About · Press · Contact · Write For Us · Top Personal Finance Blogs
Featured In:

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

By Jason Steele

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.

(photo credit: Shutterstock)

Jason Steele
Jason has been writing about personal finance, travel, and other topics on blogs across the Internet. When he is not writing, he has a career in information technology and is also a commercially rated pilot. Jason lives in Colorado with his wife and young daughter where he enjoys parenting, cycling, and other extreme sports.

Related Articles

  • http://reducefootprints.blogspot.com 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).

  • http://www.cars4charities.org/ 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.

  • http://moneycrashers.com 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.

  • http://www.maketodaypayday.co.uk 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!!

  • http://www.yourfinances101.com/blog 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

  • http://www.moneymakingsense.com Ken

    I’ve bought my last 2 vehicles used..no regrets whatsoever…we avoided the depreciatiion od a new car and got much lower payments.

  • http://www.insweb.com Robert

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

  • http://wisefinish.com Wise Finish

    Edmunds.com 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!

  • http://www.samswope.com 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!

  • http://doablefinance.com/ 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.

  • http://frugalforties.wordpress.com 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.

  • Pingback: Shoppers should consider slightly used cars()

  • http://www.rayskillmanchevrolet.com/ 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.

  • http://www.facebook.com/rkreidieh 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 ..

  • http://www.autoparkburlington.com/dealership.html 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.

  • http://www.4autoinsurancequote.com/ 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.

The content on MoneyCrashers.com is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers. We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.

Advertiser Disclosure: The credit card offers that appear on this site are from credit card companies from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, U.S. Bank, and Barclaycard, among others.
Close