Buying a used car is a great way to save money. Buy 2 or 3 years old and you’ll avoid the big hit of depreciation, plus the car will still be reliable and under a warranty. Keep in mind though that once the warranty is up you should have a plan to cover any repairs that arise.
For those who buy new to be covered under warranty for the entire length of their ownership, my argument is to buy used and the savings would allow you to make any repairs and still have a lower cost of ownership over 2-5 years.
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This week, I paid almost $3,000 to get a very long list of necessary repairs and scheduled maintenance done to my car. While obviously I would have preferred to not have any issues with my car, I was able to help my car last longer by getting everything completed and still felt like I came out ahead.
First off, when I bought my car a couple years ago I paid about $10,000 less than if I had bought it new. In the past two years I haven’t had to fix much, and as a bonus, the first year it was still covered under warranty.
Secondly, you should plan to use the savings from the purchase to pay for future repairs. You could take the available money and put it into an emergency fund, which is a smart move as it could cover car repairs, insurance deductibles, or any other emergency that arises. If you are unable to save money towards an emergency fund, at least make sure you have a credit line available to you for large, unexpected expenses.
So while I paid $3,000 for all the parts and maintenance, my total cost of ownership is still better off by $6,000-$7,000 and the large bill did not create a financial catastrophe.
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We purchased a used Honda Odyssey about a year ago and what we discovered is that 2-3 year old vehicles are very expensive and hard to come by now. The reason seems to be that the most common lease type has now become the 4 year lease, causing a glut of 4 year old vehicles. In our 2-3 months of searching, we saw only 1 Odyssey that was 2 years old, and it was almost double the price of the 4 year old one that we bought. Even the few 3 year old ones were substantially more, a far higher cost than could reasonably be justified by the additional warranty.
Granted, we were looking only at minivans, and within a month we had settled on the Odyssey, but still, I think the point applies. I’m not sure that 2-3 year old vehicles are still *always* the best choice for used, given the longer lease terms that are becoming common.
Lesley,
With 4 year old vehicles being half the price of 2 year old vehicles, I would choose the 4 year old as well… all the more room to afford any repairs that come up!
That’s why I recently bought a new car. I had a used car before and had to spend a lot on repairs, adding up over time. A new car is more reliable.
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This truely does make sense. Further, if you can throw in some sort of added benefit like cash for clunkers and still be able to by a used vehicle your are laughing compared to buying new.
Great advice. I recommend a Japanese car, preferably Toyota or Honda. Those cars need little repair in the first 5 years.
Also, if you don’t drive a lot it is even better to get a used car because the costs associated are less. The car will need few repairs and it will keep its value better.
Thanks for the Information and the Tip