Smart Way to Save: Buy a Used Car With the Help of Finance
Posted Monday, Sep 25, 2023
It’s no secret that buying a brand-new car not only disrupts your finances but could also hit your credit score. Some financial gurus go so far as to suggest that buying a new car could be one of the worst financial decisions anyone could ever make. So why are used cars a better choice in almost all cases?
The answer boils down to an economic phenomenon known as depreciation. The moment you sign on the dotted line and bring your brand new car home, its value will plummet down to as much as 20% to 30%. By the end of five years, it could lose as much as 60% of its value.
It becomes a problem when you borrow money to buy a car that immediately goes down in value. The good news is that you can get a high-quality, shiny-looking used car without breaking the bank or disrupting your finances.
Now that we have established that a new car may not be the best way to reach your financial goals, It is time to discuss why a used car is so much better.
Low Price
Depending on the used car dealership, you could get the car at extremely affordable price compared with the new car. This lets you save a significant chunk of change up front. A used car can lose up to 15% to 50% of its value in just five years, making it relatively affordable.
The best part is that you can avoid this initial depreciation hit by buying a used car and reap the benefits. The lower purchase price of the used car lets you spend the money on other expenses or contribute more to your savings account.
Reduced Depreciation - Why it is Important
As discussed earlier, a new car will lose its value very quickly. However, the depreciation rate for a used car is much slower, allowing the asset to have a more consistent value over time. If you were to consider the used car from the perspective of an investor, it can be more favorable and beneficial.
Lower Cost of Financing
Most motorists choose to finance the purchase of their used vehicle. Sure, you could buy your car by paying for it in cash, but you may have to break into your emergency savings account. This is not a good position to be in and could disrupt your financial goals in the long run.
Financing a new car is not a viable option either because the monthly premiums will be relatively high. However, by financing a used car, you will not have to use your emergency savings account or apply for a large amount for debt.
This combination of reduced interest rates and lower loan amounts results in lower monthly payments and less amount paid in interest. Before you know it, you will have paid for the used car in full without affecting your daily, weekly, and monthly budget.
Warranties
You may be able to secure extended warranties and other types of protection plans to get peace of mind that the used car is in good condition. With a warranty in place, you willo nt have to worry about out-of-pocket expenses to repair the used car. In some cases, you might even be able to take advantage of the manufacturer original warranty.
But make sure to check in with the dealership to see if the car is covered under warranty.
Lower Insurance Costs
One of the main advantages of buying a used car is the lower insurance premium. This is because insurance costs are based on the value of the car, and since used cars have a lower purchase price, the insurance premiums would be relatively cheaper. This can save you a considerable amount of money every month.
Moreover, used cars are both cheaper to repair and replace. You can find parts easily or at a cheaper price. With that said, your premium is mostly influenced by the likelihood of you getting into an accident.
Flexible Loan Options
Many used car dealerships offer flexible loan options to buyers even if they have less-than-optimal credit scores. The dealerships often have a network of lenders that offer favorable interest rates to buyers. Dealerships offer this service to stifle the competition and attract more buyers.
This creates a win-win scenario for everyone. The buyer gets access to a reliable used car at favorable loan terms, and the dealership manages to sell the car at a profit. Note that the loan terms are often competitive compared with traditional lending institutions such as banks and other institutions. It holds even if the buyer credit score is not the most ideal.
Used Cars Are Extremely Durable
Thanks to recent advances in manufacturing standards, many used cars are as durable as new cars. As long as the used car undergoes routine maintenance and is driven responsibly, it should last you a long time. Many used cars offer the same cutting-edge features as brand-new cars, including safety standards to prevent the likelihood of accidents on the road.
A well-maintained used car can reach 300,000 miles or more in total. It is, however, important to choose a high-quality make and model. If you’re not sure where to start, you can consult with the experts at Cars R Us Auto Group to learn more about longevity.
Wrapping Up
So there you have it: a detailed look at why buying a used car can help you reach your financial goals. The upfront cash you need to fork out is considerably lower for a used car when compared with a new car. And if you choose to finance the car, the monthly interest payments will be lower.
Every aspect of the used car, from insurance payments to routine maintenance, is affordable. This allows you to put more money toward your financial goals and savings accounts.
Ready to buy a used car that is both affordable and durable? Click here to get in touch with the professionals at Cars R Us Auto Group.
