5 Reasons Why Buying a Used Car Makes Total Financial Sense

Dealer hand with a cars

A car is one of the most expensive purchases you can make apart from real estate. With such a large amount of money involved, you need to be careful with your decisions if you want to get the most out of your cash.

The biggest choice you’ll need to make is whether to buy a brand new vehicle or opt for a used one. Here are five solid financial reasons why a second-hand car is the better way to go.

Buying New Means a Fast Drop in Value

It’s estimated that a brand new car will lose a fifth of its value the second you sign on the dotted line and drive it away from the dealership. But it doesn’t end there – the value will dip by another ten percent over the first year of ownership

All in all, after three years, the resale value of a single-owner car will be barely half the price you originally paid for it. That’s a lot of cash to lose just for the privilege of being a vehicle’s first driver.

Used Cars Hold a Steady Resale Value

In contrast, when you buy a used car someone else has already taken the depreciation hit. Cars usually hold a steady resale value between three to five years in age, before it starts to tail slowly off with increased mileage and years. But the value drop is much less dramatic, and with proper maintenance and care your car will command a useful resale price for years to come.

Lower Insurance Costs

But the used car savings don’t end with the purchase. Calculating an auto insurance premium takes a lot of factors into account, but one of the main influences is the replacement value of a vehicle if it’s zeroed. Naturally, used cars cost less to begin with, and so the monthly insurance premiums will be lower than with the same model of car just a few years younger.

Lower Registration Fees

To drive a car legally, you’ll need to register it with your local jurisdiction. Depending on your area, this will involve a variety of fees and taxes. In almost all cases, the value of your car will be used when calculating how much you’ll need to pay, and so used cars will cost much less to get on the road.

Increased Reliability

Lastly, used cars can also be the more reliable choice and save you money on repairs. This might seem a little surprising – surely new cars will be in better condition and need less attention?

The simple fact is that brand new cars can suffer from teething troubles and manufacturing faults more often than the glossy advertising would have you believe. This causes inconvenience and extra costs even if repairs are covered by a warranty.

With a used car, any major faults will already have been discovered and dealt with. Once a modern vehicle has made it through its first 12 months or so, you can expect years of reliable service if you maintain it properly.

Buying a used car might not offer the same thrill and glamour of purchasing a brand new vehicle, and you may also have to run the gauntlet of the dreaded used auto dealer. But if you want value for money then buying used is the sound financial choice.

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