Years ago, cars were much less dependable. That made buying a used car a risky bet. Today, with new cars having far fewer defects, the chance of buying a clunker is much lower. Still, it pays to know when it makes sense to buy used—and when it doesn’t.
Here are advantages and disadvantages of buying a used car.
Advantages:
Used cars are more reliable than in the past. According to Consumer Reports, the reported problems per hundred vehicles has declined tremendously over the last 20 years.1
With a used car, you can buy the same car for less money. Example: a new Honda Accord LX costs around $21,500. Purchasing a similarly equipped two-year-old Accord with 24,000 miles will save you roughly $4,000. You can save even more buying a car that doesn’t hold its value as well as a Honda Accord.2
With a used car, you can buy more car for the same price. For example, you might pay $18,000 for a new sub-compact. For that money, you might be able to afford a used full-sized car.
Certified pre-owned cars provide peace of mind. Some dealers put their used cars through a rigorous screening, then sell them with a manufacturer’s warranty. These cars cost more, but provide greater peace of mine than do non-certified vehicles.
Used cars do not depreciate as rapidly as new cars. According to Consumer Reports, new vehicles lose about 45 percent of their value in the first three years, followed by 25 percent during the next three.3
Used cars are less expensive to insure. Since they’re less expensive to replace due to depreciation, your insurance premium for a used car can be significantly lower.
Disadvantages:
Used cars may have been abused by their prior owner. Be sure to have your mechanic inspect any used vehicle before you buy it.
Used car loans are more expensive than new car loans. The difference—about a percentage point of interest—is not substantial, but does make for slightly higher monthly loan payments.
Used cars don’t have the latest safety features. Don’t expect a used car to have leading-edge safety technology such as smart air-bag systems or stability control.
1Consumer Reports, “Used vs. News: Do the Math”
2About.com, “Help for Car Buyers, 2007"
3Consumer Reports, “Used vs. News: Do the Math”