By Craig Erwin, Ph.D.
I need to buy a car. New or used? Used car prices have jumped, prompting many to wonder if a new car is a better bargain. It’s not. New car prices have also risen as global supply chain snarls have caused shortages and price increases. Used car price hikes have slowed, but, even if they hadn’t, I would still prefer a used car for several reasons.
Used cars are cheaper to insure. Although you are required by your lender to purchase collision coverage if you buy a new car, if you buy a used car without taking out a loan, you won’t need to pay for collision coverage. You should also pay lower sales tax on a used car than a new car.
The biggest reason to buy a used car is that a new car’s value depreciates rapidly, losing ten percent of its value as soon as you buy it. In a few years it will likely be worth about half what you paid for it. A used car depreciates more slowly than a new one.
Are you worried about buying a piece of junk? Decades back that was a bigger concern. Now, though, cars tend to be more reliable and to have better quality. A car with 100,000 miles on it is often nearly trouble-free for years. If you are fearful of buying a lemon, buy a car with 30,000 to 50,000 miles on it. They are practically new but much cheaper than a new car and likely to cost little to maintain. When my friend rode in the Hyundai Sonata I purchased used, he remarked that it looked and rode like a Mercedes. Years after my purchase I still haven’t had to repair anything on it; I just change the oil and filters. Of course, before you buy a used car, have it checked out by a mechanic to ensure it does not have any serious problems.
Remember that everything is negotiable. Unfortunately, car salespeople are probably much more experienced than you are. Conduct thorough research on the car and on the car buying process. Ask an experienced friend or relative to help you so you don’t get ripped off. Car dealers are experts at separating you from your money. Make it a fair fight.
If you can’t decide whether to buy a used car or a pre-owned car, they are the same thing. Used car dealers coined the euphemism “pre-owned” because “used” cars had a horrible reputation, mostly because many used car dealers were incredibly sleazy and couldn’t be trusted.
A final note – research fuel efficiency. With gas prices at record highs (without factoring in inflation), it’s no time to buy a gas guzzler.
Are you in the market for a car? If so, are you confident that you can avoid being swindled? Is there an experienced friend or relative that you can ask to help you buy the car?
For more information on car buying, inflation, the economy, and saving money, click on the following links: