The Changing Perception of Used Cars
Not long after the first cars were sold in the U.S., in the 1890s, some of their initial owners were ready to “trade up.” By the 1930s, industry analysts worried about a “used car glut” that could threaten the market for new models.
Today, the “typical used-vehicle buyer is representative of mainstream America,” said Tom Webb, chief economist for Manheim Auctions. Yet, after decades of being viewed as “buying someone else’s troubles,” significant changes are occurring. Increased professionalism among dealers and more available information on a car’s history have made secondhand cars less risky than they used to be.
The Inherent Gamble and How to Mitigate It
Still, every used car is a gamble, at least to some extent. Even the most meticulously maintained car could break down shortly after purchase.
- Some folks like the risk-taking aspect.
- Others seek greater assurance, for whom certified pre-owned (CPO) programs might be the answer.
- A thorough inspection by a third-party expert is always a wise investment.
Shoppers who tend to worry incessantly might be better off with a new car or a certified pre-owned example.
Market Realities: Supply, Demand, and Value
Late-model cars are generally the best bets, but that’s not necessarily the case at present. Because of sluggish new-car sales beginning in 2008, coupled with shrinkage of leasing, the supply of high-quality, low-mileage late models has sunk appreciably. Therefore, prices have remained high.
As new-car sales regain strength, the used-car supply will grow too, likely easing prices. But that won’t happen for a while yet. Meanwhile, if a tempting late-model cannot be found, older and middle-aged used vehicles may be the best value choices.
Cost Comparison: New vs. Used
| Vehicle Type | Average Price (2010 Data) | Key Consideration |
|---|---|---|
| New Vehicle | $29,650 | Subject to significant depreciation in first years. |
| Used Vehicle | $16,418 (up from $14,995 a year earlier) |
Initial major depreciation hit already absorbed by the first owner. |
Source: National Automobile Dealers Association (NADA)
Weighing the Pros and Cons
Advantages of Buying Used
- Cost Savings: The most obvious benefit, with used cars costing significantly less on average.
- Less Stress Over Minor Damage: Being “less than perfect” from the start means new nicks and scrapes are less painful.
- Access to Higher-End Models: Affluent buyers can often afford a luxury or specialty model that would be out of reach new.
Disadvantages and Risks
- Uncertainty about Condition: The number one drawback, requiring diligence and potentially an independent inspection.
- Higher Mileage and Age: Older cars are more likely to develop mechanical and electrical problems.
- Financing Challenges: Buyers with imperfect credit may face high interest rates, as explored in later parts of this guide.
- Less Negotiating Power: With high demand for clean late-models, prices can be firm and even approach new-car levels.
Making the Smart Choice: Late-Model vs. New
Late models tend to be more reliable, have more safety features, and may be better equipped. However, the decision is no longer straightforward.
Tom Kontos of ADESA noted that the average new-vehicle incentive was over $2,500 in 2010. “In some cases, taking advantage of that incentive could make the new car a better value than an equivalent year-old one,” he stated.
The golden rule: Before buying a late model, find out what it cost when new. Unless the used selling price is appreciably lower, turning to the new-car department—or a CPO vehicle—may be the wiser course.
Buying a used car remains a fundamentally smart financial decision for most, offering entry into ownership and access to better models for the money. The key is informed, cautious purchasing. By understanding the market forces, honestly assessing your tolerance for risk, thoroughly researching any vehicle’s history, and getting an independent inspection, you can navigate the used car market with confidence and find a vehicle that offers tremendous value for years to come.
