Establish a Budget
One of the biggest differences between buying a new and a used car is in how you manage your budget. A brand new vehicle comes with a warranty so you can spend almost all of your budget on getting the best trim level and feature packages.
In just two years, new cars will lose around 20% of their value, and another 20% by the time theyíre 4-5 years old. When you buy a used car, youíre getting a lot of value for a significantly lower cost.
The downside is that unless you get an extended warranty, the cost of repairs falls entirely on you. New tires, an oil change, and a replacement car battery may be necessary as soon as you buy the car, so leave at least 25% of your original budget for post-purchase repairs.
Create a List of Requirements
Itís important to create a list of features your new car should have. Do you need a small car for you and your significant other, or do you have a large family? Will you drive primarily in the city, or are you a frequent traveler? These questions will narrow your search and provide you with models that fall within your requirements.
Find the Right Car
The list of requirements will help you narrow down your search, and then itís time to pick the best vehicle. Do some online research on models you find interesting and see if anyone has experienced serious flaws with them.
Once you find a suitable model, search by generation or age and see what the average price of a decent model is. Mileage and a well-kept service book are the most important factors. Look for exterior damage and interior wear, and find the model that has the highest trim level.
Extra features cost a lot on brand new vehicles, but their value drastically diminishes over the years. An extra set of wheels and winter tires sold in a package with the car is usually a very good deal.
Inspect the Car
You should arrange for a visit and inspect the vehicle in person. Youíre looking for signs of rust and bumps. Pay attention to the wear of the interior, especially on the driverís seat and steering wheel.
A quick VIN check will tell you if the vehicle has been involved in any undeclared accidents. For a very small fee, Carfax will tell you a lot about the carís history. Read through the maintenance book and check how often the vehicle was serviced and what parts were replaced. Under the hood, check all fluid levels and see how much oil is in the engine.
Negotiate the Price
The great thing about used cars is that thereís always room to negotiate. You can go through the process of getting a loan, but if you come to a dealership with cash in your pocket, youíll almost certainly get a better deal. If the price is non-negotiable, maybe you can get a discount on an extended warranty, a new set of tires, or something else to incentivize the purchase.
Sort the Paperwork
The good thing about buying a car at a dealership is not having to worry about the paperwork, as the staff will sort everything out for you. If you need an extended warranty or minor insurance policies, discuss them with the dealer to see what they can offer.
As you can see, thereís not a lot of difference between buying a used or a new car. Stick with your budget, and buy a reliable car that has a proven track record, or get an extended warranty with it.
Cars depreciate the most through aging, with mileage being a secondary factor. The biggest price drops are between 1st and 2nd year since release, and between 4th and 5th year, making them the best-value purchases.