why purchase preowned?

Many people have a list of things they want in their next vehicle. Those things include an attractive price tag, reliability, and styling. What not everyone knows is that purchasing a late-model preowned vehicle is one of the best ways to guarantee you get all of those things. You can save yourself a lot of money by purchasing preowned. And, if you purchase a vehicle that is only a few years old it will provide many of the same advantages as a new one.

avoid depreciation

One thing that hasn’t changed, is the fact that your car will depreciate as soon as you drive it off the lot. In fact, you begin to lose money as soon as you sign the paperwork and it only gets worse in the first few months. Some experts say that vehicles depreciate between 20% and 30% in the first 12 months.

On its third birthday, your vehicle has already depreciated up to 50%, hitting about 60% depreciation by the time it is five years old. After the first five years, the depreciation rate slows down.

A car that is three years will have experienced most of its depreciation. Also, it probably has few miles on it. This is why you can snag a like-new model and save a significant amount off the cost.

Reports on stats from Kelley Blue Book show that the average cost of a new car is more than $37,000 and the average price of a used vehicle is only around $20,000. That is an average saving of $17,000, when you choose to purchase a preowned.

more affordable payments

If you plan to finance a car, your payment should be no more than 20% of your monthly take-home pay. Don’t forget to set a budget for other things like, maintenance, fuel, and insurance. After adding up all of that, buying a new car is not something that we all can do.

Even though interest rates tend to be higher with a preowned vehicle, in most cases it doesn’t usually amount to a higher payment. The lower cost more than makes up for the difference. These days, banks are offering longer terms for preowned automobiles. Two years ago, the most common length of a used car loan was 72 months.

Purchasing a preowned instead of a brand new vehicle can save you an average of $136 a month.

lower taxes on used cars

Taxes are something you will have to pay regardless of whether you purchased a new or used vehicle. That tax amount is tied to the selling price, so purchasing a less expensive car i.e. a preowned car, means you will owe less money in taxes.

Coming up with the money for sales tax is often a problem for people, so they end up financing that also. Your ability to do so will depend on the Loan to Value (LTV) assigned by your lender. Of course, this only increases the amount of your loan and makes it more likely that you will have negative equity.

lower insurance rates

Auto insurance rates are directly tied to the cost of your vehicle. That is because the insurance company must consider how much it would cost to replace the vehicle if it were totaled in an accident. So, put two and two together and you will figure out that purchasing a cheaper, used vehicle will result in a lower insurance rate.

used cars are just as reliable

People will justify purchasing a new car because they believe that they are more reliable. The idea is that by spending more money on a new vehicle will help people avoid costly repairs down the road. Concerns about reliability and auto repair is a leading reason for folks to choose a new model instead of a used one.

At one point in time, the idea that new cars are more reliable was true. Not these days. Consumer reports say that some new cars are less reliable than used models, particularly during their first year or production.

research used models

There is so much information available, so do a little research to help you better predict which models are likely to experience reliability problems. There are also companies like AutoCheck and CarFax that can provide you with a full vehicle history.

you can still have a warranty

A lot of people are interested in a warranty. A lot of people also think that the only way to get that is by purchasing a new vehicle. Well, that is not always the case. Many used cars still have most of their factory warranty remaining and in most cases it is transferable to the new owner.

purchasing an extended warranty

If your vehicle is outside the manufacturer’s age or mileage requirements, often you can purchase an extended warranty. This might ease your concerns about car repairs. You should compare the cost of the warranty against the price of some of the vehicle’s most common repairs. Also, read the terms carefully so you know exactly what the warranty covers. You might discover that a used car warranty isn’t really needed after all. Instead, you may want to set aside that cash to cover any future repairs.

used cars: the best deal for your money

Lower sales tax, insurance rates, and price tag, means that you can save a bundle by purchasing preowned. They are often a better value for your money. This is especially true when you consider that they are often just as reliable as new models.

If a new vehicle is out of your reach, but you want dependability you can find it with a used vehicle. Shop for a car that is a few years old. Purchasing an older vehicle will allow you to enjoy many of the benefits of a new car without getting in over your head financially.

Want to learn more?
Sign up to receive the latest auto finance tips & advice.

Just so you know, we’ll handle your info according to our privacy statement.