Buying a Car

When purchasing a car, the debate usually begins with “should I buy a new or a used car?”  While there are advantages and disadvantages to both, the overall best buy is a two to three year old pre-certified used car.

The cost of the car is not the only thing to consider as you make your decision.  How much you’re going to pay for insurance, registration, maintenance and gas are just as important.  

There are many different opinions as to how much a car depreciates.  I would suggest you use the 20% per year rule as a guideline.  For example, if you purchase a new car for $20,000 that same car two years later will cost $12,800.  That means you already are $7200 ahead of the game by purchasing the two year old car. 

Insurance and registration costs are based on the value of the car.  If you purchase a used car, your insurance and registration will be less than a new car.  These yearly expenses can definitely add up over the life of the vehicle.

Gas mileage for a new car versus a used one will be about the same.
 
Maintenance is the one advantage, cost-wise, that a new car would have over a used one.  The logic here is that the newer the car, the less mechanical problems it will have.  But would this slight advantage outweigh the savings on purchase price, insurance, and registration?  Hardly!

Many people shy away from buying a used car because of the risk.  Purchasing a pre-certified used car from a reputable dealer takes a lot of the risk out of the equation.  Some of these vehicles are still under factory warranty. 

Budgeting for a car is important if you want to avoid monthly payments.  Establish a car category and set a designated amount each time you get paid.  Let it accumulate until you have enough money to buy a used car.