That’s the difference between the average price of a used car ($19,495) and a new one ($33,560).
Makes buying a used car – about 40 million were sold last year – look like a pretty good idea, doesn’t it. And about 30 percent of those, or almost 12 million, were purchased from franchised vehicle dealerships, with more than 20 percent CPO vehicles.
Here are some of the reasons to buy a used vehicle:
- Save money (more on this in a bit).
- Today’s cars and trucks remain reliable longer, which has contributed to the increasing average age of vehicles on U.S. roads to about 11.5 years (and rising).
- Certified pre-owned (CPO) programs – used vehicles which have been reconditioned and provide warranties – offer “like new” condition with about 2.5 million sold last year.
- Detailed vehicle history reports based on a vehicle identification number (VIN) are available from companies such as Carfax, AutoCheck and VINCheckPro.
- Attractive financing options – reduced-rate loans – on many CPO vehicles for qualified buyers.
- Lower insurance rates, because one of the key factors in the cost is the vehicle’s value.
- You can drive a “better” car than you might be able to afford otherwise.
We’ll take a closer look at saving money and purchasing a “better” car.
Two years ago a GMC Acadia cost $33,975, just a little more than the current average new vehicle transaction price, but it now sells for around $23,100, just above the current average used price, according to NADA Guides, which represents a savings of nearly $11,000.
But it’s not all that unusual to capture significant savings, even with one-year-old models.
- A 2016 Nissan Frontier 2WD Crew Cab that would have cost $32,201, or a little under the current new-vehicle transaction price, now retails used for $25,626, a savings of about $6,500.
- And a 2016 Honda CR-V AWD now retails around $19,175, or about $6,000 less than it did new.
A big portion of the savings on a used vehicle – around $7,000 in the case of our two-year-old GMC Acadia example and about $5,000 on our Frontier and CR-V – comes from avoiding depreciation, or loss in value, which occurs with most new vehicles. The two-year total depreciation is more than half of the five-year decline for all three vehicles, based on an Edmunds.com calculator.
A ‘better’ vehicle
Of course, the flip side to saving money is that you could use the savings to get a better used vehicle, perhaps a more expensive version of the same model with a step up in features or some other model entirely that you may not be able to afford to purchase new.
For example, instead of a new Acadia, how about a 2012 Jeep Grand Cherokee SRT8 that originally sold for $54,670, NADA Guides reports, and now is priced used at $33,725.
Here are a few other choices based on the NADA Guides search tool, with the vehicles’ original prices, followed by the “Used Retail” prices and the estimated savings, listed from highest to lowest Manufacturer’s Suggested Retail Price (MSRP):
- 2009 Porsche Cayenne AWD Turbo, $97,700 new, $32,825 used, $64,875 savings.
- 2011 Mercedes-Benz M-Class 4MATIC, $92,590 new, $32,150 used, $60,440 savings.
- 2010 Lexus LX 570 – $76,905 new, $33,075 used, $43,830 savings.
- 2013 Cadillac Escalade Hybrid, $74,425 new, $32,250 used, $42,175 savings.
- 2010 Toyota Land Cruiser 4WD, $65,970 new, $32,950 used, $33,020 savings.
Whether you buy a pre-owned or new vehicle depends a lot on your specific transportation needs or lifestyle, but sometimes a lightly used (or well-maintained) vehicle is a smarter financial decision when purchasing a vehicle – especially if you’re working with a limited budget.
But if a used car, truck or SUV still isn’t on your radar screen, come back soon to find out why you should purchase a new vehicle instead of used.