Often people think that a used car purchase is for someone who cannot afford a new one. You may be thinking this as well, but this type of thinking can be a drain on your personal finances. If you have the money for a down payment on a new car, you should consider looking at a used car instead. The following are a few good reasons that make a used car purchase a smart choice for your personal finances.
You will likely save money on financing
If you plan on making car payments, you will be financing the car for a shorter period of time buying a used car because lenders will usually not loan money on a used car for four or five years as they do for a new car. But this works to your advantage. The interest you save by paying off the car sooner can be substantial.
Your car will become an asset more quickly
From the moment you drive your new car off the lot, it will be worth less than you paid for it. When you finance a new car, it will take many months before the car is worth more than the balance on your loan. Although some of this will be due to a portion of your payment going to interest, a large component of it will be depreciation. Used cars don't depreciate as much, so it will take less time until your car is worth more than you owe on it.
You may be able to avoid financing
Many people make car payments on a new car, but if you can save up the money, you may be able to purchase a used car for cash. Not having a car payment allows you more freedom in your personal finances.
Insurance will cost less
Of course, this depends upon the make and model of the cars you are thinking about buying. But given comparable models, the used car will cost less to insure than a brand new car. In addition, your annual license and registration fees will be lower.
Buying a used car does not mean you are buying an old clunker. There are many used cars found at dealerships that are only a few years old and in very good condition. Many people get tired of their car after paying it off and decide to sell it or trade it in, so they can have a new car. Many of these used cars represent good value for your money. Before you commit yourself to the idea of a new car, you should take a long look at what is available in the used car market for the models you are interested in.