Posted By Admin On August 28, 2015
As the Grateful Dead point out in their song “St. Stephen,” one man gathers what another man spills. What one person sees as having no value, another person will come along and recognize and appreciate what it is. And a used car (or if you prefer, a pre-owned one) is a clear example of this concept, make sure you know what to watch out for when buying a used car.
Are you familiar with the idea of depreciation? Anyone who buys a new car is. It’s the belief that something has a value that only goes in one direction over time (and here’s a hint: it isn’t upward). You buy stock in a company with the expectation that its value will go up, or appreciate. There are a few other investments of this nature, but automobiles are certainly not one of them.
From the day a new car leaves the lot, its value diminishes. By some estimates, 20% of a car’s value is gone instantly. A $20,000 car is only worth $16,000, for example. And who absorbs that loss? Not the person who buys the car used, that’s for sure.
New cars also depreciate at the rate of about 15% per year. Businesses would find it difficult or impossible to survive with those types of losses every year. And yet the used car buyer doesn’t suffer these losses. In fact, the high depreciation rate shows the gradual narrowing of the gap between an over-inflated MSRP and what the vehicle is really worth. Make sure you connect with a personal car shopper today at MrCarShopper.com.
The length of a car’s warranty also works in favor of a used car buyer. After three or four years, a car’s initial appeal to a buyer may have waned. A car of that age is also more likely to need repairs than a brand new car does. Warranty protections can last for five years or more, depending on the manufacturer, so the car will likely still be covered in case something goes wrong for a used car buyer in that remaining period.
We all love the new car smell, and the knowledge that nobody else has ever driven a new car around before. Some men and women are willing to pay a pretty large premium for these experiences, but other men and women are willing to gather up what is left afterward. However, if you prefer the new car smell, you can always reap the benefits of leasing a car instead of buying.