Used Cars vs. New Cars

When looking at a car, and deciding which one you will end up with a car loan on, you have many factors to decide on. You will want to look at whether a used is a better deal than a new, or vice versa. The difference between the sticker prices may not be what it really seems to be. Sometimes new cars end up being less than used ones.

When you are at the dealer, you need to think about to things – what is the car really worth and what are the differences in car loans that you could end up with. One of the biggest differences is the fact that used car loans have a higher interest rate than new car loans. Sometimes it might only be a percentage point of a difference, but over the life of five years, that adds up.

However, as soon as you drive that car off of the lot, it is now worth less than the auto loan papers you just signed. The car depreciates in value drastically, so if you buy new you eat the depreciation, but if you buy used, someone else does.

What about repairing your car? Used cars usually cost more to fix because the warranty has probably expired, so you are looking to have to make all repairs yourself. Also, sometimes the parts for older cars are more expensive because they are harder to find.

Your auto insurance agent is another place that is good to go for information. Call them before you consider a purchase, they will tell you what you are looking at premium wise. It can cost more to insure older cars because they cost more to fix. Plus, some car insurance companies will give you a discount if you buy a car that is less than three years old, so that is something else to consider.

Back to June 07 Archives