This content is sponsored by Fair Oaks Motors
Auto manufacturers have been spitting out record numbers of new cars over the last few years, and while sales saw a small drop in 2017, the overall trend means there are lots of new and used car options out there.
Of course, any big financial decision involves a careful look at your budget as a starting point.
The average new vehicle cost $35,170 in 2017. Used vehicles at franchised dealerships were almost as costly, at $33,358. At independent dealerships, the average price was $22,995, and sales between individuals averaged $11,579, according to numbers compiled by Manheim Pennsylvania from Kelley Blue Book, Bobit, the Bureau of Economic Analysis, and IHS Markit.
New cars have obvious appeal. Desired models are easy to locate and the likelihood the car has been damaged is low (although not zero). Manufacturer-subsidized interest rates make financing more palatable and there’s the all-important bumper-to-bumper warranty, which keeps ownership headaches to a minimum. Basic upkeep is needed, although some brands include some services. While negotiating, be aware that add-ons like accessories and maintenance and protection plans could drive up the price further. Because of fees, always ask for the “out the door” price, and a breakdown of how that price was arrived at.
The used market can present bargains for certain cars, trucks, and SUVs that lose value quickly. Many three-year-old cars can be had for about half the price they went for when new. The list includes Cadillac’s CTS and ATS, the Mercedes-Benz E- and C-Class, the BMW 5 Series and the Nissan Maxima, according to research of 2014 models by iSeeCars.com. Because of their popularity, SUVs have held their value a bit better, but three-year-old examples of the Cadillac SRX, Buick Enclave, Kia Sorento and Infiniti QX60 were worth only about 60% of their original price. (Lease vehicles are typically returned after three years).
On cars that have average depreciation, buying used can be a trade-off – a slightly lower price for less factory warranty coverage. Certified used cars come with a longer warranty but can rival new cars in price. Interest rates on four and five year used car loans are at just under 5% for those with good credit, according to Bankrate.com. Be sure to allow more room in your budget for repairs when going used, and it’s crucial to pull a vehicle history report and to have a trusted mechanic inspect the car.
On the other end of the spectrum, there’s a tried-and-true method for beating depreciation and high interest rates. It’s more of a challenge, actually: searching long and hard for a much older car that’s rust-free and has a reasonable number of miles on it, paying cash, keeping it in good shape, and being ready to deal financially and mentally with any unexpected breakdowns.