Why Purchasing a Used Car is a Smart Choice for Budget-Conscious Buyers
Posted Friday, Jun 21, 2024
The world is forever changing. However, our relationship with cars stays the same. Why?
Well, there are a couple of reasons. First, they offer us freedom. Convenience is a luxury that isn’t easily available. Those who can afford a car know this because they are not waiting in the cold or heat at the bus stand. That feeling of being independent is unbeatable. Alas, buying a car is no walk in the park.
It’s a big decision! It can financially drain you! If you buy the wrong car, there’s no going back!
For budget-conscious buyers, a question arises: Buy used or new?
It’s something all car buyers struggle with, and for good reason. A new car offers many benefits, such as:
Warranty Coverage
Low Maintenance Costs
Better Financing Rates
Resale Value
Latest Technology
Safety Features
Fuel Efficiency
Mechanical Reliability
High Performance
Yes, the shiny exterior of a new car might blind you. However, buying a used car has its own allure. When you are on a budget, the latter seems more achievable.
Following are a couple of reasons why a used car can be a better option for budget-conscious buyers:
Slower Value Depreciation
Depreciation should always be considered when buying a new car. Cars lose market value as soon as they hit the road. Since there is less demand for them, they join the ranks of used cars. In this sense, new car owners are most negatively impacted.
A new car immediately loses value once you purchase it. Used autos, however, are typically past that point. They lose value more gradually than brand-new cars. This is why choosing a used car may be a better choice if you want to protect your money.
It is important to remember that each vehicle has a different market depreciation rate. Hot-selling automobiles usually hold their value longer. Because they depreciate more quickly, less well-liked models are riskier investments for consumers on a tight budget.
Example: Depreciation of a New Car
Year 1: Immediate Depreciation
Initial Purchase Price: $30,000
Depreciation Rate: 20% - 30%
Value After 1 Year (Assuming 25% depreciation)
$30,000 − ($30,000×0.25) = $30,000
$30,000 − $7,500=$22,500
In year two, the depreciation rate is 15%, year three is 10%, year four is 10%, and year five is 8%.
Lower Maintenance Costs
Nobody likes sending their car to the mechanic. Auto repair shops represent a money pit. We are not that mechanics are deceiving. It’s just that while inspecting one problem, another makes an appearance and before you know it, you are paying hundreds of dollars for repairs.
So, how does this apply to a used car? Since a used car is old, doesn’t that mean it will have more repairs?
It might or might not. A way to beat the system?
A Certified Pre-Owned (CPO) vehicle!
A CPO vehicle has a certificate that states it has been rigorously tested. It tells the buyer that the car has no fault in it. This gives you the peace of mind that after a week, you won’t be sending your car to a mechanic for repairs.
Lower Sales Tax
Selecting a CPO vehicle has several appealing benefits, one of which happens to potential savings on the sales tax. The price of the car in each US state tends to influence this tax. The sales tax rate in Omaha is 7% for new automobile purchases and varies by location for used cars. Let’s apply to this a car price:
- A new car costs $40,000
- Based on this number, the sales tax on it will be 2,800
- Depending on your area of residence, the tax you might pay will range between $1,450 and $1,900
Buying a secondhand car can save more money in certain jurisdictions because of reduced rates or exemptions from taxes. You can expect a $20,000 exemption if you are a first-time buyer. However, this benefit is available in some states.
You must confirm the sales tax regulations in your state. Therefore, conduct thorough research before making a purchase. Remember to factor in additional expenditures, such as maintenance or registration fees, before you swipe your card.
No Customization Needed
Are you familiar with that meme of bugs flying out from the wallet? Don’t bring yourself down to such a situation by buying a new car because it has all the latest gadgets. We get it – technology is cool, but so is living in your house and not declaring yourself bankrupt. These are just some possibilities if you are unable to make the monthly payment after getting a loan from a bank.
On average, customizations cost $500 to $1,000. Depending on the type of part needed, the cost might go higher.
When it comes to used cars, you might get lucky and find a car that is already customized. Yes, they are rare but a little research will get you what you are looking for. It’s not necessary to settle while shopping used; you can locate high-quality customized solutions without going over your budget.
Lower Insurance Costs
Buying insurance sometimes feels like a financial burden. A myth about used cars that most people believe is that getting insurance for it is costly. This is not true!
Choosing secondhand cars can spare you from this inconvenience. Keep in mind that a used car has already lost its value. This means that repairs will not be costly. The premiums drop to reasonable levels when market demand and value decrease.
Depending on your preferences, you can use the extra funds to save for other needs. To help you make an informed decision, you can also compare insurance offers from different local suppliers.
Speak with a local dealership about insurance alternatives. No one is better than seasoned sellers to advise you on what things to avoid when applying for used car financing.
Some buyers buy the first used car they come across. One of the best things about used cars is that you are bound to find the same models in different conditions at different dealerships. So, don’t limit yourself to one. Compare at least five offers, and then make your decision based on who offers more bang for your buck. Auto World – Omaha offers quality used cars and flexible financing options. Let our trusted dealers guide you in finding your dream car. For more information, call +1 402-504-1804.
