New vs. Used Car – 6 Benefits of Buying a Slightly Used Car for Cheap

used car dealershipOther than your home, your car might be the most expensive purchase that you ever make. I love nice cars, but I also try to manage my finances responsibly. As a result, I have reluctantly come to the conclusion that a new car is an unnecessary expense.

Sure, you can find overpriced used cars and bargain buys on brand-new vehicles, but it’s not just the sticker price that makes a new car a waste. The associated fees, subsequent costs, and losses in value (i.e. depreciation) add up to thousands of dollars over the first few years of new car ownership. This is especially bad news if you end up upside down on your car loan.

On the other hand, a “slightly-used” car – one that’s only around two years old and has under 30,000 miles on it – can help you keep cash in your pocket without sacrificing quality. Below are 6 benefits of buying a used car (in like-new condition) over a brand new one.

1. Used Cars: Lower Price Tag, Less Depreciation

Remember the old adage that a new car loses thousands of dollars in value the moment you drive it off the lot? It’s still true, and it’s why used cars are better bargains. It’s also why you can buy a 2007 Porsche for the price of a 2011 Honda. Someone bought the Porsche for $50,000 and now it can be yours for $25,000.

Think about the average price of buying new. Figures from CNW Marketing Research show that the average price of a new car in 2008 was $25,536 before taxes and fees. That car could now be worth around $13,000. Would you rather  be the original buyer, who lost $12,000 or $13,000, or the second buyer who saves that much?

If you buy a car that’s one or two years old, it’ll still depreciate, but you’ll lose less money less quickly. And you’ll avoid that big initial hit that the previous owner took.

2. Sales Tax on New Cars

Every ad for a new car glosses over the tax issue. Many state laws subject new cars to state sales tax, but not used cars. In Georgia, for example, if you buy a used car from a private seller, you won’t owe any sales tax at all. Comparatively, the sales tax that dealers have to add to the price of a new car can be thousands of dollars. Don’t underestimate the savings, and research your state’s laws on the subject before you make a decision.

3. Falling Registration Fees

In most states, the rate of your annual registration fee is based on your car’s value and its model year. In Colorado, for example, registration fees fall dramatically during the first few years after a car is manufactured. The rate is highest in the first three years, and then levels off after five years. If your state has similar rules, you can save about a thousand dollars by avoiding the new car registration fees and buying a car that’s at least three, or better yet five, years old.

4. Useless Extras on New Cars, Cheaper Features on Used Cars

The oldest trick in the dealer’s book is to install additional dealer options. They’ll add a pinstripe, a protective film, or the immortal “anti-rust coating,” but new car buyers who want these add-ons can easily get them for a much lower cost from an after-market installer. Regardless, these changes don’t add a dime to the car’s resale value anyway. When you buy used, you may not get every feature you want, but you certainly won’t end up paying extra for things you didn’t ask for.

On the other hand, when you search for specific features that you do want in a used car, like a sunroof or navigation system, you’ll pay far less than the original owner did. Instead of needing to decline a dealer’s expensive navigation package with fees and surcharges, you’ll be able to afford the built-in features.

5. Dealers and Their Crazy Fees

As if paying $500 for rust-proofing isn’t bad enough, dealers hit new car buyers with shipping charges, destination fees, and “dealer preparation.” These fees feel even worse because unlike the unnecessary, unwanted pinstripe, owners have absolutely nothing to show for these charges except a lower bank account. When you buy a used car, you’ll have to visit the DMV to pay tag, title, and registration fees, but you won’t deal with any of the nonsense that dealers add.

Instead of caving to dealer fees and buying new, you take on a more powerful role when you’re in the market to buy a used car. You have a much better case for negotiating when you can tell a private seller you might just walk away from their old car. If they bought new, they’re not going to know everything you know about the benefits of buying used. They’ll be eager to keep you at the negotiating table.

6. Condition

Nowadays, cars are built to last for at least 100,000 miles, so you don’t have to sacrifice reliability and overall condition just to get a good deal on a used car. You can get a used (or “pre-owned”) car that’s scratch-free and in excellent mechanical shape. In fact, if you know anything about cars, you should be able to find one that is in “like new” condition.

However, if you’re not comfortable under the hood, you can rely on the certification programs and extended long-term car warranties that most car makers offer. When you buy a used car at a manufacturer’s dealership, you’ll know that they’ve inspected the vehicle and that it meets the strict requirements for certification. The biggest benefit you might find is the manufacturer’s warranty for used cars. Toyota, for example, offers a seven-year 100,000-mile warranty on certified used vehicles. This kind of peace of mind is crucial when buying a used car.

Final Word

New cars smell great, but how much is that scent really worth? By looking beyond the sale price and considering the total cost of buying new, you can get a better idea of how much you are really going to pay for the privilege of being the first owner of your next car. You might have to spend a little extra time on research, but from the initial price to the long-term costs, you’ll thank yourself for buying a slightly-used car that’s in good condition.

What are the pros and cons that you see to buying new or buying used? Share your success stories or nightmare deals in the comments below.

  • Small Footprints

    Absolutely! Not only is it good for the reasons you mentioned … it’s also good for the planet (as long as one isn’t buying a gas guzzling, polluting used car).

  • Cars4Charities

    Instead of trading in or selling your old car, please donate car to charity. You can select from over 1,000 very fine charities to donate your car to at Cars4Charities. Cars4Charities picks up car donations nationwide and lets you donate a car that needs work or doesn’t run. When you donate car, you get a tax deduction and you car donation helps a good cause.

  • Chris B

    @Cars4Charities – thank you for the comment. This is a very good idea for those who are looking to get rid of a car before buying used.

    @Small Footprints – great point. Although it is not always easy, thinking of the environment when buying a car is very important.

  • Kate

    My family has always bought used cars and never had a problem until the recent Jetta I bought, I did not get certified used and recommend that if you are going to buy something used. It is also a good idea to have your personal mechanic look at the car before you buy, it can cost about $80 but at least you are not just taking the dealer’s word for the certification.

  • Zach @College for 10k

    I bought a 1998 Honda Civic with 212k miles on it.

    It’s up to 229k miles and it still runs smooth! I’m running it till it dies!!

  • David/Yourfinances101

    I had always heard that this was the way to go–I even heard today that you can get even better deals on cars that were previously leased by someone.

    Worth checking out

  • Ken

    I’ve bought my last 2 vehicles regrets whatsoever…we avoided the depreciatiion od a new car and got much lower payments.

  • Robert

    You miss the initial hit and get a fairly new car. Not a bad deal.

  • Wise Finish has some good articles on how not to get ripped off when buying a used car. I also just put an article on my site about Used Car sites that offer RSS search feeds to let you know when the car you want is posted – to get a good deal you really need to stay on top of what is out there!

  • Louisville KY Used Cars

    As soon as you drive your new car off the dealership lot, its value will drop immediately within the first few years of ownership. It’s been said that you lose at least 30% of your car’s value in the first 2 years of owning it. I recommend buying a used car!

  • Doable Finance

    What’s a new car look like? Does it have horns instead of 2 headlights. I will always buy a used car but no older than 4 years 5 years at the most. Older than that will force me to get acquainted with the mechanic. But if I could find more than 5 years old and looks and runs great, then I would be all for it. That happens less frequently with the way people drive and maintain cars so badly.

  • kh

    I’ll never buy a used car again. I have a post coming about it soon, but I don’t subscribe to the PF bloggers mantra that a new car is always a bad thing.

  • Tyra Shortino

    The option whether to buy a used or new car mainly depends on the person’s budget. But if a used car is as good as a new one, then I don’t see any reason to refuse that deal. What matters most is the car’s holistic condition and the value for money.

  • Rashad Kreidieh

    I agree 100% ..though high demand on used cars may raise the prices and get the difference Vs new car less than 30% for the first 2~3 years ..

  • Clint Moore

    These tips fall into one category: practicality. A used car is a cost-effective purchase, as it saves your money from depreciation. However, a used car doesn’t always mean instant savings. You must consider the history of the car to make sure that it’s still in good running condition. Plus, check out the car’s engine. Reminder: never buy a car without test-driving it first.

  • Jamie Chen

    I have never purchased a used car but did buy 3 new Honda Civics between 2004 and 2014. I kept the earlier ones for only about three years and 90,000 miles or so. However, knowing the Honda reputation for longevity, I have retained the two most recent, a 2007 sedan (131,000 miles) and a 2010 coupe (173,000 miles) to save money and to see what the ownership experience would be like with a high-mileage car.

    So, instead of buying used, I have kept my own two old cars since I know their history and how they have been driven and maintained. This has enabled me to avoid the uncertainties inherent in the purchase of a used car and it has saved me a great deal of expense over the last ten years or so, although there have been some significant repair costs. Modern cars are much more durable than their earlier counterparts, and my experience with these two cars has been favorable. They are also very cheap to insure – I have found $25/month rates from 4AutoInsuranceQuote (Insurance Panda is also cheap)… Another consideration is that, in recent years, low-mileage used cars have been relatively expensive compared to new cars. In terms of dollars per mile of transportation, older cars are probably a better value.

  • Boronda McCorkle

    Hey I know this post is old but holy cow, I laughed so hard. :x lolol… thanks for that.

  • scarhill

    The fallacy of this article is a person cannot buy a slightly used vehicle on the cheap. In many cases a late model used vehicle can be almost as much and sometimes more than a new model.
    All vehicles depreciate, new and used. They all depreciate up to twenty percent of the current value each year.
    The absolute best method to buy new is to buy at the right time. A time when inventory is high, demand is low, and OEM incentives are available. Buy at least ten percent under MSRP and finance using the OEM subsidized rate, like .9 percent or zero percent.
    Seriously, why would anyone want a seven year old vehicle just because the price is lower than it was when it was new. It is seven years old and has all the problems of a seven year vehicle, like repairs and breakdowns. A seven year old Porsche is in no way the same as a new Porsche.

  • Slim

    At face value, it would seem logical for a used vehicle to cost less than a new one. A repeated quote is that a vehicle driven off the dealership lot brand new supposedly drops significantly in value. No one defines the word significant, but like me, I am sure most people think it is around $5,000 to $10,000.
    Then take into consideration the age, mileage, damage, etc and that should reduce the value even more.
    With that alleged drop in value, a buyer should get a used vehicle at a real bargain. Yet, I have searched used cars in person and online, dealers and private sellers are charging almost the same for a used vehicle as a new one—in many cases it is only a $2,000 difference between a 2012 car (with high mileage and scratches) and a 2015 new car on the lot.
    There are other factors to consider about a new car benefit over a used one: a bumper-to-bumper warranty for starters.
    I once kept a car for 13 years, because experts claimed it is cheaper than buying a new car. Sure, I did not have a monthly car payment on a new vehicle, but my older car became a money pit with repairs needed once a month –water pump, fuel pump, air conditioner, transmission, power window breakdowns, etc. plus labor.

    When I traded it in, the dealer would only give me $1,000. Yet, I see 2003, cars with 157,000 miles selling for $8,000.

    In general, a buyer would need to weigh all factors against a new vehicle before making a purchase.

    • Amy Livingston

      I absolutely agree. When we went shopping for our last car, we started out looking at used cars because I assumed they would cost less. But for the kind of car we wanted (a small, fuel-efficient car with a stick shift), it was actually cheaper to buy new. The few acceptable used cars we found cost nearly as much as a new one, and they didn’t have the latest safety features. So we ended up buying a new car that we have now had for four years and plan to keep for another 11 at least.

      It makes no sense to assume that a used car will always be cheaper than a new one. Start by looking at *actual* cars in your area, then do the math.

    • jim patterson

      The warranty on a new car is massively overrated. With new cars the quality is so high now that the warranties rarely get used

  • EasyloansIndia

    Thank you for the useful information you are providing to us.Really it is very useful and worthy to me.

  • Socal Gal

    This logic really depends on the car. My husband bought a new Toyota Tacoma because used ones with 20-30k miles were only a couple thousand less (because of such high demand). He got the Toyota rebates and warranty for buying new and keeps his vehicles 8-10 years, so it was a no brainer to go new.
    My best friend bought a new Jeep Wrangler for this same reason… didn’t pay to buy used. But in luxury vehicles, it usually pays to buy used.

  • Jerry Jamis

    It’s nice to ride in a car that no one has ever owned before, with that new car smell and feel. But, that scent, brand new upholstery without a single flaw, and single digit mileage doesn’t come cheap. The price gap between new and used vehicles was around $20,000 as of earlier this year.

  • Jayshree Makadia

    Yes, new car is an unnecessary expense, that’s the reason the reason I also choose to buy used car and got it evaluated from the professionals like IBB, now I am enjoying my drive.

  • Govind Goswami

    there are lots of advantage when you buys second hand or used car such as lower price, declining depreciation, my friend got car insurance and tax benefit from Mahindra First Choice.

  • Corsia Logistics

    In most cases you have to go to a dealership and buy a car. So, just as you pay your sales tax you will have to pay dealership’s fees. And this is not going to change even with all those online platforms / online dealrships where you can buy a car. As in any industry there is always going to be a broker or a management company that adds its fees. So, this is unavoidable.

    One thing that is great about MOST new cars is their fuel efficiency, if it is an EV even better. Yet, the time when we all will be buying EVs is far away, unfortunately. Something else to consider, when thinking of new vs. old, is insurance cost and maintenance.

    Corsia Logistics

  • Shawn Wyss

    All this talk about a non-cash expense (depreciation). If you buy a new car and drive it until the wheels fall off is the best way to go. You are the only one responsible for maintenance and will get the best per mile cost out of a car that you keep for the long haul. Besides, this whole thing of a car losing 20% of its value is not the case these days. For example, I found a 2014 Honda Ridgeline for $34,000, with 80,000 miles one it, when I could buy a brand new one for 38,000. It truly depends on the make and model of the car you are looking at. Just my two cents.