Outside of your mortgage, your car payment is the likely the other high monthly payment that you need to budget for. While it is nice to have a shiny new car, it is also nice to maintain your financial security. The price tag on a new car is not the only reason that buying a used car is a smart idea however, as there are plenty of other issues like depreciation, associated fees, etc. If you are torn between buying a new or used car you may want to quickly peruse the following benefits to purchasing a used car.
You Avoid Depreciation
The number one reason most people choose a used car is depreciation. The joke that a new car is worth half its value the moment you drive it off the lot is not far from the truth. On average, a new car depreciates about 11% while you are on your way home from the dealership. You literally lose thousands of dollars in about ten minutes in resell value. The depreciation continues to occur for the first few years and then becomes much more reasonable. Thus, if you are looking at your car purchase as an investment, buying a car after the depreciation rate has leveled off is much more reasonable.
Save Money Upfront
It doesn’t take a genius to recognize that used cars are cheaper than new cars. However, you may not realize that used cars can end up being as much as 50% cheaper than new cars when you consider the financing fees associated with your purchase. Most people switch cars every five to six years, and if your loan is paid off you can simply buy a second car if you wish instead of trading in your previous model.
Skip Out on Sales Tax
Sales tax can add to your final price tag considerably, but in some states, you don’t have to pay sales tax if you purchase a used car. Even if you live in a state that requires you to pay sales tax, you will pay much less tax if the overall cost of the car is less. Why pay a few thousand in sales tax when you can pay a few hundred instead?
Avoid Customization Costs
Dealers love to add extra customization costs and add-ons to new cars to increase the cost of your purchase. Oftentimes the only models available on the lot will come with dealer options that you will suddenly have to pay extra for if you want to walk away with your new car today. When you buy a used car you avoid this racket, and if you choose to have the add-on you can purchase it from an after-market installer and pay a lot less.
Lower Insurance Costs
Finally, used cars save you money on your monthly insurance premiums because they cost less to insure. Therefore, not only will you have a lower car payment, but you will have a lower insurance payment as well.
If saving a great deal of money isn’t a good enough reason to buy a used car, then feel free to pay a high price for your shiny new piece of metal. However, it may be worth your time to fall in love with an older model of the same car so that you have the cash to fuel it instead.