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Shopping for a New Car? Why Buying a Used Car Is Better

July 29th, 2016 · No Comments · Auto Loans

by Kristy Welsh

(Last Updated On: November 10, 2017)

Shopping for a new car? Why buying used is betterIf you’re in the market for a car and buying new seems like a foregone conclusion, give it some thought. Depreciation, car insurance, credit checks, and monthly payments just might convince you buying a used car is better.

You won’t pay for depreciation

When you buy a new car, Autotrader reports that it depreciates between 20 and 30 percent when you drive it off the lot. By the third year of ownership, it’s lost a whopping 50 percent of its value. When you buy used, you’re buying the vehicle at an already-depreciated value. In fact, a used car can actually appreciate in value if you put enough work into it.

You’ll pay less for car insurance

Insurance premiums are higher for new cars than used cars. (Incidentally, your credit score can affect your insurance, too.)

No credit check when you pay with cash

Financing a new car means a credit check, and if your credit is less than stellar, that means a higher finance charge. On the flipside, when you buy a used car directly from the owner, you pay in cash. That means no credit check and no finance charges.

Lower monthly payments when you finance

Though buying a used car with cash is ideal, you can also finance a used car through a dealership. But you’ll be financing a lower loan amount than you would be buying new. In turn, you should have lower monthly payments over the life of the loan.

One drawback to keep in mind

When you buy a new car, you’re getting the warranty, which usually covers basic repairs for the first 3 years. If you’re buying used, you don’t have that perk. Unless you bought the car within those first 3 years and the warranty was transferred to you, the cost of repairs is up to you.

The best way to avoid used car repairs is to have a trusted mechanic inspect the vehicle before you buy it so as to minimize surprises. Or, if you’re buying from a dealership, you may be able to get a certified pre-owned vehicle covered by a factory-backed limited warranty.

Watch 1-minute FTC video for more tips on buying used.

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