Is it a good investment to buy a used car?
Buying a used car can often be a good investment choice compared to buying a new car, but there are risks involved. Used cars, for example, can have issues from regular wear and tear. When you're in the market for a used car, it's important to avoid things like not taking a test drive or buying based on price.
If you're planning to finance your car, you'll be more likely to get a lower interest rate on a new car than a used one. New cars have a higher resale value and are less likely to have mechanical issues. That means the lender is less likely to lose their investment if you can't make your payments.
You will never know how the old owner treated their car. They might have driven it hard or skipped minor maintenance over the years. A pre-purchase inspection can uncover some potential issues, but there is the possibility of surprise repairs.
What is considered high mileage on a car? Often, 100,000 miles is considered a cut-off point for used cars because older vehicles often start requiring more expensive and frequent maintenance when mileage exceeds 100,000.
The optimal time to purchase a used car is typically between 2 to 5 years old. Within this age range, the vehicle has already experienced the most significant depreciation, yet remains relatively new and in good condition.
Cox Automotive Chief Economist Jonathan Smoke says 2024 will be the best year for consumers to buy a new car since before the pandemic, as new vehicle supply increases, transaction prices come down, automakers are expected to offer more deals and interest rates should ease. Happy New Year!
According to industry analysts from Cox Automotive and J.D. Power, some automotive market conditions are likely to improve in 2023, but perhaps not enough to trigger radical change. "We certainly do expect the market to get better than it's been," says Tyson Jominy, vice president of data and analytics at J.D. Power.
- 'I love this car! ' ...
- 'I've got to have a monthly payment of $350. ' ...
- 'My lease is up next week. ' ...
- 'I want $10,000 for my trade-in, and I won't take a penny less. ' ...
- 'I've been looking all over for this color. '
Buy a like-new one if you can. Just buy one with enough warranty to get you through the amount of time before you typically buy another. Seven years, or 84 months, is basically the “end” of a car's life, according to the banking industry. A seven year old car should cost about 15 to 35% of its original price.
- Buying Can Be More Expensive – in the Short Term.
- Pay Interest on the Total Cost of Your Car.
- You May Pay More Sales Tax.
- Larger Down Payments.
- Future Value of Your Car is Unknown.
- Manufacturer Warranties Will End.
What matters more car age or mileage?
In conclusion, while it's a good idea to consider both the age of a vehicle and the mileage on the odometer, how it was maintained is the key. A 10 year old car with 100,000 miles may have received more maintenance and upkeep then a 5 year-old car with 50,000 miles.
According to a recent study by Consumer Reports, Toyota and Lexus were the most reliable vehicles in 2022. After Japanese cars, BMW was ranked third, while Mercedes' reliability was rated the lowest.
A car that is ten years old might be perfectly fine for your needs, but chances are if you are looking at a car that is over 20 years old, you will find more problems than it's worth.
The answer lies in buying within what we call the "sweet spot", the point at which an indicator (in this case 'depreciation vs repair costs') provides the optimal balance of costs and benefits. This sweet spot lies between 2 to 10 years for the age of the car (assuming we are working with daily use passenger cars).
Even when mileage is low, the older a car gets, the less reliable it becomes. Modern cars are much more reliable, even as they age. Five-year-old cars record what is considered a major problem every three years, while 10-year-old cars are more likely to face a problem every 18 to 20 months.
How much do cars depreciate? Cars lose the most value in the first year, and depreciation continues for about five years. A car can lose up to 20% of its value in the first year, and over the first five years fall to around 40% from the original price.
Used car prices expected to stabilize in 2024 after two years of decreases from record highs. After record-high used vehicle prices declined notably in 2023, pricing is expected to be relatively stable this year.
“Interest rates have taken such a toll on purchasing power,” said Ivan Drury, director of insights at Edmunds. Yet, consumers might begin to see lower prices in 2024, experts say. Improvements in the supply chain ought to bolster inventory, while interest rate cuts are on the horizon.
Consumers looking for new vehicles should have better luck in 2024, with inventory levels expected to be higher, putting downward pressure on prices, experts say.
- Top choices: Any Toyota Camry, Kia Soul, 2017–2019, and Hyundai Sonata. ...
- Interesting substitute: Nissan Leaf, 2011–2017.
- Used SUVs: Nissan Rogue, 2014-2017, and Dodge Journey, 2011-2020.
- You might realize that it will be difficult to locate an SUV in the price range that you like.
What is the cheapest month to buy a car?
Edmunds reports that December is the perfect time to get the best car prices because the last month of the year has the highest discounts and incentives. Tip for this tactic: Pay attention to sales when older models will likely go down in price.
What's the best time to buy a used car? Used and new cars follow similar cycles. If you're shopping for a used car, the early months of the year — January and February — are a good time to ship. You may see more vehicles on the market then as people sell their old vehicles after buying new ones over the holidays.
Toyota, Honda, and Mazda are renowned for their reliability and long-lasting performance. Models like the Toyota Camry, Honda Accord, or Mazda6 are popular choices among sales reps for their reputation for dependability, which helps ensure that you can get to your meetings without any unexpected delays.
Lexus and Toyota took the top spots for brand reliability this year, followed by Mini, Acura, Honda, and Subaru. And while people are buying more EVs, CR's members experienced 79% more problems with them compared to gas-powered cars.
The Porsche 911, Mercedes-Benz SL, Jaguar E-Type, Volkswagen Beetle and MINI Cooper are all examples of cars that have stood the test of time and continue to be popular among car enthusiasts.
