More than twice as many car buyers opt for a used vehicle over a new one, but is that the right choice for you? While lower used-car prices are a key factor for most consumers, there’s more to consider as you come to a decision.
Pros of buying used
Used-car buyers can take advantage of rapid depreciation in the value of new cars to the tune of 20 percent in the first year and about 40 percent after three years. Lower average prices for preowned vehicles also provide a better chance of being able to pay for your purchase in cash, or making a larger down payment. You might get a higher-spec model than you could afford new, too.
Smaller loan amount
With lower prices, it’s no surprise that used cars have smaller average loan amounts than new ones. Depending on the terms of the loan, that could translate into lower monthly payments and a smaller total interest charge.
Used-car loans are usually shorter than those for new cars, enabling borrowers to pay off their vehicles sooner.
Cons of buying used
Despite improvements in quality, it stands to reason that preowned cars generally will be less reliable than brand new models. The older the car, the more money you may have to spend on repairs, especially if it is no longer covered by the automaker’s warranty. The driving behavior of previous owners plays a role in reliability, too, which is why a vehicle history report is important. These reports contain a record of accidents, service history and the car’s title status, which includes notations for salvage, rebuilt, flood or lemon-law titles.
Private-party purchase may not come with warranty
Unless a vehicle is still under manufacturer warranty, buying from a private party means you could miss out on protection against mechanical and electrical faults. Dealerships, on the other hand, might offer their own warranties on used vehicles.
Choice may be more limited
New-car buyers can typically select the features, color and any accessories they want for a particular model. Used-car buyers may need to be more flexible, or shop around, when it comes to these preferences.
Rates may be higher
Interest rates tend to be higher for used cars. Partly, this is because of manufacturer incentives on new vehicles, but also because of the greater risk involved in used-car financing. Consumers with lower credit scores will often buy used, for example. Another reason is that used-car values are less predictable, which makes it harder for the lender to know how much money it can recoup if it needs to repossess and resell the vehicle.
Your car-buying decision
These pros and cons should prove valuable as you weigh the options on your next vehicle, but don’t stop there. Consider thoroughly researching what models meet your wants and needs, and budget what you may be able to afford. When you’re ready for financing, take a few minutes to apply with RoadLoans and get a decision in seconds. We accept applications from consumers across the credit spectrum and, if approved, we’ll connect you with a dealership nearby. As a trusted lender, we only work with dealers that are able to show our customers select, high-quality vehicles, so you can buy with confidence.