How Buying Used Cars Can Save You Big

We all have heard the old story about how driving a new car off the lot will cause the car to loose 2/3rds of its value instantly. Everyone knows this, but people still buy used cars constantly. If people understood that depreciation will actually cost you more over the life of the car than the gas will, people might behave differently.

Let me tell you a story. I drive a 1990 Honda Accord with over 200,000 miles on it. I spent $1700 6 years ago, and its worked for me that entire time. It fuel efficient, is big enough for most of my needs, and as been generally reliable all things considered.

As you might expect, some repairs have been necessary. I've installed a new alternator, replaced brake pads, and swapped out old leaky coolant hoses. On the whole, though, I've probably put only $800 into the car over the years (not including gas, of course).

My insurance is cheap. Since the car is so old, I don't need comprehensive and collision insurance, which save me a lot on my monthly premiums. On the whole, this car is amazingly cheap. Is it sexy? Heck no, but it does it job while letting me spend my money on more important things.

Let's think about what a new car would cost to get us the same point A to point B functionality. Say you spend $20,000 or so on a new Accord. Right off the bat, you're out more than 10 times the price of my old Honda. Add more to that if you didn't pay in cash, and took out a loan.

You're going to need insurance. Since you just bought a shiny new car, you'll need both comprehensive and collision insurance, which can be high, especially for younger drivers in newer cars.

A new car still needs to be maintained, which will cost money. All this time, the car will be loosing significant amounts of its value. Do you think this is a good way of spending your hard earned cash?

Buying used will allow you to save a lot of money on the expense of owning a car. Imagine how much more free your monthly budget would be in the absence of expensive car payments and high insurance premiums. Buying a cheap used car buys you financial freedom.