Should Millennials Buy a Car?
May 17, 2016 / Sara Davis / Prepare for College Financially
When you're in the market for a new car, it can be tempting to buy a vehicle that's brand new.
Those cars are shiny and perfect with that new car smell everyone wants. You may think that driving one around town will show everyone how successful you are.
But before you drive that car off the lot, be sure you've given the purchase a lot of thought. There's a lot of reasons on why buying a new car isn't as glamorous as it sounds.
Buying a new car might seem like an exciting purchase, but there are a plethora of reasons that make a used car a much better investment. One primary reason is the depreciation the car undergoes the moment it is driven away from the dealership, according to Autoblog.
"The big cost is that hit the minute you drive off the lot," Jake Fisher, an automotive test engineer for Consumer Reports, told Autoblog.
While the depreciation has a specific beginning, there isn't a finite end to the process of lost value.
According to TrustedChoice, an insurance provider, a car will continue to depreciate rapidly over the first few years you own it. After just one year, the car will be worth 25 percent less than what you paid for it, and after five years, the car may have lost 63 percent of its value.
When you buy a new car, whether it's brand new or just new to you, you'll probably need an auto loan to help with the financing.
LearnVest pointed out that it's best to choose a car you can pay a good amount for upfront. The more you pay in cash, the shorter your loan term will need to be, and the less money you'll pay in interest.
When you buy a used car, chances are you'll be able to get more car for your money, or pay for a bigger portion of the car upfront. That means you'll pay less over time.
Plus, if you are a younger buyer or someone who has little or poor credit history, you may not be eligible for the best rates around. If you are stuck with a long-term loan with a high-interest rate, you will be paying much more than the sticker price.
Interest rates aren't the only thing working against new car buyers. Insurance rates will also be higher.
According to Esurance, the make and model of your car play a role in how much insurance will cost. In the case of comprehensive and collision coverage, people who own cars that are worth less will pay less.
Basically, LearnVest explained, the more valuable your car is, the more expensive insurance will be.
Some people point out that new cars get the factory warranty, which is nice to have when something goes wrong in the first few years. However, Jalopnik explained that the warranty will typically expire long before your loan does.
The typical car warranty will last 3 years. The average auto loan, on the other hand, lasts 5.
This means that for 2 years, you'll be writing those car payment checks every month with no warranty to help in the event that something goes wrong.
Digging Up Dirt
Plenty of people have come up with many reasons to buy a new car instead of a used one. But the truth is, used cars have a lot going for them.
Many of them are reliable. Consumer Reports pointed out that many of today's cars can last a lot longer than you'd think.
While past generations celebrated the 100,000 mile mark and never dreamed to double it, your car may be able to do just that with the right care. So if you find a used car with 80,000 miles on it, you don't necessarily need to pass it by. There could still be plenty of good miles left on it.
Plus, with the interconnected nature of today's world, you can likely find a lot about the car you will purchase. It's important to do your own research and use reliable sources like Edmunds.com or Consumer Reports. These will tell you about the make and model of the car in the year it was manufactured.
Plus, DMV.org explained you can usually find some information about a particular car's history.
When making a used car purchase, take advantage of these tools to make sure you're making a smart, sound purchase.
You'll be able to rest easy knowing your car is safe, and you saved money by buying used.
Get more tips about used car buying by signing up for our newsletter today!