Benefits of Buying a Used Car
As mentioned earlier, there are several good reasons to consider buying a used car, including ample selection and the improving reliability of older cars. But the main attraction for used-car buyers is still affordability.
Buying a new car is definitely more expensive than buying a used one. In fact, the price spread between new and used is widening. The latest figures available from CNW Marketing Research indicate that the average transaction price, before taxes and fees, on a new car in 2011 was $29,916. The average used car transaction was $9,297 during that same time period. This spread has increased nearly 20 percent since 2008. Unless you decide to lease, your initial costs on a new car will be hefty. Financial institutions typically require down payments of about 10 percent on a new-car loan, but it helps to add more. If you pay less money up-front, your monthly payment will be higher.
Two other key considerations may tip the balance in favor of used cars: certification programs and new-car depreciation.
Another trend that makes buying used a better option is the proliferation of certified pre-owned programs. The idea started with luxury brands such as Lexus and Mercedes-Benz. Today, most manufacturers have instituted these programs.
General benefits of CPO cars include:
- Manufacturers usually consider only late-model, relatively low-mileage used cars and trucks with no history of major damage for their certification programs.
- CPO vehicles undergo a rigid inspection process of mechanical and cosmetic items before they obtain certification.
- CPO vehicles are normally covered by a warranty that extends beyond the original factory warranty. The warranty often includes the same features as a new-vehicle warranty, such as roadside assistance.
- Several manufacturers offer special financing on CPO vehicles, usually at lower rates than those on new-car loans or the typical, higher used-car loan rates.
Buyers should be aware that they pay more for a CPO car than for a regular used car, but the higher price may be worth it for the extra coverage and the peace of mind they receive.
Once you drive your new car off the dealership lot, its value will drop immediately in your early years of ownership. On mainstream vehicles, expect your new car to lose at least 30 percent of its value in the first two years of ownership.
|Best Overall Car Resale Values|
|The residual values below are a percentage of the manufacturer's suggested retail price (including destination charge) and are provided by ALG. Click on the image or model name to read the vehicle's 2009 Cars.com report.|
|Rank||Make and Model||Style*||Residual Value|
|1.||Mini Cooper||Hatchback (two-door)||68%|
|2.||Honda Civic||EX sedan||64%|
|3.||BMW 1 Series||Coupe 128i||63%|
|4.||Subaru Impreza||2.5 i sedan||61%|
|6.||Honda Civic Hybrid||Base||61%|
|7.||Jeep Wrangler||Sahara (two-door)||61%|
*Listed style had the highest residual value for that model.
Consult used-car value guides to get an idea of what a particular model will be worth in the future. Leasing guides are another good source, even if you intend to buy instead. Lease payments are calculated based on residual, or resale, values. ALG projects those values for leasing companies to use when setting their prices.