There are many good reasons to buy a used car, including ample selection and the improving reliability of older cars, but the big draw for used-car buyers? Affordability.
Buying a new car is definitely more expensive than buying a used one. Unless you decide to lease, your initial costs on a new car will be hefty. Financial institutions typically require down payments of at least 10 percent on a new-car loan (but it helps to add more). If you pay less money upfront, 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.
One 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 typical used car, but the higher price should be worth it for the extra attention, coverage and the peace of mind buyers 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. 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.