For many Americans, the question of whether to buy a new car or a pre-owned car is a tough one to answer. And if you’re anything like the millions of consumers who are faced with this dilemma each year, you’ve likely researched the topic online only to find that there are thousands of articles on the subject.
It’s a modern day classic debate of cost versus value – and function versus feature. But regardless of which articles you read, most of them will agree on this one common rule of thumb – ‘New cars lose about 20% of their value the moment you drive them off the lot; and after the first year of ownership, continue to depreciate at a sustain rate of 12% over the course of the next four years. To put that in perspective, that’s a $6,000 decline based on the average cost of a car, according to a recent article published by USA Today.
But hey… who doesn’t enjoy the smell of a new car? Or the idea of knowing they’re the first person to sit behind the steering wheel of a hot new ride? Nevertheless, at the end of the day, you still must decide whether to buy brand new or used. Still not sure whether you can resist that new car smell? Before you give in to the temptation, here are three arguments for why buying a pre-owned car is almost always a much better deal.
- The Obvious Reason — You'll Pay More
If money is not a concern, it probably doesn't matter whether you buy new or previously owned. But if you are like the rest of us, you want a monthly payment that doesn't stretch your budget or cause unnecessary financial strain.
- Faster Depreciation and Negative Equity
As previously mentioned, new cars depreciate much faster than pre-owned vehicles. In fact, the average new car can depreciate as much as 20% in its first year — and that's just an average. What does this mean for you? In short, if you buy a brand-new car without a down payment, or if your monthly loan payment isn't high enough to compensate for depreciation, you could end up owing more than the vehicle is worth.
- You Get More for the Money Buying Used
Since cars depreciate rapidly within the first year, buying a used car is an opportunity to extend the value of the money you spend. In many ways, if you’re able to find a car with low mileage, it’s like buying a brand-new car, without the brand-new price tag.