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Millionaire Money Habits

August 3rd, 2009 at 10:43 am

The Great New Car vs. Used Car Debate

When you’re looking to buy a car, you have two options: new or used/pre-owned/slightly used/pre-loved, etc.  While the direction you choose is entirely dependent on your own needs and desires, a used car is generally a better investment.

New cars certainly have their advantages, and if you find a new car that has exactly what you’re looking for and you can afford it, by all means get it.  A new car will have all of the newest safety and entertainment features (and the safety features might qualify you for insurance discounts).  The warranty will generally cover more years than on a used car (some going as high as 10 years or 100,000 miles) and may also cover more maintenance issues.  Your interest rate on the loan may be lower, too, and you may even qualify for 0% financing that dealerships only offer on new cars.  But here’s where the advantages end.  The moment you drive off the lot, you car loses value dramatically, and you immediately owe more on your loan than the car is worth as the value continues to drop quickly in the first two years.

Some people might argue that this fact is negated by how much time and money you will save on maintenance, as you are the first owner and won’t have to take care of previous problems that might show up again.  However, the used car market is significantly better than it used to be.  Many franchises have Certified Pre-Owned programs that will guarantee the condition of the car after running it through a long and rigorous list of checkpoints, so you no longer have to worry about surprise problems showing up two weeks after you buy the car.  While it’s true that you may have to purchase an extended warranty to have similar coverage to that of a new car, your maintenance issues are likely to be no different with the Certified program.  You’ll probably just need the same routine service and oil changes.

Financing rates can be higher with used cars, but your car will not decrease in value as quickly as a new car and your insurance is likely to be cheaper.  Plus, you might be able to get more for your money in a used car.  For example, if you’re looking at the basic model of a brand new car, you might want to consider the same model but one or two years older.  The luxury model of a used 2008 car will cost significantly less than the basic model of the brand new 2010 version, meaning you’ll have a lot more fun and better features in the used car!

It’s certainly not a crime to buy a brand new car.  Just be sure to consider your options.  You’ll be handing over a large amount of your hard-earned money, and you want to make sure you’re getting the best value for it, covering all of your needs, and leaving room for a little fun, too.

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  • Joe Morgan
    9:54 pm on August 5th, 2009 1

    It may not be a crime to buy a new car, but it can certainly be one of the biggest financial decisions you make - especially for recent highschool or college grads. I know, because I made the new car mistake when I got my first “real job” out of college. Long story short, I paid FAR more than I should have because I didn’t know any better.

    To be fair, I had lousy credit and made some other bone-headed mistakes on the deal, but I cam out of the experience with a firm resolve to never buy new again.

    My wife and I bought a minivan in Feb, and we bought used. We got a 2008 van with 28,000 miles on it. It was just broken in, and we saved about $12,000 - even after the cash back bonus offers at the time!

  • CypemoopHed
    4:19 pm on November 25th, 2009 2

    Credit you looking for details. It helped me in my assignment


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