Let’s look at some advantages and disadvantages of buying second-hand:
If you pay an average of $569 a month to finance a new vehicle, you spend $6,828 a year. If you have a 70-month deal and keep the car to the end, it will lose a lot in value due to depreciation, so you will not be able to recover much of the almost $40,000, that you only paid for owning the car.
Paying in cash for a $5,000 used machine does not mean a monthly loan. Since the car is likely to have a high mileage, maintenance costs are most likely above average. The average maintenance cost for cars in 2019 was almost $1,190 per year, but can be significantly higher on older models.
If you lose a job or suffer another major setback, you may not be able to make car loan payments. You can lose your car if it is financed, it is not bought with a car in cash.
The cost of insurance for a new car is higher, you need to have insurance to repair the car if you have an accident. If you own a used car, you can forego collision insurance and save extra money.
Here is a quick comparison:
A new car is delivered with high financing costs, but low maintenance costs, especially under warranty. A used car bought with cash can have high maintenance costs, but no monthly payments. If the $5,000 used car cost $2,500 a year to maintain and maintain for six years, it would cost $20,000. After 70 months, two months less than six years, the new car being funded will cost $39,830, plus maintenance costs.
You could easily save more than $20,000 in six years if you buy a used car for $5,000 instead of a new car with a monthly payment of $569. It is money that you could invest, pay your debts or buy a house.