Why buying a used car pays in the long run

How it used to be
Decades ago, buying a used car was considered to be buying someone else’s problem. This may have been true then, but is certainly not the case today if you shop carefully. Here is why buying a used car makes more sense than buying a new one:

New Cars Drop in Value as Soon as You Leave the Lot
The second you drive a new car off the lot, its value may drop by up to 25%. On a $20,000, that’s a $5,000 drop for no reason other than the fact that people put an emotional premium on owning a car that’s brand new.

After this, cars decline in value much more slowly. Getting a car two to four years old could save you 30% to 40%. If you just have to have a car that’s even newer, lease a trade in of last year’s model are often available with less than 10,000 miles and fully loaded for far less than you’d pay for this year’s basic model.

Lower Price Equals Lower Interest
If you buy a new car with little to no money down, you’ll be paying thousands of dollars per year in interest. Over a five or six-year car loan, you’ll likely pay enough interest to buy a reliable used car in cash.

By choosing used so that you don’t need to take out a loan or only need to take out a much smaller loan that you can quickly pay off, you can keep the money that would go to interest in the bank.

Make Car Payments to Yourself
If you are making enough money to cover a large car payment and want a new car, it can still make sense to go used. Hold on to your current car or buy a cheap used car. Create a savings account and automatically transfer the amount of a new car payment to it each month. Within a few years, you’ll have enough to buy a new car in cash and can keep your savings plan going for your next new car. The thousands of dollars in interest you’ll save over your lifetime can go straight into your retirement plan.

Cars Last Longer Now
As recently as 20 years ago, some cars were almost guaranteed to be falling apart by the time they reached 100,000 miles. Today, reliable models can be expected to get close to 200,000 miles or beyond. This eliminates one of the biggest arguments about buying used — that you’ll soon be spending so much to repair it that you would have saved by buying new.

With careful research and a thorough pre-purchase inspection, you can easily find a used car that will run reliably for years. So do your homework, and make a smart purchase with your vehicle.