The Upside to Buying New: Keep in mind that interest rates on new cars are lower than on used vehicles. And, in general, new cars can be financed over longer terms than used ones. This equation can make a new car cheaper — on a monthly basis — than a used one in many cases.
Now I hear many people say “don’t buy a new car, as soon as you drive off the lot, it looses it’s value” and while this might be true, it’s also true with Pre-owned vehicles. It’s common sense to understand that a New Vehicle looses value when driven off the lot, but why? Well typically a New car’s Value is MSRP (Manufacturer Suggested Retail Price) and when it is driven off the lot the value becomes Invoice. When a Bank looks at the value of a Semi-new Vehicle that has been registered but is not yet valued under NADA book it looks for the Invoice to determine it’s value.
The biggest problem with today’s economy and the reason why many Franchised Makes are going out of business is because they were selling vehicles at MSRP which in some cases, especially with Domestic Brands, there could be a 10,000 dollar difference between MSRP and Invoice plus you add negative equity, over priced Warranty, Gap and other back-end products and you get people buying a vehicle for 35,000 dollars and as soon as they drove it off the lot it is worth 20,000 or less!
So, if you’re smart and purchase a vehicle below Invoice with Rebates and Discounts and avoid paying for back end products that you don’t need except of course, Extended Warranty and Gap (at a good price) then you’ll end up in a very good situation and reap the benefits of Manufacturer Bumper To Bumper Warranties that only cover the first owner, the smell of a Brand New Vehicle and knowing that you are not taking other peoples possible problems.
The Upside to Buying Pre-owned: Even though you might not get the best Interest Rates possible, you can save thousands of dollars by getting a Pre-owned vehicle. Vehicles loose value, that’s a given. When a Vehicle can be valued under NADA, the vehicle starts devaluing monthly and for that reason you can get your hands on demo’s, lease trade-ins, etc. and end up saving thousands of dollars than buying that same vehicle Brand New.
Also, you can end up buying a Pre-owned vehicle that you couldn’t otherwise afford Brand New. Say you’re pre-approved for a 22,000 loan and the vehicle that you want is 28,000 Brand New, you can probably get a Semi-new Vehicle with Low Mileage for the amount of the loan. |
