Everyone likes saving money. With most households spending upwards of 20 percent of monthly income on cars or trucks, it's important to think about budgeting when it comes to that auto purchase. The good news is, there is no shortage of ways to save money on vehicles. The easiest and most effective way to save money on your car is by buying it slightly used, or nearly new.
But first, make sure you're covered with an affordable car insurance policy.
Why Buy New When Slightly Used Will Do?
A vehicle loses nearly 20 percent of its value during the first year it is driven. That's a huge loss in such a short period, and the reason why so many car enthusiasts joke about the "$5,000 drive out of the dealer's parking lot." After that first year, the car's value depreciates more slowly for a time. When a car reaches its fifth or sixth year, the value drops quickly again, making it a cheap deal for any potential buyer.
The most fiscally aware consumers buy a car that is 1 or 2 years old, allowing the first owner to take the biggest depreciation hit. Then, before the second large loss in value occurs at around five or six years, they sell it off for the next person to take the hit. Pretty ingenious, right? So how do you find a car that's nearly new and ripe for the picking?
Determine Your Car Needs
Ask yourself what type of vehicle meets your needs. Do you really need an all-wheel drive vehicle capable of going off-road? A little self-examination will point you in the right direction:
- How many passengers do you typically carry?
- Do you want an automatic or manual transmission?
- How much cargo space do you require?
- What types of safety features are important to you?
- What kind of mileage are you looking for?
Once you have identified what you're looking for in a car, be sure to keep your mind open to various manufacturers of similar vehicles. You may be surprised to learn that one carmaker can meet your needs nearly as well as the next but offer a much more appealing price.
Research Your Car's Resale Value
Some cars hold up better than others do over time. Some depreciate much more quickly than their counterparts do. The best way to track how your car will perform is to check the Kelley Blue Book value. The 2014 prestigious Blue Book Best Resale Brand Awards went to Toyota and Lexus for having the most models with the best resale value.
You don't have to stick with these two brands in order to secure the best deals on new cars, however. Plenty of other car manufacturers have specific models that hold up over time as well. Honda has typically out-performed in the resale value category in past years.
American drivers generally put around 12,000 to 15,000 miles on vehicles each year. If you can find a 2-year-old car with fewer than 30,000 miles, that's preferable to one with more miles logged.
Take Good Care of Your Car While You Can
Once you have found a killer deal on a nearly new car, it's important to perform regular maintenance on it to keep it running strong. At this stage in its life, it's probably a good idea to install new tires, to have the wiring and belts checked and replaced if needed and to regularly change the oil and filters. Keeping your car in good condition during its "Goldilocks" years will ensure you will get the most out of it when you sell.
Another thing to keep in mind is car insurance. This might seem like a no-brainer, but if you get into a collision with your car and need to get it repaired, having adequate coverage pays off quickly. Going to the mechanic for fixes to the car can be completely comped with the right coverage in place.
You are required to carry liability coverage by law, but that won't help you if you're in an accident, or something strikes your car, like a tree during a storm. You'll need a comprehensive and collision insurance package for that. Independent agents can shop around for you to help you get the deal you need. Independent agents are ready to help.
Unload It Before the Value Drops Again
Once you've enjoyed the car during the best years of its life, it's time to sell it or trade it in before the depreciation puts another large dent to its value. That is typically within five or six years and when you have to start making major repairs.
Mechanic Nate Benoit knows when a car is on its last legs.
"I started buying slightly used vehicles about 15 years ago and I haven't bought a new car since," Benoit said.
Finding a good, trustworthy mechanic is a must for the slightly used car buyer. They can track your car's repairs and give you an idea of when the car may start becoming more expensive than it's worth. But you don't have to be a motor head to purchase your vehicles in this manner. By keeping track of the Kelley Blue Book value on your vehicle, you can be ahead of the game.
Unless that new car smell is worth $10,000 to $15,000 to you, buying slightly used is the way to go. Just make sure you're covered with an affordable car insurance policy.