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Buying a Used Car to Save you Money

Although it is always nice to be the first person to drive a particular car, a lot has to be considered before you lay down your hard earned money. For one, are you buying brand new because you think it is a safer purchase? Do you think there are some benefits to that new car over one that is one year old and has less than 20,000miles (30,000kms)? To some the purchase of a brand new car right off the delivery truck is more like a status symbol of your success rather than being a sound financial decision.

Why not allow someone else to take the huge financial hit on their new car purchase and you take advantage of their loss. On any new car purchase, a car will lose close to 45% of its value in the first three years after its initial purchase. After that it level out at about 25% for the next three years. Essentially think of it as a steep slope that flattens out as the car gets older.

The trick is to still get that new car smell, and allow someone else to take the loss. This is why used car sales have been booming lately as people realise that buying a new car will be one of the worst financial decisions people will make during their lives.  Once all four wheels are off of the new car lot, the price of that car is now easily 15% less than your purchase price. Does that sound like a good financial decision to you? Do you like to lose 1000′s of dollars in one transaction as soon as you leave the lot…….I didn’t think so.

With new car warranties getting longer and longer as manufacturers fight for the dwindling new car consumer, the one year loss on say a 5 year warranty is technically nothing. If you are planning on keeping the car for a long period of time, ask them about their extended warranty plans when the factory warranty runs out. In a lot of cases, the extended warranty could be deemed a good deal after only a couple of major repairs.

So before you get suckered into purchasing a new car based on some low interest rate or cash back option, get a price quote from the dealer on the car you want and then shop for used car that is one year older with low miles and check out the difference in cost. You will easily see that the different can be huge.

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