- Ken Mills Toyota Maroochydore Site
By Al Wannestadt
Buying a new car is one of the most exciting times in your life, especially if it’s your first time. A lot of recent college graduates with their first real jobs will go off and buy a brand new car as their first ‘real world’, grown-up purchase. But do they always make the right decision about what they buy? Buying a brand new car hot off the assembly line may sound great and yes it’ll smell great with that “new car”; but at what cost? Buying a brand new car versus a used car can end up costing a lot more money then you expect. And that new car smell may not be worth it.
In the first three months of a new car’s life it will lose 30% of its value. After five years it will have lost almost 70% of its value and that new car smell will be gone. Most car purchases are made with a cash down payment and a substantial loan. If the loan for the new car is set to be repaid in more than five years, after the first five years the owner will be ‘upside down’ on their loan. This means that the car will actually be worth less than the amount owed on the loan. In case of an accident where the car has to be totaled the insurance company will only pay what the car is worth; not the amount still owed on the loan. This could lead to some serious cash problems with repaying back that loan and trying to buy another car.
Choosing to purchase a used car makes the most financial sense. A used car that is only one of two years old will cost about 20 to 30 percent less than a new car. Used cars will also depreciate slower than new cars. Unlike a new car the used car will not lose more than a few percent of its value the first year you own it. Purchasing a used car also allows for lower financing costs in the form of fees and interests paid; as well as lower registration and license fees and lower insurance premiums. Sales tax is also not paid on used cars since the tax was already paid by the previous owner when it was purchased new.
A lot of times new car purchases are made because consumers believe that older, used cars are not in very good shape. But today’s used cars, even ones five years old are still in pretty good shape. It’s true the interior and the exterior may not look the best depending on previous owners; but under the hood everything is working great. In fact some used cars may still have the factory warranty on them that was issued when they were first purchased. Kia and Hyundai offer a 10 year/100,000 mile warranty on all of their new cars and most people who purchase brand new cars do not keep them for 10 years.
A used car that is only a year or two old may not even be that different from the brand new one sitting right next to it. Unless the car has had a total model redo the only changes will be minor. Possibly a few technology updates but nothing too important. The money saved on buying a used car instead of a new one can be used to purchase a used car with more upgrades then you would be able to afford on a new car. That extra money can be used to buy leather seats, mahogany panels and in some used cars satellite radio or Bluetooth capabilities.
Ultimately, the decision to buy new or used is your decision. You just have to figure out how much that “new car” smell is really worth.
About the Author: Al Wannestadt works as a freelance writer and marketer for companies like CarLocate, a web car listing service with
new and used cars
for sale. They are located at
. When he is off the clock, Al writes about and stays up-to-date on the latest marketing innovations, and follows the latest news about the automotive industry and cars.