faster at first, it should also be worth
more, longer again, because it starts out having higher value.
On the other
hand, late-model used cars with 40 or 50 thousand miles on them
will usually go at least another 100,000 largely trouble-free miles
if you dont abuse them and maintain them properly, especially
the basic stuff like regular oil and filter changes. And if you
get a really good deal on a four or five-year-old used car and plan
to drive it for another four or five years or more, depreciation
wont be as much of a factor anyhow since by the time a car
(any car) is pushing ten years old, its value will begin to plateau
regardless of whether it was originally purchased new or
Just some food
with permission from EricPetersAutos.com.
[send him mail] is an automotive
columnist and author of Automotive
Atrocities and Road Hogs (2011). Visit his
© 2011 Eric Peters
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