When it's time to get a replacement vehicle, many options come to mind. One of these options is whether to get a new car or opt for a quality pre-owned vehicle. Both are great options, but buying a pre-owned vehicle comes with many additional benefits, ranging from upfront savings to lower insurance rates.
Below, we'll cover all the benefits of buying a used car to help you make your car buying decision with all the facts laid out.
Benefits of Buying a Used Car
There's a wide range of benefits of buying a used car instead of a new one. Here are six great reasons to hit the pre-owned dealership instead of a new car lot.
1. Upfront Cost
Of course, buying anything secondhand means savings, but few secondhand items offer the savings a pre-owned car can. In 2021, we saw the average new car price shoot to $47,332.
Despite 2021 ushering in some of the highest demand we've ever seen for used cars, the average used vehicle price remains significantly lower at $28,305. That lower price offers upfront savings of $19,027 compared to a new vehicle, which translates into lower monthly payments.
You can either keep the money you save in the bank or upgrade to a better-equipped pre-owned vehicle and still save.
2. Depreciation
Research has shown the average car loses 20% of its value in just the first year, and some vehicles — particularly luxury cars — tend to depreciate much faster. So, that $47,332 vehicle, on average, will be worth only $37,866 after 12 months.
After the initial depreciation hit, the average vehicle continues to lose 15-25% of its value every year for its first five years after leaving the car dealership. That's up to a 60% loss in value in just five years, bringing that new car's value down to about $18,933 — a loss of $28,399.
If you buy a year-old used car, it's already taken that initial 20% hit, so you'll see less depreciation after leaving the showroom.
Worst case, a one-year-old used car loses 15-25% per year for the next four years. After four years, that $28,305 pre-owned car is worth $8,956, assuming a 25% value loss each year. That's a loss of $19,349, which is $9,050 lower than a new car.
This is especially helpful when it comes time to replace your vehicle, as you'll lose less money on your trade-in.
3. Insurance Rates
Your car insurance rate is another reason to consider buying a pre-owned car over a new car. A new car has a higher value when you purchase it and generally costs more to repair if it's in an accident. These higher costs to the insurance company translate to higher car insurance costs for you.
Ratehub.ca performed research on a handful of 2010 vehicles and new-at-the-time 2019 models. It found car buyers saved 5-28% on insurance premiums by opting for the 2010 model.
4. More Options
Walk into any new car dealership, and you're presented with a wide range of colours, trim levels, and options for any given new model. However, they are all the same brand, which dramatically scales down the options you have.
At a used car dealer, you will have a wide range of makes, models, and body styles to test drive and choose from. Plus, some larger dealerships may even have a particular model in different trim levels and colors.
This is great for undecided buyers who want to try out several vehicles from different brands and classes before deciding on their next vehicle.
5. In-Depth Vehicle History
You can get added peace of mind when you buy a used car by ordering a Carfax vehicle history report. This will show you if the previous owner was in an accident that involved an insurance claim, if the vehicle was flooded, and much more.
Plus, if the previous owner was meticulous with their maintenance, you may even get a list of all the completed maintenance. This is just an additional assurance that you're getting a quality pre-owned vehicle.
6. Cars Last Longer Than Ever
Decades ago, 160,000 km was when a vehicle reached the end of its serviceable life. Today's technology and assembly processes ensure cars last longer than ever. In fact, industry experts say they're designed to last over 400,000 km, given you follow the manufacturer's routine maintenance schedule.
So, that used car with 40,000 km on the odometer has only been through 10% of its estimated lifespan.
Benefits of Buying a New Car
While the benefits of buying a used car are plentiful, new cars have some benefits of their own.
1. Factory Warranty
The manufacturer warranty is a go-to reason for buying a new car, and it's a valid point. Many new cars include at least three years of bumper-to-bumper coverage and five years or more of powertrain coverage. That's a lot of peace of mind.
However, many pre-owned dealerships offer extended warranties with similar coverages. Plus, these extended warranties generally don't require you to go back to the dealership — any certified repair facility can complete the repairs.
Also, with the money you save on a pre-owned car, you can add the extended warranty and still save big compared to a new car.
2. Ability to Customize Your New Car
Another benefit of a new car dealership is they have a wide range of options available for the same vehicle, such as trim levels, colous, accessories, and other options. So, if you want the upgraded stereo system, the dealer likely has a higher trim level of the same vehicle with the premium audio system.
While it may seem convenient to head to a new car dealership and just choose the options you want, the internet allows you to search for a used car in your area with the exact features you want.
3. Better Financing Options
Banks often offer lower interest rates on new cars because there's less risk of defaulting them, but the big interest savings on new cars is due to captive financing. Most automakers have their own financing arm, known as a captive finance company, and they can leverage this partnership to offer low- or no-interest financing on their new cars.
However, buying a car is all about the overall cost. If you get a 2.99% interest loan on a $47,332 new car for 60 months, you'll pay $3,572 in interest, bringing the total cost to $50,904. If you buy a pre-owned vehicle at $28,305 using a 60-month loan at 4.99% interest, you'll pay $3,666 in interest for a total of $31,971.
See the Pre-Owned Benefits at Clutch
While you can read all about the benefits of buying a pre-owned vehicle here, you can see the benefits by checking out Clutch's pre-owned vehicle inventory. We not only have a wide range of pre-owned options from all the major automakers, but we also offer easy financing and a comprehensive extended warranty for added peace of mind. Plus, every vehicle we sell includes a free Carfax vehicle history report.
All our vehicles have also been through a 210-point inspection and reconditioning process to ensure they're in top shape. Plus, you can test own your vehicle for up to 10 days and return it within that trial period for a full refund if you're not satisfied.
