Posted Wednesday, September 14, 2022
Many people like to renew their cars often, but can’t always get the newest and more expensive models. In the case of Americans specifically, a clear preference has emerged for buying used vehicles, which in good condition can last a long time and re-sell at reasonable prices. But purchasing a used vehicle still requires consideration of a number of factors, from potential depreciation to financing options. Considering this, we’re going to take a look at some questions it’s important to answer when you’re buying a used car.
There are different factors that determine the value of a used car. Naturally, a vehicle that has been used to travel around the country multiple times will typically have less
value than one used just to go shopping once a week. Apart from mileage however, the condition of the car is an important variable as well. A vehicle that looks as good as new will be sold for a higher price than the same model if it was kept outside for months, with no protection against the weather. These are big, clear factors but they’re still important to assess, and they’re also what will factor into third-party assessments.
According to Forbes, buying a used car instead of a new car will save you around $20,000 on average. But there are some disadvantages also, like expecting a higher cost of maintaining the car, paying more for any replacement parts, and so on. Additionally, at the time of this writing, used car prices have spiked due to various supply chain and broader economic issues. That makes the current gap in price between a used car and its newest model narrower than usual.
One drawback of a used car, to some, is that there can be fewer ways to pay for it, with fewer lease agreements available in some cases. However, you still have options. The financial guidance site AskMoney wrote up a helpful list of financing options some time ago, highlighting motor vehicle title funding (essentially a car loan) and co-applicant purchases as suitable options to consider. In motor vehicle title funding, the title is kept as security for a small loan that will allow you to afford the car. A co-applicant, meanwhile, has equal responsibility for paying the loan, but also has equal rights to the vehicle.
Usually, cars lose a large portion of their value as soon as they are sold. However, The Wall Street Journal recently reported a surprising trend. The low number of vehicles produced of late, and the increasing demand for used vehicles has led to an increase of 40% in the value of used cars. That said, as car manufacturers recover from lockdowns and chip shortages, the situation is expected to go back to normal.
Your answer here will likely depend on the age of the car. After approximately five years, the value of a car will typically have depreciated to almost half of the price it had when it was new, so that’s probably a good place to start. Just remember that the
average lifespan of a car is 12 years –– unless of course you are driving a Tesla, which can now reportedly last 16 years with proper maintenance.
Usually, normal car insurance applies to used cars. The only issue is that, as older cars are more likely to have problems and require repairs, the cost of your insurance might rise. You should also consider that nicer and faster models would also increase your premium, even if they are second-hand.
Making the decision to buy a used car is exciting, but you still have to ask yourself these additional questions. Consider them carefully and decide what makes the most sense for you. And, if after that you still have questions about buying a used car, you can always contact us directly here at Indy Auto Man.