Why is Buying a Used Car a Good Idea? Used Car Values Explained

Many drivers are choosing to purchase a used car over a new one as prices spike at the gas pump and in grocery stores. New vehicles are expected to cost close to $47,000 by early 2022, according to Kelley Blue Book, so now might be an excellent time to save money by buying used. 

When you buy used, you save money

Buying a used car rather than a new one can save you thousands of dollars over the long run. Moreover, you will be paying much less in terms of fees, insurance, and depreciation compared to driving a brand-new vehicle.

In the second quarter of 2022, drivers financing a new vehicle paid closer to $667 per month, while those financing a used vehicle paid $515 per month. When you choose a used car over a new one, you could save over $160 a month, which adds up quickly. The obvious reason to purchase a used car is the lower purchase price, but there are other advantages as well.  

5 benefits of buying a used car

Not all used cars are created equal. You have to look before you buy so you don’t buy a lemon. Nevertheless, here are five of the best reasons to purchase a used car.  

1. Less car depreciation

A used car typically doesn’t experience the same amount of depreciation that a new one does. Typically, new cars will lose 20 percent of their value once they’re driven off the lot. According to recent research, most cars will lose about another 10 percent in value the first year. This is a loss of value of about 30% in the first year of ownership.

When you purchase a used vehicle, its depreciation level will already be less than if you bought a brand new car. New cars will rapidly depreciate the moment you buy them, but a used car is going to depreciate at a more gradual pace, which will provide for a stable loan-to-value ratio. 

2. Lowering insurance costs

There are a number of factors that can affect the cost of your auto insurance such as your age, driving history, credit score, and the miles you put on your car. Insurance on a used car tends to cost less than insurance on a new one. When figuring out how much you need to pay for car insurance, the worth of the car will come into account. As older cars have less value than newer ones, you will pay less for car insurance.

Keep in mind, if your car is older and you want cheaper insurance, you can go with liability coverage. But if your car is newer and you want to add collision and comprehensive coverage, it is best to research the costs of such policies. Keep in mind, there’s a big difference in insurance rates for different brands, so you can save some money by researching rates and comparing the different insurance rates before driving off the dealership lot. 

3. Lower dealer fees

Car insurance fees may differ depending on where you live in the U.S., just as insurance on a used car may cost more or less than on a new car depending on the age of the vehicle and other factors. More specifically, this is true if you have to pay a sales tax.

To prepare for the financial burden that is car ownership, check the DMV website in your state for information regarding registration fees, title taxes, and document fees. 

4. More value for your money

Another benefit of buying a used car is that you can buy more cars with your car-buying dollar.

A luxury vehicle that is a few years old might be more affordable than this year’s model if you’re looking for a luxury car. Additionally, carmakers are no longer redesigning their models every year, so you may not be able to notice the differences in style and tech.

You can calculate these potential savings and even compare new versus used cars. 

5. Peace of mind

Prior to the release of vehicle history reports, the purchasing of used cars carried a certain amount of risk. But now, the car-buyer has access to various forms of pertinent information on the past life of their soon-to-be vehicle.

It is recommended before signing off on a used vehicle, to visit websites such as Carfax and AutoCheck and read through a vehicle history report that has been generated by the car’s vehicle identification number, or VIN. These reports provide verification of the mileage as well as information on whether the vehicle was ever declared a total loss by an insurance company. 

Certified pre-owned option

For those concerned about hidden problems in a used car, purchasing certified pre-owned may be a solution for you. Not only will you get to purchase a used car and save money, but you will also have confidence in its reliability. The majority of automakers have some form of a Certified Pre-Owned program. These are used cars that the manufacturer says meet their established standards and come with some type of warranty.

Check the inventory for your desired CPO vehicle before going to a dealership, as each will use its own specific language to describe its pre-owned vehicles. More than anything else, many of these vehicles come with lengthy warranties to protect you and yours, so take the time to know what it’s really covering. 

Next steps 

If you want to get behind the wheel without paying as much as for a new car, you should consider buying a used car. Having a good-condition vehicle will save you money on insurance and registration while also reducing depreciation. Make sure you check current car loan rates before financing a used car. This will ensure you get the best offer.