Buying a new car isn’t a smart financial decision for some folks. Buying a used car might make you feel nervous…
“What if I get stuck with a clunker?”
“What if the previous owner didn’t take good care of it?”
These are genuine concerns that I will address in a pro and con format. I hope this list helps you feel better about your decision to buy a used (or new) car. Let’s look at the pros of used cars first.
1. You don’t need a loan.
My recommendation? Save ahead of time and pay cash.
Most auto loans hover around 4-5%. That doesn’t sound bad, but it can add up. Let’s say you get a $20,000 car with a 5% interest rate and $500 minimum payment.
You’d end up paying about $2,000 of interest in addition to the initial balance. If you have poor credit, the cost would be a lot higher. Click here for a car loan interest calculator.
2. You can get a heck of a deal.
New cars lose 15% of their value every year. That’s bad news for their owners, but it could be good news for you. Why pay full price for a new car when you could pay a fraction of that price for a used car that’s almost as good?
3. You’ll save money on auto insurance.
Used cars are usually cheaper to insure than new cars. That’s because they are cheaper to replace. Makes sense.
4. You can buy certified pre-owned to reduce your risk.
Certified pre-owned vehicles are a pretty safe bet. They have been inspected and certified by the manufacturer. They’re more expensive than used cars on Craigslist, but your peace-of-mind might be worth the investment. Sounds good so far, but let’s balance things out. Here are the cons of buying a used car.
1. You could get stuck with a lemon.
Used cars are a risky investment when you don’t have much of a budget.
If you’ve only got a couple thousand dollars to spare, please be careful about who you trust. Cheap used cars don’t come with a warranty. If it craps out, there isn’t much you can do.
2. You’ll have to spend more on gas and repairs.
New cars don’t require as much maintenance. They also tend to be more fuel efficient. These costs usually pale in comparison to a loan. If you have a long commute, however, this point is worth considering.
3. You won’t have the most advanced safety features.
Defensive driving techniques can prevent most traffic accidents. Even so, it’s nice to know your vehicle is equipped with the latest and greatest safety features. This is especially important when you have a family.
4. You might have to compromise on color, style, etc.
If you buy a new car, you can probably get anything you want. Most dealers will let you customize the color, interior style, and more. If you’re buy a used car, you won’t get to customize anything. You’ll have to a) spend more time searching or b) accept what you get.
Please share this post with anybody you know who is thinking about buying a used car. They will appreciate the thought. Thanks! 🙂