The thought of purchasing a brand-new car that no one has ever driven before is undeniably appealing, and that new car smell is always enticing. However, new cars don't have as much of an advantage over used cars as you would think. Here are three reasons why buying a used vehicle is a far better investment than getting one that's brand-spanking new.
Depreciation Isn't as Serious
The top reason a used car surpasses a new one is the depreciation in value isn't as severe. It's a well-known fact that cars lose value the moment they're driven off the lot. The decline in value is much more severe with new cars, though, than it is with used ones. According to Edmunds—an automobile review website—new cars lose up to 31 percent of their value within the first two years and a total of 60 percent after 5 years.
This is problematic for a couple of reasons. Since most people finance their cars, they generally end up being underwater on their loans within a short period of time, owing more on the vehicles than they're worth. Second, auto insurance companies will only give policyholders the market value of the vehicle if it's totaled in an accident. Unless the car owner has gap insurance that will make up the difference between the loan amount and the depreciated car value, he or she will still owe any balance not covered by the insurance payout.
With a used car, the majority of the depreciation has already taken place. Though the vehicle will still decline in value, it will do so at a much slower rate, helping you to avoid the gap trap most new car buyers find themselves in the first few years of ownership.
Same Features, at a Lower Price
The other benefit to buying a used vehicle is that you still get the same great features available in a new vehicle, just at a lower price. Manufacturers like to tout that their new models are vastly superior to their old ones, but in many cases there isn't a big difference between a model that came out a few months ago versus an older one that came out a few years prior and was just traded in by someone looking to upgrade.
For instance, the 2016 Audi Q3 model was primarily a cosmetic upgrade from the 2015 version, though the newer model did include come with parking sensors and a backup camera standard. The newer model was also priced $1,200 more than the older one, starting at $34,625 (both new). However, these days you can get a used 2015 model (or even a used 2016 model with the same exact features) for much less—to find out what prices are like in your area, contact your local dealership for a quote.
Sometimes the only difference between the models is the number of miles the used vehicle was driven. But that is often a small price to pay to be able to save several thousand dollars on the car you want.
Secret Tax Advantage
A third benefit used cars have over new ones is that some states don't charge sales tax on used cars, which can save you thousands of dollars. Even if your state does charge tax on the used car, you'll pay less since used vehicles tend to be less expensive than new ones.
Additionally, used older-model cars can often be registered at cheaper rates than newer-year models. In Montana, for instance, it costs $217 to register vehicles up to four years old. However, the registration price drops to $87 for cars aged five to ten years old.
There are many other reasons why a used car makes a better purchase than a new one. Contact a local auto dealer for more information about these issues or for help selecting the right vehicle for you.