More than twice as many car buyers opt for a used vehicle over a new one, but is that the right choice for you? While lower used-car prices are a key factor for most consumers, there’s more to consider as you come to a decision.
The first step is to know the risks involved in buying a used car.
With so many choices, you may feel overwhelmed by your options, but it doesn’t have to be that way. Before you start shopping for your next pre-owned vehicle, read through this list of what you need to know about buying used cars, as well as some advice on how best to find the perfect one for you.
Pros of buying used cars
- Better value: New cars lose significant value once they’re driven off dealer lots because manufacturers build in larger profit margins when building new vehicles. On the other hand, most late-model used cars have already taken their biggest depreciation hit and can cost thousands less than a new car.
- Less hassle: There are no hassles associated with buying new cars, such as negotiating a price or getting a trade-in offer on your old vehicle. And in most cases, there’s no need to wait for the paint to dry at a dealership—a used car will have been pre-approved and be ready for you to take home immediately.
- More choices: With so many late-model used cars available, you’ll find more options when shopping—including makes and models that may not be sold new anymore. In addition, you have the chance to drive off in a multi-year-old car with low mileage under its belt.
- Lower Loan Amount: With a lower purchase price, you can opt for a used car with a smaller loan amount that allows you to pay off the vehicle within its useful life.
- Lower Insurance Premiums: With good credit, you may qualify for a lower monthly premium with an insurance company.
Cons of Buying Used Cars
- No warranty: Buying a used car means you have no warranty protection, which can make buying a vehicle with major problems through an auction or from a private party riskier. Keep in mind that if the seller has a warranty on the car, the policy will transfer to you as soon as you drive it off the lot—so opt for one with a solid service record.
- Hidden costs: The financial risks of buying used cars go beyond just losing money on depreciation. You’ll need to consider things like taxes and fees, as well as higher insurance premiums since some insurers charge more based on the age of your car. In addition, if repairs are needed down the road, they could cost thousands of dollars.
- No trade-in value: Most consumers buy used cars with the intent of getting a trade-in value on their current car. If you don’t have a car to trade in, this won’t be an option.
- Less dealer support: When buying a new car, most dealers offer incentives and programs to make buying your next vehicle an easy and seamless process. While many used cars will still offer a warranty, this can vary depending on where you buy from.
What to do when buying used cars
Buying a used car doesn’t have to be risky, but it takes some basic precautions. Here are some things you can do to lessen the inherent risks of buying pre-owned:
- Get an inspection: An expert mechanic should inspect any used vehicle you’re considering before making a purchase. An inspection will reveal any potential damage, including rust, faulty wiring, or a faulty engine—as well as whether it’s been in an accident.
- Consider a warranty: If you know the car has major problems that would be expensive to repair, consider buying a used car with an extended warranty to protect your investment and minimize costs if repairs are needed.
- Negotiate before you inspect: It’s always wise to negotiate the price of a car before you have it inspected by an outside party. If the seller won’t budge on the asking price, you may want to keep shopping—or look for cars with less expensive issues or no problems at all.
- Know your state car history: Every car has a history, but some states are more thorough than others in keeping records of accidents, title transfers, and even thefts. While this won’t necessarily affect the value of the vehicle, it can give you peace of mind.
Conclusion
Buying used cars can help you get more value for your dollar—and even fulfill dreams of owning a luxury vehicle once out of reach. However, you’ll need to weigh the pros and cons before making the purchase.
For example, buying used cars can save you money on depreciation costs but it also means losing the benefits of having a factory warranty. And while buying used cars can help you save money on taxes and insurance, these costs may be higher than what you’re paying now.
Finally, if you’re not sure whether to buy a new or used car—consider buying both! Compare different makes and models that fit your needs and budget. You might find that with the high level of competition in the car industry, you can find new cars with great used-car prices.