- Never buy a new car when trying to save money. Let 1-3 years of a depreciation of a vehicle do the saving for you.
Let’s talk about the first topic. Never buy a new car when trying to save money. There is an allure about buying a new car. It can make an owner feel good to drive something fresh on the eyes. It’s a symbol of how far they have come financially. Personally? While I understand the attraction to the new car smell, I don’t think that scent is worth thousands of dollars.
Let me explain. It has been said that a new car that drives off the lot, depreciates 20%-30%. There is truth into that. Why? The new owner is now officially listed on the Carfax. It has been sold at a specific location. Then, the new owner has to go through break-in period. While there are several opinions about how that should be done, consulting the instruction manual is the best way. In the end, the driver is basically limited to driving roughly 55 miles per hour for at least 500 miles. Sometimes, shortly after, there’s an immediate oil change.
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Today, there are multiple places to buy used cars. Carmax has a wide variety of stores throughout the United States. Craigslist allows car owners and sellers to meet. Traditional dealerships are always trying to accumulate more used vehicles. Why? The value of the used vehicle drops dramatically the first year. Imagine looking at a car that’s roughly $25,000 brand new. Imagine the same car, lightly used. Does it mean much to you if the car is driven 5,000 miles? 10,000 miles? Break-in period is over. The car, even at that point, is usually in good-to-great condition. Is it enough to justify a potential $4,000 difference? I may be talking about a hypothetical car, but the $4,000 difference over 5,000 miles is definitely a savings worth taking. There’s no negotiation necessary. It’s like getting an automatic discount with the car.