A New Car or A Used Car?

by Joe on March 3, 2010

I drive a 1993 Honda accord and it is nearing the end of its useful life. So replacing it is in my mind possibly sooner than later. Interestingly, the more I think about replacing it, the stronger the feeling of attachment, and the more cars on sale I see in the streets. We have already decided that a new car will not be an option, and also we will pay cash for it. Therefore I will keep driving my old clunker as long as it can; until I save enough or my wife cannot stand it anymore and I get an ultimatum to replace the car. If you are in the same boat as I am, and have not decided whether you want to finance a new car or save for a used here are some things to consider.

Remember that once you drive a new car out of the dealership lot, the value of that car drops significantly by almost 20% depending on the type of the car.

Before buying the car

1.     The choice often boils down to money.
While some dealership might let you buy a car with no money down, they will slap you with high interests for financing your car. I am a proponent of paying with cash; but if you cannot reach your budget goal before your clunker dies on you, consider using your local credit union. Bottom line – you will need to have the money for the car or someone will finance it for you.

2.     Do your research and set your target price.
The Internet has made it easier to find out the dealer’s cost for each vehicle and its options. This is the first step to getting the best possible deals. Check the dealership near you; at this time of the year  many people use their tax refunds to replace their cars, you might get a great deal or a very bad deal. Do some extensive research. Check the prices of the vehicles that interest you on Edmunds.com ,Kelley Blue Book’s , and NADA.com

3.     Know how much your old car is worth.
If you are not planning to give your car away, check the fair amount that you can sell it or trade in value at Edmunds.com, Kelley Blue Book’s , and NADA.com  because that figure might be an important factor in your budget.

4.     Negotiate your purchase.
This gene either died when I was growing or it never was in me, but my other siblings are good at this. I hate haggling that is why I tell a seller my budget upfront. I know this is not the best way but you’ve got to start somewhere.

5.     Have the car inspected
For any used car, you want to be sure that the car you are about to buy is what you think it is (a good car). Some dealerships do not allow you to bring in an external mechanic to check their cars. I find this very strange and I would not deal with such.

On top of having your mechanic check the car, if you still like it; for the peace of mind consider getting the car history from place like carfax.com. From these reports you can tell if the car has ever been sent to a junkyard, if there is odometer discrepancy, and even the maintenance report. It is a good $35.00 investment before committing to buy the car if the seller does not provide it.

6.     Understand the terms of sale.
If you have found what you want, done your homework good enough; saved enough to pay for your car, be sure to ask about warranty and service.  Most dealers will have “As Is –No Warranty” on buyer’s guide.  According to federal trade commission:

When the dealer offers a vehicle “as is,” the box next to the “As Is – No Warranty” disclosure on the Buyers Guide must be checked. If the box is checked but the dealer promises to repair the vehicle or cancel the sale if you’re not satisfied, make sure the promise is written on the Buyers Guide. Otherwise, you may have a hard time getting the dealer to make good on his word.

Did you finance your car or paid it cash?

Related Articles

{ 6 comments… read them below or add one }

Jolyn@Budgets are the New Black March 3, 2010 at 11:55 am

I just took some polls on this topic for my blog last week! It was very interesting to see the results and read the different opinions. The last vehicle we purchased was a used van and we did finance it. We just paid it off last month! The last item on our (non-mortgage) debt snowball. W00t! We plan on running our two (paid-off) vehicles to the ground. God willing, the next vehicle will be purchased WITH CASH.

Reply

Joe March 3, 2010 at 3:57 pm

Thanks Jolyn! It’s always exciting to hear about other people’s experiences and victories over debt. We will pay cash for our next car.. hope this clunker can last a bit longer.

@ ELizabeth Thanks for the tips –

Reply

ElizabethL March 3, 2010 at 1:39 pm

Great post! Here’s some tips on buying a car for your first time that I think may help some people

Reply

Arthur @ Financialbondage.org March 3, 2010 at 7:34 pm

For my next car, I will look for a honda or toyota with 100,000 miles on it. I will finally make the leap to foreign cars reluctantly.

Reply

Ken March 3, 2010 at 9:24 pm

We’ll probably finance our next car…it will be a used car. We’re probably 4-5 months away from a purchase.

Reply

Joe March 3, 2010 at 10:15 pm

@ Arthur: Toyota’s and Hondas have always been my favorites.. hopefully Toyota will recover well from the recent hitch. I have not decided yet whether i will go to japan next time or keep the dollars in US. Thanks for your comments, and keeping the conversation alive.

@ Ken: I am all for used cars, i will propably never buy a new car unless i have finished paying up all our debt – and even then 20% drop on resale value just by driving off from the dealership just don’t rub be well. All the best in the search for your next car.

Reply

Leave a Comment

Previous post:

Next post: