Used Vehicles

1.3 The Case for Buying a Used Vehicle

Indeed, price is the primary reason most people consider buying used cars. In a study by the Dohring Company, market researchers found that 85% of survey respondents who intended or would consider purchasing a used vehicle said that the high price of a new vehicle is the reason they would consider buying a used one. But in the National Automotive Consumer Study by the Dohring Company, 59% of those surveyed said they would rather purchase a $20,000 new vehicle than a used higher-end vehicle whose price had dropped to $20,000 from its original purchase price.

You Get More for Your Money

"Used cars provide the opportunity for someone to purchase a car of their choice for less money, or to step up to a better model," said Vogelheim. The reason is simple: the original owner has already absorbed the largest depreciation hit, so you don't have to.

Jack Gillis agreed: a used car can cost 50% less overall to run compared to a new car findings are that, "From the moment you drive away from the dealership your car loses value. The largest drop, near 20% of the purchase price, occurs in the first year. After that, the decline is less steep. Depreciation accumulates as a percentage of a percentage of a percentage, each year," explained Vogelheim; so typically the depreciation amount changes by smaller and smaller increments as the car ages. However, the rate of depreciation is not uniform, owing to ungovernable changes in the automobile and commodities marketplace (i.e. small fuel efficient vehicles are in demand when the price of gas is on the rise; trucks are in demand when a construction boom occurs). As a result, some vehicles hold their value better than others, but often for different reasons.

These days, a car bought several years into its life span has stabilized greatly in value but has neither declined significantly in mechanical reliability or appearance, nor increased in ownership costs. In fact, insurance costs and other fees often are considerably less than when the car was new. Therefore, if your main goal as a vehicle buyer is obtaining reliable transportation for a good price, the used vehicle market can be the best place to shop.

The CarEdge website is a useful tool to help you in making your vehicle purchase. The Depreciation Tool is particulary useful in viewing the cost of new car ownership of a wide variety of vehicles, and in determining when it may be the optimal time to purchase a used vehicle. Click the CarEdge image to view the tool.

Source: YouTube

View the video: "Should I Buy a New or Used Car?"

In this video, the presenter provides a cost comparison of a new versus used vehicle. The video stops at the 4:15 mark, but the full video can be seen on YouTube.

Used Cars with Peace of Mind

The most promising sources for used vehicles are the growth segments of "off-lease" and "certified used" vehicles. Off-lease vehicles generally are two to four years-old and began life as vehicles sold to lease customers. Because of mileage restrictions and maintenance requirements that are part of most leases, these vehicles practically qualify as new, even in appearance; and they usually are still covered by their original warranties.

Certified used vehicles have been refurbished to like-new standards and have passed a checklist of requirements that are the basis for certification. It is important to know whether a used vehicle is dealer-certified or manufacturer-certified, since the standards for each may differ. Nevertheless, certified used vechicles can provide the same peace of mind that traditionally comes only with buying a new vehicle because they often come with manufacturer-backed warranties.

What is a Vehicle Lease?

A vechicle lease allows you to drive a brand-new vehicle for a fixed period at an agreed monthly rate. Leasing doesn’t require a car loan approval or a hefty payment up front, but unlike typical financing plans, monthly lease payments go toward the use of the vehicle instead of the ownership of the vehicle. In other words, it’s a long-term rental, and once the fixed lease period is over (typically between 2 to 4 years), then the customer must either return the car to the leasing company or purchase it for market value.

Leasing a car may require a down payment and includes monthly payments comprised of rental charges, interest, taxes, and the depreciation costs of the vehicle over time.

When and Where to Buy?

When should you buy your vehicle?

In the fall, a few months after the new models have been released; there is usually a large supply of used vehicles on the market. This is also the time of year when vehicles seem to get a year older: the two-year-old vehicles are suddenly three years-old, compared to the newly released vehicles. This is often the best time to purchase.

But don't overlook other obvious possibilities for getting a good price. A vehicle without air conditioning in the middle of the summer is probably very hard to sell, so the price will probably be negotiable. The same goes for a convertible in the winter, or when the dealer has an oversupply of a particular model.

If the seller is eager to sell, you get a good price. If there is a big demand for the vehicle at the time, you will end up paying more money for the vehicle.

Where should you buy your vehicle?

You can buy a used vehicle from a dealership, which may be more expensive, but may give you peace of mind if it comes with a warranty. You can also buy independently, which may be cheaper, but you are taking a risk as they are usually sold "as is." You may also choose to buy through an auction by a government agency or a private auction, either of which may result in a very good price. If you choose this method, you often do not know the true condition of the vehicle until after you have purchased it. At this point you may have either obtained a wonderful vehicle or a true "lemon."

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