By now, like many Americans, you have experienced what is known as the sticker shock of new-car prices. These days, the average new car costs nearly $22,000, and even that whopping chunk of change doesn't get you into anything more exciting than a base-level family sedan. The average used-car price, however, is about half that of the average new-car price. For every new car purchased in this country, seven or eight used cars are bought and sold, a ratio that continues to widen every year as new-car prices continue to increase. The times, they are a-changing.
Leasing is another recent development designed to make new cars more accessible to more people, but off-lease cars have simply added to the nation's supply of affordable, well-maintained, low-mileage used cars. Lease a brand-new car, and among the other fees, you pay for its depreciation -- which can be equal to the entire value of that car three or four years from now. However, at the end of a lease you are left with nothing, whereas after financing a used car you get to keep it and perhaps resell it in a few more years for half of what you paid.
Buying the right used car can save you thousands of dollars. First of all, it's important to keep in mind that a well-maintained car - any car - will generally depreciate from its current value by about 50 percent every four years. Of course, that means that the biggest hit occurs within the first four years of a car's life, just after it was purchased at its most expensive price. That $19,000 bargain-basement new car you found today - properly cared for - may be worth only $9,500 in four short years. Buy an older model now, however, and you'll pay $4,750 less in depreciation over the same span of time. Think of used-car ownership as giving yourself a $1,200 raise every year. Then just invest that money in a Roth IRA, watch it grow at 15 percent a year, and wave to your kids as you send them off to college, paid for with the money you've saved by not buying new cars all these years. Alan Greenspan would be proud.
In the meantime, cars are becoming more and more reliable, meaning that the average life of a vehicle today is much higher than ever before, so a four-year-old car can still provide the owner with years and years of satisfactory, low-cost performance. But you probably already discovered much of this on your own, scouring new- and used-car dealerships, the classified section of the newspaper, and the local park-and-ride for a reasonably priced used car. You're here to learn some tips that will make purchasing a used car that much easier. Now that we've confirmed that you're making a wise decision, let's talk about making a decision wisely.
