Used Versus New
First, is a used car even the right choice for you or would you be better off buying new? Here are some reasons to go used and a few reasons that you might go with a new vehicle.
A used vehicle will always cost less, simply because of depreciation. In the first year alone, a new vehicle will depreciate roughly 20 percent. For example, at the end of year one, a vehicle purchased for 30,000 dollars will be worth around 24,000 dollars. Every year after that, it will continue to depreciate, although at a lesser rate.
Of course, these are trade in numbers. If you purchase that same vehicle from a dealership, you can expect some markup. Still, buying a used vehicle will save you a lot of money over the cost of new.
With supply chain issues, due to the pandemic, new vehicles can now be much harder to come by. The situation is improving, but if you need a vehicle right now, you may be better off going to the used market. You will obviously have to be flexible with options and even vehicle types, but there are a lot of good used vehicles out there.
No Factory Warranty
This is the biggest downside to buying a used vehicle, the lack of a factory warranty. Sure, you can buy an aftermarket extended warranty, but it is never as good as a bumper to bumper factory warranty. With anew vehicle, you can rest assured that virtually any problem will be taken care of.
In addition, aftermarket warranties can be expensive, potentially costing thousands of dollars.
It’s Not New
Some people just have this thing about being the first owner. If you are one of these people, it might be hard to take on a second hand car. Before you consider used, think about whether you will ever be happy being a second or even third owner.
Choosing A Used Vehicle
Assuming that you are sticking with a used vehicle, how do you choose the best one? You need to do your research and pick carefully. Consider the following.
Certain brands of vehicles have a reputation for quality and reliability. While some of this may be hype, where there is smoke there is fire. Choosing a vehicle manufacturer with a reputation for quality is always the best move for several reasons.
Obviously, if they have a reputation for making quality vehicles, your vehicle will last longer. This will save you money over the long run because of fewer and less expensive vehicle repairs.
Another benefit is that your vehicle will hold its value longer. Years from now, when you go to sell, you will be thankful that you have a good brand to put on the market and get more money in your pocket.
Finally, if you intend to finance, certain makes will qualify you for lower financing. This is because the banks recognize that people keep making the payments on vehicles that continue to run.
Engine Size & Type
A smaller engine is great because it will get better MPG, but it often comes with a cost.
Small engines generally need to rev high in order to make the power that consumers demand. This means that they are under a lot of stress and often have very complicated systems in place. This might be okay for a new vehicle, but n a used model it could mean some pricey repairs.
While a larger engine might get worse as mileage, they often last much longer. Be sure to balance the potential fuel savings against longevity.
Picking A Dealer
This is another important factor to consider when choosing a new vehicle. For most people, a dealership will be where they turn, but which one?
If you hate to negotiate, a “no haggle” dealer will be a good option. You can walk in and immediately see the price that you will pay and if you lack the skills of negotiation, you should come out ahead.
For those of you who can negotiate however, a “no haggle” dealer can cost you several thousand dollars. Of course, you will have to deal with the entire salesman process, but if you have the skills it can save you money.
If you can find a used vehicle that is still under factory warranty, this would be the ideal solution. You get the cost savings of buying used and still enjoy factory protection. This will limit you on vehicle selection however as you would have to either choose a low mileage model or go wit a factory certified used vehicle.
If you can not find a vehicle with a manufacturer warranty still in place, you have to consider whether or not to get an extended warranty. It can provide you with protections, but it comes at a great cost. Most people who will buy an extended warranty will lose money. If they didn’t then warranty companies would not exist because they are in business to make money.
Still, a warranty is something to consider, especially if you lack the ability to come up with several thousand dollars out of pocket, in the even of a breakdown.
Money Saving Used Car Tips
You have chosen a vehicle and you are ready to go make a deal, but you want to save as much money as possible. Here are some quick tips to help you do that.
Everything Is Negotiable
Assuming that you are buying a vehicle from a dealership, you need to remember that everything is negotiable. That is because the dealer stands to make a profit from every part of the process. That means that your interest rate, extended warranty price and even your gap insurance cost is negotiable.
Get Your Own Financing
Before you head to the dealer, get pre-qualified from a local bank or credit union. This will let you know what interest rate you should qualify for, because the dealer finance department can not be trusted. Know your rate in advance so that you do not get take advantage of.
Dealer Adds Can Cost You
Many dealers will place extra costs on the vehicle for trivial things such as window tinting or VIN etching. Ideally, you want to avoid these dealers but if you can not, ask to have them removed.