You might feel jealous if you buy used cars and your friends drive showroom-new cars. Strategically buying used cars can be a wise financial move.
Instead of envying the shiny new SUVs of your friends, make them jealous of your healthy bank account. You can increase your financial stability by buying a used car from a reliable dealer rather than a new one.
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Imagine you have just bought a car. A small down payment has been made and you have committed to making monthly payments for the vehicle. The vehicle’s value drops by around one-third as soon as it is driven off the lot.
It may not seem like much, but being “upside-down” on your car loan might be a problem. However, if you are involved in an accident and your insurance company gives you only the value of the car, you could end up owing thousands.
The dealer may have a new or pre-owned car for sale. The new car can be purchased for $20,000, or you can buy a pre-owned vehicle for $12,000. Experts agree that the pre-owned vehicle is better.
You’ll pay $21,000 if you buy a new vehicle at $20,000 and finance it with 5 percent interest. Then you will own the car for free and clear.
You’ll pay only $12,600 if you finance the vehicle used at the same interest rate. By purchasing a second car, you could save $8,000. You could save more on car insurance premiums because you would likely pay the car off faster.
This would allow you to not only get your car faster but also save money each month and use it for something else.
These savings can be used to pay for big expenses like a house, a child’s college tuition, or they could be used for something more rewarding like a boat or luxury vacation. You can also use the money to save for retirement or pay cash for your next car.