Everyone loves a new car. People love them so much in fact that air freshener manufacturers have even bottled the scent. Yes, new cars are great, but they come with a hefty price tag. If you are in the market for a new vehicle, here are some reasons to consider an older vehicle instead.
1) You Get A Much Cheaper Purchase Price
The obvious first reason to choose an older model car or truck is the reduced purchase price. With the average new car coming in at well over 40,000 dollars, this is a big deal. Forgo new and purchase a slightly loved vehicle for roughly half of that new price. Assuming that you are financing, which most people do, the affect on your monthly budget is significant.
Take a new vehicle costing 40,000 dollars and finance it for 5 years at 8 percent interest. Your monthly payment would come in at just over 800 dollars and you will pay almost 9000 dollars in interest over the course of the loan.
Take a used vehicle coming in at 20,000 dollars and finance it with the same terms. Your payment comes in at 400 dollars now and you will pay just over 4000 dollars in interest.
This represents a dramatic savings. Who couldn’t use an extra 400 dollars a month in their pocket and wouldn’t you like to save 5000 dollars in interest?
2) You Lose Less Money Driving Off The Lot
A new vehicle can lose roughly 20 percent of its value in the first year. That means that this fancy new 40,000 dollar car of yours would be worth just 32,000 dollars in only a year. And, it doesn’t stop there, Like all cars, it will continue to depreciate at the rate of 10 percent a year. So, after 3 years of ownership, you will have lost over 14,000 in depreciation costs.
Let’s take the 20,000 used vehicle now, which will still be subject to an annual 10 percent depreciation. After 3 years of ownership, you will have lost a little over 5,000 dollars in depreciation costs. That is a difference of around 9,000 dollars.
3) Maintenance Costs Are Much Less
Sure, that new car has a warranty, but it will eventually expire. If you are someone who puts a lot of miles on their vehicle, this could come sooner than later.
Once out of warranty, what you will find is that repair costs are significantly higher on a newer vehicle. All of those high tech features come with a hefty price tag. It takes special knowledge and often specialty tools to make repairs on newer cars and that costs money.
While old technology might not be as romantic, it sure is a whole lot cheaper to replace. The knowledge required to fix problems is less and more parts, including used parts, will generally be available.
4) Insurance Premiums Will Be Reduced
Your insurance company is not insuring a car, they are insuring a dollar sign.
What this means is that the more your car costs, the more expensive it will be for an insurance company to replace it. That increases their risks, which will increase the cost of your insurance premium.
Now, do keep in mind that some safety features may negate some of the insurance differences. Companies love things like skid control and collision avoidance systems because they reduce the likelihood of an accident. Be sure to check with your insurance carrier to compare price differences.
5) Old Cars Fit A Budget Friendly Lifestyle
New cars are flashy and they can lead to other flashy purchases. If you look the part, you will likely start to act the part. That means your new car purchase could lead to other purchases and this could set your financial goals back.
When you drive an older vehicle, you are saying that you are not trying to “Keep up with the Joneses”. It gives you the proper attitude to keep living a frugal life which will keep your finances going in the right direction.
6) You Are Free To Make It Your Own
That brand new car is just too pretty to modify and, even if you wanted to, modifications could void your factory warranty. This is not the case with an older car
With an old car, you can modify it to your heart’s content and make it your own. Do you want a louder exhaust or a spoiler? Install whatever you like without the fear of voiding a warranty or causing your 40,000 dollar plus vehicle to depreciate further.
7) Thy Are Just Cooler
Sure, they do not have all of the bells and whistles or the latest tech, but an old car can be quite cool. If you have a thing for classic cars, this is particularly true and it does not even have to be a well known classic.
We all know classics like 1960’s era Broncos or Ford Mustangs, but there are other really cool models that you can own for a steal. For example, there are thousands of 1980’s era Cadillac on the market and vehicles that have no modern day equivalent like Ford Excursions. A used vehicle can help set you apart from the pack. You are not a car owner, you become a car enthusiast.
If you want to be unique and set yourself apart, a used car is certainly a way to do it.