Does buying a used car really save you money?
More than 75% of the cars that we deliver to our clients are new. You might be inclined to think that it’s because people just prefer new cars, and that may be true, but you may be surprised to know that far more than that remaining 25% start off thinking that they’ll get a used car, but find themselves driving off in a new one. There are several reasons why, none of which are that a new car is any less work for us than a used one. We’re happy to help with either.
In years past, people looking to buy could anticipate a substantial difference between the purchase price of a slightly used car and the purchase price of a new one. For some makes and models, that still holds true, but overwhelmingly we are finding that because technology has come so far in recent years, that today’s vehicles have far greater reliability, less required maintenance, fewer mechanical/electronic issues and, as a result, a longer lifespan.
All of this tied together means that vehicles just a couple years old are holding their value far better than they have in the past. What used be a large gap between the purchase price of a one or two year old car and a new one, is now far more narrow.
Admittedly, savings are savings when comparing a purchase price, but we always figure that savings need to be weighed against anticipated expenses – things that would likely need to be repaired/replaced on a used car sooner than they would a new one: tires, brake pads and rotors, windshield wiper blades, and engine belts to name a few. Additionally, a used car is going to have less warranty remaining than a new car would come with, bringing into the fold the additional cost of a warranty which narrows the gap even further. Speaking of warranties, there is always the chance that an out of pocket expense is created by something breaking or going wrong with a used car that might otherwise be covered by a new car warranty.
Still, Japanese and Korean cars tend to hold their value better than American made cars, but even there, we have found that used car purchases really make the most sense and offer the greatest savings when cars that are between 3 and 4 years old (or older) are purchased as opposed to those that are 1 and 2 years old.
With used car purchases, finance rates are also something to consider. Generally speaking, finance rates for pre-owned vehicles are higher than finance rates for new vehicles. Lenders see more risk in a used car purchase than a new one, so interest rates are higher, which means that even if the selling price is lower for the used car, the amount of interest that is paid into the lender over the term of the auto loan could be greater, further narrowing the gap between new and used car pricing.
All of this said, we are happy to assist our clients with new and used vehicle purchases, but it’s always important to us that we educate those clients to the point that we and they are absolutely sure that the car they ultimately buy makes perfect sense for their every need. We’re always on their side!