How Much Can You Save by Buying a Used Car?

The pandemic has brought upon an increase in the price of new and used vehicles due to the decrease in the use of public transportation as the average listing of a used car on the marketplace is up 5.2% from 2020. The increase in demand of used cars is due to the fact that more people are now starting to realize that buying a used car in Ontario is a cheaper and safer investment than a new car. Though interest rates on used car loans are higher, a used car can give you more advanced features, a lower car insurance and less depreciation over time, all in your given budget.

Features

One of the biggest advantages of used cars is that one budget range can give you several options for what type of car you want. A spending range of $25,000-$30,000 can either get you a relatively new mid-level model car or an older luxury model with good features and decent mileage. A lot of the technology used in luxury cars 4-5 years ago is something one can get in a new car today including features like backup cameras, navigation, and lane assist. Sometimes it may be the case that even new cars do not have the features that were in older luxury cars meaning you get more value for your money. 

Reliability

Used car reliability is usually questioned the most when people look to purchase vehicles. However, cars in the last 10 years have been more reliable than ever. In fact, a recent report by Consumer Report showed that 3% of cars from 2013 had major engine, brakes, and climate control problems. This trend has only gotten better over time as the reliability of cars has increased. This means that used cars are as safe a bet to buy as new cars and that the maintenance costs of new and used cars are roughly the same. The cost of maintenance for a new car and a used car of the same model, would roughly be the same as all cars require regular oil changes, tire rotations, brake pad changes, etc. Given that the chosen car is a reliable one, car maintenance should not be a big cost contributor to owning a used car vs a new one

Car Insurance

 Used cars generally have cheaper insurance due to the fact they are older. This low cost in insurance can be very important if you live in an area with high accident rates. Insurance companies have to pay more to replace or repair new vehicles, which accounts a lot for why the insurance is higher. On the contrary, used cars are a lot cheaper to replace and repair as they come for a fraction of the cost of a new vehicle. Insurance companies also take into account how many safety features your car has. This means that if you are about to purchase a used car, make sure the car has as many safety features as you can get, in your budget.

Depreciation

The most important aspect of buying a used car is how much it depreciates. On average, a new car loses 40%-50% of its value in the first 5 years of purchase. This is a staggering amount and should be taken into account when buying a vehicle as used cars depreciate at a much slower rate than new cars. In fact in the first 2 year of buying a new car, the car loses about 30%-40% of its value and then around 20% over the next 3 years. This is why it’s recommended to buy a used car that’s around 2 years old and then sell the car when it’s 5 years old. This practice will help you save a lot of money in the long run. 

Saleability 

The best part about a used car is that they’re excellent starter cars for people who are buying their first car. They usually are not too big of an investment and retain most of their value within the first few years of purchase. The reselling of these vehicles becomes much easier if they are kept for a relatively short period of time and can help you with your transportation needs until you find better options. This along with the small amount of depreciation means that buying a used car is a safer investment than buying a new car. 

Loans and Interest Rates

Purchasing a used car has one major drawback which is the interest rates on used car loans. The interest rates on car loans are generally higher than new cars due to the fact that they are not worth that much. Banks and other lenders get their profits from interest paid by people on loans they have obtained. This means that smaller loans tend to have higher interest rates and used car loans are of lesser value than new car loans. You can check how much interest you might pay on your used car loan using the SavingsHippo Car Loan Calculator.

There are several different factors to consider when purchasing a car with cost being one of the most important ones. It can be concluded that used cars in most cases are cheaper options than new cars. Though the interest rates are higher on used car loans, they might be able to provide lower depreciation, more safety and technology features and lower insurance along with the same reliability of new cars all in your required price range.