Your once-proud set of wheels is now a sad, rusted-out tin can. And what’s that new rattle as you head to work? Repairs are mounting and it’s time to face the piper: like it or not, you need to buy a new car.
Unfortunately, a new car is prohibitively costly: according to a 2011 study, the average new car costs a lot – as in a ‘3’ followed by four zeros. The staggering $30,000 BUY ME!!! dealership sticker and today’s difficult economy are more than enough to steer anyone away from buying new.
But is buying a used car instead a hassle or a panacea? Like anything financial, it depends….
New Car = Automatic Depreciation
It’s been said over and over again, but bears repeating: despite the blissful, nirvana-like moment you experience driving a shiny, brand-spanking new car off the lot, your wallet automatically becomes the victim of depreciation theft. In some cases even several thousand dollars are gobbled in Pac Man-like fashion due to automatic depreciation. Buying used (even with low mileage) makes you appear a financial whiz because it allows someone else to pay this up-front hefty depreciation premium.
Let’s Talk About Models
Certain car models (Japanese, some European models like the Mini Cooper and a few popular American models) are famous for holding on to their value better than domestic and European models. Even worse, many used models are even to be avoided. If you plan on buying used (and letting someone else pay the costly initial depreciation) pull up a trusty depreciation calculator, plug in models and time frames when you are considering a model and make. What’s that? A two-year-old Honda CRV holds its value better than a Jeep Liberty? That’s right.
To Haggle or Not To Haggle?
Some of us in the audience get a thrilling adrenaline rush from presenting a case, “winning” an argument and walking away from a combative negotiation feeling like we scored the best deal in the world. Though exaggerated, we tell colorful tall tales of conquest to family and friends, reveling in our genius and intellectual fortitude. For these argumentative, thick-skinned, Type-A personalities, a car dealership that is excited at the prospect of hours of back-and-forth haggling may be a good fit. Conversely, most of us hate verbal combat. If you are considering buying a used car but despise the haggle-hassle, there’s a new car dealership model out there that has traditional car dealers wincing. Dealers like CarMax and TrueCar.com offer a bottom-line pricing and advertise a haggle-free experience used car-shopping experience.
Big Savings When Signing up for Car Insurance
Another way to save money (and this goes for both used and new car ownership) is to get creative with your insurance options. For example, insurance companies offer discounts and advantages for those who have attended safety certification classes. Safe drivers = less accidents = lower cost to insure you. Club membership matters, too: for the senior citizens in the audience, be sure to mention your AARP membership to your insurance agent. Also, insurance companies offer discounts to teacher and other members of “low-risk” occupations. Lastly, listen up students: good grades aren’t just for pleasing mom and dad or future prospective employers: straight A’s also add up to insurance cost savings. It doesn’t hurt to ask, does it?
This was a guest post by Kyle Taylor is the editor of ThePennyHoarder.com, a blog that focuses on weird & wacky ways to make extra money.