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The case for buying a used car versus a new car

buying a car
(© Kurhan –

Many people look to buy new cars, but cannot afford one, and end up buying used because of the price. A lower cost is only one of the benefits of buying used cars compared to buying new.

Looking at price

The main problem with buying new cars is the price tag. According to Kelley Blue Book, the average price of a new car is over $37,000, and the average price for a used car is about $20,000. Newer cars become more expensive when you add in the cost of financing a high-priced vehicle, and the cost of insurance as well. New cars may have the latest technology, but after the warranty expires, it becomes very expensive to repair if it were to break.

You have to buy a new car from a franchised dealership, which means that being able to negotiate on price is very difficult. Buying from a dealership means that part of the price paid goes toward keeping the dealership open, and while there are benefits from buying from the dealer, they do come at a high cost. You can buy used cars from car dealers, car superstores, or private parties. This allows you more options of what you can buy since there will probably be more Brands than what a dealership may hold.

Taxes and insurance

It is possible that after buying a new car you will have to pay more in taxes depending on the state that you live in. If you were to buy a used car taxes would be lower as a result of the low price of the car. Buying from a private seller means that you pay sales tax when the car is registered at the DMV.

Insurance can become tricky with new cars when compared to used cars. With a used car, someone might not pay for the Collision coverage or comprehensive coverage because of the low value of the car, but when it comes to new cars you will not be able to. There are also leasing companies and lenders that will require you to take on gap insurance as a way to pay the difference between what is owed on the loan, and the car’s value.

Depreciation of cars/

With a car that is brand-new, as soon as you buy it from a dealership its value will immediately begin to drop when you drive it off the lot. A car’s depreciation is the highest at the beginning of ownership and is the lowest at the end of the car’s life. Buying used instead of new allows the owner of a used car to let the previous owner deal with a large depreciation hit while buying at a lower price and dealing with a slower depreciation for the car.

With appreciation being a major cost of owning a car, it seems like a smart strategy to buy used. Most people learn this after buying their first new car, and then seeing how much the value has dropped when they go to sell it.

Better financing

When financing a new car it is more likely that the owner will go underwater with their car loan. To go underwater means that the person is paying more for the loan than the car is actually worth. This has also been called negative equity or being upside down on the loan.

This is crushing for new owners that have their car stolen or are in an accident that totals the car. After losing the vehicle, new owners are still required to pay off the loan even though the car is no longer in their possession.

People who buy used cars may still have to take out loans, but they are less likely to go underwater with these loans because they will be smaller, and the car will hold its value longer than it would a new car.

You may be able to find a better used car than a new car

When buying cars the price is mainly dependent on the condition of the car, and how high the mileage is. There are used cars that may be in slightly worse condition than new cars, but because the mileage on used cars will be higher than a new car, the price for the used car will be lower. This may allow the buyer of a used car to purchase something comfy and roomy for a much lower price compared to the newer version.

Some people are okay with a used car that is not in the best condition or may have high mileage for the price that is posted for it.

Car histories

One of the scariest things about buying a used car is that you don’t know if the car has any accidents on its record. It’s easier than you think to look up a car’s history report by searching for the car’s history online. A car’s vehicle history report can show you what maintenance was done on the car, the number of owners the car had, any accidents or repairs done on the car, and the title history.

Having a car’s history can help you decide which cars to look at, and which cars not to, but it is still a good idea to have a mechanic that you trust look at the car before purchasing.

Knowing the problems

Every car develops a few problems after it’s been on the road for a certain number of years. Knowing what those problems are, and how much they will cost to fix is important information to have when buying a used car. There are forms online where current owners of cars new, and used post the current issues they are facing with their vehicles. These forums may be full of unhappy buyers, but you can see what cars have the bigger issues, or most costly repairs, and you will know what cars to avoid.

There are also resources online that have information about the cost of ownership of certain cars, which can help you find which cars are expensive to keep running long-term, and those that are not. You will also need to search the area where you are looking for a used car, for example “used cars in Greenville, Ohio” if you were looking for a used car in Ohio.