Small Business Brief

Auto Dealership

Is a Pre-Owned Car a Good Investment?

Is a pre-owned car a good investment for your small business? Or is it better to buy a new vehicle? Find out the pros and cons of both options here.

Right after driving off the showroom with your spanking new car, it embarks on a relentless quest to lose as much value as possible. In fact, motoring experts say a new car loses about 10 percent of its value as soon as it leaves the showroom, and as much as 30 percent by the end of year one.

With stats like these, it’s no surprise why pre-owned cars are a hot favorite among at least 65 percent of Americans.

But is that all?

In this article, we are exploring the pros and cons of investing in a pre-owned car.

Buckle up, folks!

Why a Pre-Owned Car Is a Sound Investment

Besides the rapid loss of value thing, here are more reasons to go in for a used car.

More Room to Negotiate

Buying a brand new car from a showroom is a lot like buying stuff from a supermarket. You know very well those price tags are there for a reason, and they cannot be reviewed on your whim.

That’s not entirely correct, though.

If you’re an experienced buyer and know how to push the buttons of those new car salesmen, you can get anything from $1,500 to $5,000 off the price of a new toy. But for many new, naive buyers, the price tag is pretty much what they pay.

On the other hand, buying a pre-owned ride gives you plenty of wiggle room with the seller. Used car dealers or sellers are much more approachable than the often stern-faced new car salesmen, so you can lowball them if you like. You have nothing to lose, after all.

If they reject the offer, you can check out the next dealership.

If you’re a skilled negotiator, you can reach a very attractive deal on a used car, or even capitalize on a desperate seller. In the end, you’ll save some decent change.

Much of the Depreciation Has Already Occurred

Yes, news cars relentlessly depreciate, but that doesn’t mean the depreciation is linear. The car will shed much of its value within the first five or so years, then the depreciation will slow down significantly.

This means if you buy a car in its third or fourth year of use, you can count on it to hold steady and maintain much of its value. When your turn to sell comes, you won’t make a major loss.

Lower Insurance Premiums

This is pretty straightforward.

New cars are costly to insure. In case of an accident or theft, an insurer will need to fork out a sum that’s equivalent to the car’s present value. To protect themselves from this risk, they charge owners a hefty premium.

Pre-owned cars – having lost much of their value – are less risky to insurers. As such, your car insurance premiums won’t be rough on your pockets. You won’t even need gap insurance, which covers the gap between the car’s value at purchase and value at the time of loss.

You Can Opt for a Certified Pre-Owned Car

The #1 worry prospective used car buyers face is the mechanical condition of the car.

You have no way of telling whether the car you want to buy was being driven by a possessed maniac to whom braking and car maintenance are alien concepts. Nobody wants to buy a car that has no pulse; a car that will spend more days in the mech shop than on the road.

The good news is you don’t have to worry about that anymore.

All you need to do is focus on finding certified pre-owned cars. Whether you’re looking for used trucks or used Lambos, you can find ones that have been thoroughly inspected by their manufacturers and declared mechanically fit for resale.

Why a Pre-Owned Car Might Not Be a Good Investment

On the downside, used cars present the following challenges:

You Risk Being Ripped Off

Beginning right off where we left with the pros, buying a used car is a risky fair.

There is a horde of dishonest people in the used car market who swindle unsuspecting second-hand car buyers. If you’re not very careful, you could buy a used ride that looks shiny and handles alright during the test drive, but take it home and the next morning the engine doesn’t purr. The best it does is click – and that’s if you’re a lucky bastard.

Even if you opt for certified pre-owned, the risk of being ripped off is still there. It’s very important to shop at a reputable dealership, and be sure to put that toy through thorough paces before buying.

No Comprehensive Warranties

Like any new machine, equipment, appliance or device, a new car comes with a warranty that typically lasts 3 years. Within this period, the manufacturer will take care of the car’s service and repair needs, free of charge.

How’s that for peace of mind?

Well, some used cars do have warranties, especially if you buy one that isn’t more than 3 years old. For most people, though, buying an older certainly means making do without a warranty, or purchasing one independently. This is an additional cost.

Bad for the Environment

79 percent of Americans consider themselves environmentally conscious.

If climate change matters to you, buying a pre-owned car qualifies as a bad investment.

You see, new cars not only have the latest tech, but are also designed with environmental friendliness in mind. They emit less carbon.

Even though you can find newer model pre-owned cars, many on the market are a couple of years old, so they were manufactured without a laser focus on environmental fuel efficiency.

New or Pre-Owned? Our Verdict

We’ve fleshed out all the information you need to make a smart decision. However, you could still be at a crossroads.

To settle those doubts, you should look at your financial position. If money isn’t one of your worries, buy new. After all, new cars are safer, more fuel efficient and high tech.

But if you live paycheck to paycheck like most people, buying pre-owned is the better investment. If you buy well, you’ll get a car that will not only go easy on your wallet or purse, but also give you several years of excellent service.

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