While it can be tempting to buy a new car when it comes time to replace your current ride, it can also be one of the worst financial mistakes that you can make. Buying a new car means that you’re paying too much for something that you can find a lot cheaper. In the short term, this means that you can have a lower monthly payment and be done paying your car off sooner than you would have been if you had bought a new car. Long term, you’ll make more money when it’s time to trade in your car, and have the resources to buy your next car with cash.
New cars come with no mileage and a good warranty, but a late model used car will typically come with low mileage and in many cases an even better warranty. In fact, cars that are just one to three years old typically cost about 70 to 80 percent of what a new car of the same make and model would cost. In addition, a used car will usually come with a better warranty than a new one.
The cost difference between a new and used car is fairly significant when you consider that most late model used cars have the same features of their new counterparts. In many cases, the mileage on these cars is less than 50,000. At many dealerships, it’s even possible to find used cars that have less than 10,000 miles on them, yet they have a big discount on the price. In the case of these very low mileage cars, the dealership certified used car warranty will extend beyond the original factory warranty. This means that by buying a used car, you’ll save money on the purchase and you won’t have to worry about maintenance for the next several years.
In addition to saving money every month on your car payment, you’ll also see a lot more money back when it comes time to sell your car. By buying a late model used car and taking good care of it (a task that will be a lot easier by saving some of the money from your lower car payment) you’ll be able to sell the car at around the same time you would have sold your new car. Because you paid so much less for it when you bought it, you’ll make more money back on the sale.
Because buying used means that you have a lower payment every month, many people are able to get their car paid off quickly. That means that when it is time to sell, they own the car free and clear. At a dealership, this means being able to negotiate the value of the car, not how much the dealership will give you towards paying off your loan.