Save Big Money On Used Cars

April 5, 2011 - PRLog -- Carolina, Puerto Rico — Save Big Money On Used Cars

So you’re thinking about buying a new car.  Times are tough!  So you don’t want to spend all your money.  Just imagine what would happen if —God forbid— you or your wife were laid off.  It’s happened to other people you know.  No one’s immune!

So what’s the alternative?  Buying a used car can save you thousands of dollars and still leave you with an excellent vehicle… and even with a manufacturer’s warranty.

When you buy a new car several things happen backstage that no one really thinks about.  Let’s start with depreciation.  Accountants call it straight-line depreciation.  Here’s how it works. Every year that goes by your car loses value by a fixed percentage… usually 20%.  When does it start?  The minute your new car touches the road!  That’s right!  

Let’s say you buy a $30,000 car.  The minute it touches the pavement it’s worth $24,000.  During the second year its value goes down another 20%.  Now it’s worth $19,200.  Three years down the road you’re driving a $15,360 car.  In many cases it’s still under warranty, but it’s worth half the money.

Insurance is another factor.  Insurance for a new car is generally more expensive than for a used one.  And what are you really insuring?  If you laid down a small down payment or no down payment at all —which is actually the smart move— you’ll be insuring someone else’s property.  Think about it!

I could go on, but I don’t want to depress you.  Buying a used car —especially in tough times like these— can actually be your smartest move.  Why?  There are dozens of reasons.  But I’ll just add three more to what we’ve discussed so far.

Car manufacturers are struggling to keep their heads above water.  One of the many tricks they’re using to entice new buyers is a longer warranty.  Many vehicles today are covered by 5-year warranties, 100,000-mile warranties and many other sweet deals of the sort.  That $30,000 car will cost you between $19,200 and $24,000 two years down the road and it will probably still be covered by the original manufacturer’s warranty.  The same thing is true for models manufactured 2-3 years ago.

Better still; let’s suppose you buy a two-year-old car for $22,000… just to use our original figures as an example.  Your depreciation after the first year will only be $4,400.  That’s close to a third less than what you would’ve paid on a new car. Plus your insurance will also be lower.

Used cars also have a track record.  What does this mean?  It means that whatever factory defect they might have come with will have probably been discovered and corrected already.  From a safety standpoint alone this is a great benefit.

Finally, you can usually find better deals on used cars than on new ones.  Why?  Because new car prices are pretty much fixed.  Manufacturers set a factory price. Then dealers add their expenses and profit margins to arrive at a sticker price.  That’s it.  There isn’t much room for bargaining.

On the other hand, the used car market is a haggler’s hunting ground.  And I’m not talking about auto dealers alone.  There’s a world of opportunity waiting in the “for sale by owner” market as well.  

People sell their cars for a myriad of reasons and it isn’t always because the vehicle is giving them a hard time.  Couples divorce every day.  And what happens?  Many times they sell everything.  People die every day.  And what happens?  Pretty much the same thing; their heirs sell all their belongings and split the money.  People are fired ever day.  And what happens?  Well, you get the idea.

If you want to save big money on used cars keep in mind that it’s a game of patience.  If you are one of those guys that wants a new car and wants it NOW forget about used cars.  You’ll probably end up with a lemon.  But if you dedicate the time to look at many vehicles, take them for a test drive and bargain, bargain, bargain; you’ll probably end up with a great car and thousands of dollars to spare in your bank account!  

Happy hunting!

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