This is reassuring news at a time when everything seems to be getting more expensive.
Key Points Although used car prices skyrocketed not long ago, they’ve finally come down. Buying a used car has several advantages, one of which is cheaper car insurance. Before you buy, research a used car’s history to make sure it’s safe to drive.
There was a point not too long ago when the inventory of used cars was so low that buyers scrambled to buy previously driven vehicles. This has pushed up used car prices.
But fortunately, used car prices have fallen sharply. In January, the cost of used vehicles was 11.6% lower than a year earlier, according to this month’s Consumer Price Index.
For some people, buying a used car is not ideal; They would rather have a new vehicle with updated features. But buying a used car could benefit you financially in more ways than one, so it may be worth forgoing the new car — and buying a used one instead.
Overall less spending
Consumer lending rates have been rising across the board these days in the wake of Federal Reserve rate hikes. Therefore, it is not the best time to sign a new car loan. The benefit of buying a used car is that your car loan payments may be lower than if you were buying a new car since you’re likely to be spending less (possibly a lot less) on a vehicle you’ve previously owned.
Also, a used car can be less expensive to maintain and repair. Those fancy new car features you’ve been craving? They can add up to higher bills over the years. An older car can mean fewer bills — and take less of a strain on your savings account.
Your insurance costs could also be lower
Auto insurance companies consider several factors when setting premium rates. One factor is, for example, how much experience you have as a driver and what your driving experience is like. Another factor is where you live. If you live in an area with a higher crime rate, you’re likely to pay more for auto insurance than if you lived in an area with a lower crime rate.
More: Check out our picks for the best car insurance companies
Likewise, the cost of your car will factor into the cost of your car insurance. The reason? If your car is totaled, it will cost your insurance company more to replace a new car than a used one. So if you are willing to buy a used vehicle, you may end up getting lower car insurance premiums.
Is a used car risky?
When you buy a used car, you take certain risks – namely that problems with that vehicle lurk. To ensure you’re buying a used car in decent condition, research its history before you buy it. One easy way to do this is to look up the VIN (vehicle identification number) on the National Highway Traffic Safety Administration website.
Another good option is to take a used vehicle you’re looking to buy to a mechanic before making the purchase (just make sure it’s a mechanic you trust). That way they can check it and tell you what condition it is in.
There is a certain comfort in driving off in a brand new car. But the cost of doing so could be prohibitive these days, between higher car loan payments, maintenance and insurance costs. So a used car can be a much better choice – especially now that prices have come down.
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