After your home, usually, the car is the single-biggest investment that you make. New cars tend to be so expensive that they upset all household budgets, even if you can get substantial discounts on their sticker prices. Apart from the price you pay for the vehicle, you need to contend with a variety of associated costs for registration, finance, and insurance; all of which can add up to another few thousand dollars. The huge erosion in the value of a new car during its initial years can be a big concern if you are taking finance as it is very easy to be upside down on a loan, where the value of the asset is less than the loan amount outstanding.
Many smart buyers have taken to purchasing used cars as they not only tend to cost far less but represent a better value, especially when they are just about a couple of years old and have less than 30,000 miles on the clock. Some undeniable advantage of pre-owned cars:
You Pay Less and Incur Less Depreciation Too
It is a well-known truth that a new car loses substantial value the minute you take delivery of it from the dealer, and more so if the car is more expensive. It is not uncommon for a car that is a couple of years old to be worth substantially less than what it was originally bought for – you can expect the price to be less by 20-30%. What this really means that you can buy a fancier car at the cost of a typical sedan, if you so want. This is not to say that old cars do not depreciate – they do but at a lesser rate, which means that they retain their value better. Buying a pre-owned car can make you avoid the heavy hit that is associated with new car purchases.
No Sales Tax
Advertisements for new cars mention attractive sticker prices but invariably fail to mention additional costs like the sales tax that is imposed by many states. The amount can really be quite substantial and may catch you unprepared. On the other hand, you can buy even certified pre-owned cars without sales tax being applicable. However, do make a quick study of your state’s sales tax laws before making a decision.
Decreasing Registration Fees
Registration fees for new cars can be quite substantial because usually the amount is calculated based on the price of the car, and the model year. There are a number of states where the registration fees keep decreasing with the age of the car. Typically, in the initial three years, the rates are the highest but tail off to a lower level after five years. When you avoid buying a new car, you can save a handsome amount in the high registration fees in the initial years. However, do check out your state’s laws.
Get Extra Features without Paying For Them
When a new car is being purchased, customers are cajoled into buying a lot of unnecessary but expensive accessories and extras by the dealer, such as window films, decals, anti-rust coating, etc. When the same car is being sold, the owner never gets any value for them so the new buyer ends up getting all the features without having to pay for them. If you are really keen on any item, such as a sunroof or a navigation system, you can approach an after-market accessory shop and get better stuff for much less.
Avoid Dealer Fees
Because new car dealers are so hungry for profits that they will not only hit you for unnecessary extras but charge fees on a number of heads like shipping, dealer preparation, destination fees apart from the ones charged by the DMV. When buying an old car, these unreasonable and downright exploitative extra dealer fees can be completely avoided, though the DMS fees still need to be paid. It is almost always easier to negotiate prices with owners who buy new cars because they are usually ill-informed about the value of used cars.
Author bio: James Mitchell is a dealer specializing in certified pre-owned cars. A car enthusiast, James also blogs extensively on the many aspects of buying used cars.