Automakers and dealerships are more willing than ever to extend rebates and other generous offers in order to spur sales. As a result, the thought of replacing your current vehicle with a new one might seem particularly enticing. Not so fast. From a purely financial perspective, there are compelling reasons to hold onto your current car and replace parts when they fail.
While buying a new automobile poses plenty of perks, it will also leave your bank account much lighter than a used one. In this article, we'll compare the pros and cons of both. We'll take a look at the effects of depreciation and the ongoing cost of ownership. Then, we'll offer a few suggestions for finding value among the used gems.
The Initial Loss In Value
The moment you drive a new vehicle off the dealer's lot, it loses nearly one-fifth of its value. The reason? Depreciation. Every new automobile hemorrhages a large portion of its value almost immediately. Moreover, by the end of the first twelve months, most cars have lost over 30 percent of their value (some lose even more).
This is one of the main reasons to keep your current vehicle, or consider buying a used one when the time comes to replace it. If you purchase a car that is four years old, the majority of its depreciation has already occurred. In most cases, the increased costs associated with maintaining - or repairing - a used vehicle do not offset the higher price of a new car.
Considering The Cost Of Ownership
Few people think about the ongoing cost of owning and driving their vehicle. In addition to the monthly payments (in the case of a new car), you'll need to allocate part of your budget to fuel, insurance, repairs, and regular maintenance. Given that these expenses can add up to thousands of dollars each year, they're worth considering.
Because of depreciation, new cars are very expensive to own. After a few years have passed, the cost of ownership declines. By years six through eight, the combined cost is equal to that of the first year.
For used vehicles, depreciation has already taken most of its toll, and thus annual ownership costs are already much lower. However, the costs associated with repairs and maintenance rise with age as parts begin to wear down and need to be replaced. There are plenty of resources online that will provide the average carrying cost for a particular make, model, and year. Factor this in when deciding whether to buy a new model.
Uncovering Value In Used Vehicles
New automobiles are expensive to own and drive while older ones are much less so. The question is, how old is too old in the context of maximizing value per dollar spent? A 1999 Honda Civic may come with a budget-friendly sticker price, but will repairs and maintenance become too expensive down the road?
Experts suggest one of the best places in which to find automotive value is in vehicles that are between three and four years old. As noted earlier, most of the depreciation has already occurred by this point. Hence, the money you spend is more likely to be reflected in its resale value.
Late model cars also offer the benefit of being roadworthy for several years into the future. You may need to replace the alternator, fuel pump, and invest in a new set of tires, but such vehicles tend to have plenty of life in them.
The one area in which buying a new car trumps keeping an older one is with the factory warranty. When you purchase a new vehicle, the warranty all but guarantees you'll be protected from an unexpected cash outlay due to a failing part or system. Most major components are covered. That said, you can also invest in an aftermarket extended warranty that provides a similar level of coverage for your current automobile.
Buying a new car may be appropriate if you're willing to absorb the higher cost of ownership. Otherwise, consider keeping your current vehicle and investing in high-quality replacement parts when necessary.
When looking for a Wichita Kansas Car Dealer, Wichita Kansas Honda or many other Kansas cars, trucks, and SUVs. Visit Conklin Cars online at: ConklinCars.com.
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