Happy, young couple driving car
Happy, young couple driving car

4 myths about used cars

When you’re buying a car, it pays to question the conventional wisdom

Whether you’re looking for a truck to haul farm equipment, a crossover hybrid to shuttle the kids, or a compact sedan you can wedge into a parking space, you’ll have plenty of options to choose from, both new and used. Before you head over to the dealership, though, it’s worth considering whether you need that new-car smell or if you might be able to find some better value in a vehicle that already has some miles on it.

There are decent arguments for both options, but there are also many myths that are worth better understanding. Here are four common excuses for buying new that aren’t entirely true.

Myth #1: You can’t get a bank loan for a used-vehicle purchase.

While it’s true that the age, mileage, and value of a car can affect your ability to get an auto loan, people finance used vehicle purchases all the time. If you’re buying used to get more for your money but cannot pay the full amount in cash, you can go to a bank to see about financing, including getting pre-approved for a loan. The process is the same as if you were financing a new car: You have to consider the monthly payment, the total cost over the loan’s life, and the possibility that the loan will outlast the vehicle, to decide whether an auto loan will work for you.

Myth #2: New cars are a better investment.

Some people think the resale value of a new car is higher than the resale value of a used car. The idea is that the premium you pay for a new car will be worth it when you sell it or trade it in because it’ll command a higher price than a used car would.

But given how much a new car depreciates in its first years of ownership, a used car may be more likely to retain its value than a new car. In any case, treating your vehicle as the kind of investment you’ll one day cash in on is a recipe for disappointment. In general, cars go down in value over time rather than up, and eventually, they quit working altogether.

Myth #3: Used cars cost more when you figure in maintenance costs.

Used doesn’t necessarily have to mean abused. Judge each used car, truck, or SUV on its own merits. A vehicle history report should list damage from accidents and extreme weather, previous owners, odometer readings, and periodic service and repairs. You can also request a service history separately if there isn’t much information in the report. A pre-purchase inspection from a third-party mechanic can help you catch red flags that the vehicle history report might miss.

Of course, every vehicle has a lifespan, and after enough time and mileage, components will start to fail on any car. Consumer Reports has found that yearly maintenance costs typically begin to rise significantly when a vehicle hits the 10-year mark.1 Knowing that’s the case, you wouldn’t expect to pay much more in yearly maintenance for a three-year-old used car than you’d pay for a brand new one.

Myth #4: Used cars cost more if you’re financing.

This myth stems from the tendency for used-car financing to come with a slightly higher interest rate. But a used-car purchase can be a great deal even when you’re borrowing. Because new cars lose a lot of their value immediately, a slightly used car often comes with a big price discount, which could outweigh the expense of a marginally higher interest rate.

Whatever ride you’re looking for, it’s worth making sure you check out used options as well as new to get the most car for your money.

1 Consumer Reports 2019 Annual Auto Reliability Survey. https://www.consumerreports.org/cars-car-reliability-guide/

The information on this page is accurate as of January 2021 and is subject to change. First Financial Bank is not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving bankatfirst.com. First Financial Bank is not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender.

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