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: "Our findings are that a used car can cost 50 percent less overall to run compared to a new car."
From the moment you drive away from the dealership you car loses value. The largest drop, often as much as 20 percent of the purchase price, occurs during 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 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 marketplace. As a result, some cars 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-car market can be the best place to shop.
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 the stringent mileage restrictions and maintenance requirements that are part of most leases, these vehicles practically qualify as new, even in appearance. And they are still usually covered by their original warranties.
Certified used cars are vehicles that 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 cars can provide the same peace of mind that traditionally comes only with buying a new car because they often come with manufacturer-backed warranties.
Making the Choice
Deciding whether to buy a new or used car should start with asking yourself what your strongest interests are in owning a vehicle. After that, compare prices and financing opportunities. If you decide to buy used, choose a certified used car "either a near-new" or an older model. Whatever you do, warned Vogelheim, "buy from a dealer unless you know the seller well, so you'll have a place to go back to if something goes wrong with the car."
