There’s nothing quite like the thrill of seeing your neighbor’s jaw drop when you pull onto your driveway in a brand-new car. Once that 30 seconds of pride fades, though, you quickly realize that buying a new car isn’t all it’s cracked up to be. Especially when you have to start paying the higher prices that come with owning a new car, particularly as it relates to insurance and registration.
While the obvious difference in costs comes through the sticker price, a used car, in fact, saves you a lot of money in some other unexpected ways. Therefore, if you want people drooling over your big bank account instead of your shiny new car, keep reading to learn about all the ways that a used car can save you money.
One of the problems you’ve likely run into if you’ve ever shopped for a new car is that you’re fairly limited on the options that are available across the different trim levels. In other words, if you want leather seats, but that option is only available in a package with a bunch of other options that you probably won’t use, you either have to forego the leather seats or pay up for the full package, all while knowing you’ll probably be wasting your money.
What many people don’t know, though, is that most automakers allow you to pick and choose specific vehicle upgrades without having to purchase an entire upgrade package. However, upgrading your vehicle in this way is often more expensive since it has to be custom-made. Speaking of custom-made, the lengthy time it takes for a specially upgraded vehicle often drives many interested buyers away.
There are car buyers, however, who are picky enough to spend the extra money and wait the extra time it takes to go this fastidious route. When they trade those vehicles in, then you, as a used car buyer, can take advantage of their choosiness and find a vehicle with custom upgrades for a fraction of the cost of a new vehicle with the same upgrades.
One of the most significant ways that a used car will save you money is in the realm of insurance. To be sure, auto insurance is kind of a mysterious formula that uses a host of different criteria. One of the most important data points that is considered, however, is the age and value of your car.
After all, a newer and more expensive car will be more expensive for your insurer to repair or replace. Therefore, they will want more money from you so that they don’t go bankrupt from fixing your new car. In addition, if your car is totally new to the market, insurers may not have enough data to accurately determine how much various repairs will cost, which could drive up your premiums even further.
Along those lines, buying a used car gives you the power of information when it comes to insurance. Before you purchase a used car, you can check to see which models are more expensive to insure and which models don’t cost quite as much to insure. If you purchase a new car, you often don’t have this luxury of hindsight.
Of course, when it comes to insurance, not everything is controlled by the insurance company. A large portion of your premium is determined by the levels of coverage that you choose. Now, while you certainly don’t want to skimp on injury and property damage coverage, there are other parts of your insurance coverage that you can possibly cut back on by having a used car.
Your comprehensive and collision deductibles, to a certain extent at least, are at your discretion when you select your insurance coverage. If you are financing your vehicle, your lender may require a certain deductible level. If you’re paying for your car outright, though, you can choose essentially any deductible.
These two variables can have a massive impact on your premium because these types of repairs are typically some of the most common that an insurance company has to pay for. If you’re willing to settle for a higher deductible or forego the coverage altogether, you can save a lot of money on your premium.
Keep in mind that the higher your deductible, the more you’ll have to pay out of pocket to repair your vehicle if it’s damaged. The fact that this is even an option because you have a used car, though, shows just how much money a used car can save you.
As if having to pay sales tax on your new car wasn’t enough, you’ll be unpleasantly surprised again when you receive your annual tax bill in the mail the year after you purchase a new car. In most states, registration fees consist of a base fee that everyone pays, no matter how old their vehicle is, and a property tax fee.
This property tax fee varies from state-to-state and even city-to-city. You can call your local transportation department or tax office to learn what the formula is for your location. In nearly every case, though, the amount of tax you pay will be directly related to the assessed value of your vehicle.
Therefore, if you have a new car, and the assessed value of your vehicle is $31,000, you will have a much higher tax bill than someone who owns a vehicle that has had a chance to depreciate for a few years, bringing the value down to $24,000. This is true even if the vehicles are in the same generation, meaning they have the exact same styling, fuel economy, and technology package. In other words, if you want to owe less money to your local government, it pays to buy a used car.
Another unexpected way that used cars can save you money is by helping you to avoid lemons. If you ask most people what type of car they would expect to be a lemon, they would probably describe an old jalopy that is clearly on its last leg. However, new cars can be lemons just as easily as old cars can.
This doesn’t apply just to random mistakes where Bob on the production line didn’t tighten a bolt properly, either. Sometimes, when a manufacturer releases a new generation of a certain model, there are more lemons in the bunch than there is lemonade. Whether it’s a large batch of faulty parts, a serious design error, or some other type of problem, there’s a lot that can go wrong with new vehicles once they’re “in the wild.”
Though lemon laws are designed to protect you from such a scenario, there are cases where the problems may not show up until it’s too late. If that happens, you’ll be wishing you had purchased a used car.
That’s because used cars are well-tested by a large group of drivers across a wide range of real-world situations. If these drivers experience a problem, you can be sure they’ll post about the problem online for all the world to see.
Lucky for you, you can learn from these other drivers’ pain and figure out which vehicles should be avoided if you want to eliminate expensive repair bills. As a result, when you finally sit in the driver’s seat of your used car, you can be confident you’ve got a reliable vehicle that will keep you cruising for years to come.
One way that new cars are marketed is with rock-bottom interest rate offers. With such low interest rates, it might seem as though buying a new car is a better deal. However, a few moments of “real math” will reveal that, unless your credit is less-than-ideal, you’ll likely end up paying less each month if you purchase a used car.
This is because your monthly payment is ultimately determined by the cost of the car you purchase. Sure, the interest rate plays a role in the final number, but with low interest rates available for both new and used car loans, it doesn’t affect your payment as much as you think.
Basically, the moral of the story is to not get sucked in by the promise of low interest rates. Instead, take the time to calculate the monthly payment for both new and used varieties of the vehicle you’re interested in. When you do, you’ll likely be surprised at just how much more affordable a used car can be. Plus, when you add in the other differences to the cost of owning a new versus a used vehicle, you will quickly understand that used is the only way to go.
Whether it’s lower payments, greater reliability, lower taxes, lower insurance rates, or less expensive feature packages, used cars win the battle in almost every metric. Don’t buy the hype that surrounds a new car. Instead, be a savvy used-car buyer, turning people’s heads with all the other things you can afford because you didn’t buy a brand new, fast-depreciating hunk of mobile metal.