Three Common Myths And Misconceptions About Buying Used Cars

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When it comes to taking care of your home and family, a huge priority should be taking care of your money. A few years back, we found ourselves really struggling to make ends meet, and I knew that I had to do something in order to make things work. I started cutting back a little at a time, and I was able to find some extra money in the budget to start saving. This blog is all about creating an excellent financial plan and making things work with what you have. I know that these tips helped me, and I am confident they can make a difference for your family.


Three Common Myths And Misconceptions About Buying Used Cars

22 October 2014
 Categories: Finance & Money, Articles

If you're in the market for a new (or new to you) vehicle, you may be wondering about the best choice. Should you purchase new, or used? Would leasing be a better option? What about a warranty? If concerns about the condition or reliability of a used vehicle are limiting your selection to new car lots or lease advertisements, keep reading -- three of the most common misconceptions about purchasing a used vehicle are debunked below.

Myth #1 -- Used cars are a mechanical gamble.

One of the most common fears gripping used car buyers is that the seemingly pristine car they drive off the lot will immediately collapse into a pile of rusty bolts. Indeed, the fact that many used cars are sold "as is" -- with no warranty -- is enough to make the average buyer nervous about the potential cost of needed repairs and maintenance.   

However, there are several ways to prevent this fear from becoming a reality. First, when shopping for a used vehicle, bring along a trusted friend or family member with mechanical experience. You may even be able to request that you "test-drive" the car to your mechanic for a checkup. This person should be able to look over the car and point out any obvious defects or flaws, which can be factored into the purchase price you wish to offer. 

Second, check out an aftermarket warranty. Many used car dealerships offer limited warranties on the cars they sell, or you may be able to purchase a warranty through a private insurer. However, be sure to read the fine print -- some warranties marketed as having "bumper to bumper" coverage have a number of exclusions or deductibles which may factor in to what you will pay out of pocket for repairs.

Myth #2 -- Used cars don't hold their value.

On the contrary, new cars depreciate much more quickly than used ones. Often, the drive home from the new car dealership will be one of the most expensive drives of your life -- your new car is suddenly worth thousands less than you paid, now that it is officially classified as "used."

However, by purchasing a late-model used vehicle, you can take advantage of this depreciation loss while still enjoying an essentially new car. Many of these vehicles are still covered under the factory warranty.

On the other end of the spectrum, many older used cars have hit a depreciation "bottom" -- a point at which they no longer decline in value. Purchasing a car near this point means that you are very unlikely to lose any money on the investment. Barring an accident or extensive necessary repairs, you may be able to sell this car for close to its purchase price, even years and thousands of miles later.

Myth #3 -- It's harder to finance a used car.

Although auto dealerships often advertise a temptingly low teaser rate for new vehicles, it is possible to finance a used vehicle at a competitive rate -- whether through the dealership or your own bank. More than half the used cars purchased in the United States in 2014 were financed, with the average used vehicle loan totaling more than $18,500.

Before trying to finance a used car, do your research. If you already have a particular kind of vehicle in mind, make sure there are no loan restrictions on the year or mileage of your vehicle -- some lenders will not lend funds to purchase a vehicle that is more than a certain number of years old, or has more than a certain number of miles. Other lenders may charge higher interest rates for these loans.

Also investigate any potential interest rate discounts. If you're financing through a private bank, you may be able to get a lower interest rate by agreeing to have payments automatically debited from your bank account, or for opening a new checking or savings account with this bank.

For more information, head to a used car dealership, such as, Neil's Finance Plaza Inc.