The cost of owning a car is much more than the monthly payment. You should also consider:
- The cost of auto insurance premiums
- Routine maintenance expenses such as new tires and oil changes
- Repair costs
- The cost of filling up your tank
Even if you buy a new car, some repair costs will not be covered under the warranty. For example, brake repairs are not normally covered by the manufacturer’s warranty.
Depreciation is one of the hidden costs of buying a car. The minute you drive a new car off the dealer’s lot, it depreciates in value. Every mile you drive causes it to depreciate. Depreciation is an important factor to consider as you choose between a new car and a used car.
New or Used?
The look and smell of a new car are tough combination to beat. New cars are typically free of problems and are covered by a manufacturer’s warranty. The down side is the high initial cost and the fact that the bulk of a car’s depreciation takes place in the first few years. Generally, a new car depreciates about 30 percent in value after one year.
There are also certified pre-owned vehicles that undergo a rigorous inspection before being resold to the public. Although you will pay a premium for a certified pre-owned vehicle, the warranty is likely to be longer than the one offered by most used car dealers.
Extended warranties are usually a bad deal for customers. They are expensive and may not cover certain types of car repairs.
Although your monthly payment will be lower with a used car, you must allow more room in your budget for repairs.
Fear of the unknown keeps many people from buying a used car. You may not know if the car was involved in an accident or sustained weather-related damage. Here are some ways to avoid those problems:
- Buy your used car from someone you know and trust.
- If you purchase the car from a private owner, ask to see the vehicle’s maintenance records.
- Have the used car inspected by your own mechanic.
- Purchase a vehicle history report through Autocheck.com or Carfax.com.
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