Catch the Benefits of Buying a Used Vehicle

Four years ago, some 41 million used cars were sold compared with 17 million new cars, according to Edmunds.com. The main reason so many more used cars are being sold? The price tag.

In 2000, the average price of a used car was about $12,500, while the average price of a new car was around $25,600. Even with the chance of increased repairs and maintenance costs on a used car, you could spend less per year than on new car payments.

"I purchased a year-old Toyota 4-Runner with roughly 15,000 miles. I managed to save $6,000 off of what I would have had to pay for a brand new car, while retaining all warranties, and most of the new car smell," says George, of Texas, a respondent to our "What's Your Story" feature. (We developed this article with input from readers contributing to What's Your Story.)

Plus, by buying used you may get "more" car for less money. "We felt that we could get more car for the buck by getting a used car, and we didn't want to lease another vehicle since we intended on keeping it indefinitely," says Don, of California. "I insisted on buying from a dealer and only a factory-certified model. This way I had the assurance that the car had been inspected and was backed by the factory. The car was a lease return and had documented service records which allowed us to purchase an extended warranty--which, as it turns out, was the best money we ever spent on a car."

Another reason so many people are buying used cars is the rapid depreciation of new ones. A used vehicle loses less value than a new car when it's driven off the dealer lot. In the first year of a new car's life, it loses 20% to 30% of its value. A car's first owner takes the largest depreciation hit.

The downside of buying used

While buying a used car can save you money, be aware of some downsides. Many people won't buy a used car because they're afraid of buying someone else's problems, as was the case with Bob, of Minnesota. He bought a used vehicle a couple of years ago and, four months after his purchase, the car "suffered major damage to the engine." The engine repair work totaled $3,200.

Unlike the possible repair troubles with used cars, most new cars are likely to be trouble-free for at least a few, if not several years. But sometimes a new car can turn out to be a lemon, which is what happened to Doresa, of Georgia. She bought a new car in 2001 that turned out to be a lemon and was repurchased by the manufacturer under the lemon law in 2003. "I learned my lesson--new doesn't equate to better," says Doresa.

While more and more new cars are coming out with longer warranties that often transfer to the used-car owner, the warranties still will be limited or possibly not exist at all. With many used-car purchases you have the choice of buying extended warranties, but do your homework before buying one. To learn more about extended car warranties read, "Take a Hard Look at Extended Warranties."

Depending on how many owners a used car has had, there also is the possibility of not having any or limited maintenance records. There are some ways you can check on the history and number of owners a vehicle has had by using a service such as CarFax. Just enter the car's vehicle identification number (VIN) and you can get a report of the car's history--if it has a "salvage title" or if there were any recalls.

Published May 3, 2004