More than twice as many car buyers opt for a used vehicle over a new one, but is that the best choice for you? While lower used-car prices are a key factor for many consumers, there’s more to consider as you come to a decision.
Advantages of buying used
Rapid depreciation, with a new car losing 20 percent of its value in the first year and about 40 percent after year three, enables used-car buyers to take advantage. Lower prices also provide a better chance of being able to pay cash for the purchase, or make a more sizeable down payment, and get a higher-spec car than you could afford new.
Smaller loan amount
Used vehicles bought with financing have smaller average loan amounts. Depending on the terms of the loan, that presents less of a debt burden and could bring other advantages such as a smaller interest charge.
Continual improvements in quality and reliability across the auto industry mean there are many great used cars on the market, and more of them are now built to cruise past 200,000 miles. Customers of online lender RoadLoans are able to connect with nearby dealerships and confidently shop for high-quality vehicles meeting our standards for age, mileage and financing.
Used-auto loans are usually shorter than those for new cars, enabling borrowers to pay off their vehicles sooner.
Disadvantages of buying used
Despite improvements in quality and longevity, used cars are still generally less reliable than brand new, zero-owner vehicles, which could lead to costly repairs ahead. There’s also the possibility of buying a lemon with issues not covered by a warranty, or even taking home a car with flood damage. A vehicle history report will tell you a lot about what’s taken place, including the vehicle’s title status, service history and any accidents along the way, and you may be able to get additional service records and information from the seller. Beyond that, you might not know how previous owners really cared for the vehicle or how hard they drove it.
Private-party purchase may not come with a warranty
Unless a vehicle is still covered by the manufacturer’s warranty, buying from a private party means you could miss out on protection against mechanical and electrical faults. Dealerships, on the other hand, may offer their own warranties on used vehicles.
Higher interest rates
One way lenders will often balance the risk of lending on a used-car purchase is to charge higher APRs.
There’s likely less choice if you’re after a particular model with particular features and a certain color. And that might mean you have to shop around, cast the net wider and look at cars across or out of the state to find the right one at the right price.
Knowing the pros and cons of buying a used car is a good start as you weigh the options on your next vehicle, but you’ll want to do some thorough research into the models you like as well as budget what you can afford. Look at expert and consumer reviews of vehicles to see how they’re rated, and use auto loan calculators to understand what may work for your finances. If you decide a used car is the best option, consider a test drive in different conditions, getting a vehicle history report and arranging an inspection by a mechanic to ensure you end up with a car you’ll be happy to own.