Three Ways A Pre-Owned Car Can Save You Money

With the holidays right around the corner, you may be looking for the perfect vehicle to place a bow on Christmas morning. While you may have probably already picked out the new vehicle that you want, a pre-owned vehicle would be a much better choice. Not only will you not have to come out of pocket with as much money to purchase one, buying a pre-owned car will save you money over the long run. Here are a few ways it will do so.


Everyone knows that a new car will begin to depreciate the moment that it is driven off of the lot. It is literally like you are leaving behind a trail of money as you drive. This means that once you arrive home, your vehicle may be worth less than you paid for it.

While it depends on the make and model of the car, it has been shown that a new vehicle can depreciate by as much as 11% the first time it is driven. By the end of the first year, you may have lost as much as 25% of the value of the vehicle. This means that unless you have put down, or paid off, at least 25% of your loan, you will probably be upside down, or owe more than your vehicle is worth at this point. By the time your vehicle is three years old, it could be worth only half of it's original worth. 

When you buy pre-owned cars, much of the depreciation has already taken place and is factored into the price you pay for the vehicle. While it continues to depreciate, it does so at a much slower rate than a new vehicle would. This means that depending on the price you pay at your pre-owned car dealership, you may be able to remain right-side up in your car loan. 

Insurance Costs

The type and value of the vehicle you drive has a lot to do with the cost of your auto insurance. This is because the insurance company is taking a much higher risk if your vehicle is damaged or stolen. 

When you purchase one of the pre-owned cars for sale, you will be paying less for your vehicle, which means that the insurance company will not have as much on the line. They in turn can pass these savings on to you through lower insurance premiums.

Depending on whether or not you finance your vehicle, and the state you live in, there may even be components of insurance you do not even have to purchase. For example, many states will allow you to not carry collision insurance if your vehicle is paid for. 

Taxes and Fees

The total amount of tax that you are responsible for paying the state when you purchase your vehicle is based on the total amount you pay. While many people do not give this money any thought because it is financed in with your loan, it can equate be quite substantial.

For example, in the state of California, you will automatically pay 7.5% on your purchase and depending on where you live, you may be levied an additional 2.5% to your local city or district. In addition to the taxes you will pay, you will also owe a $50 emissions testing fee and registration, title, and licensing fees. On a $40,000 new vehicle, you can find yourself paying more than $4,000 in taxes and fees. 

Do not spend money that you do not have to spend. There are many high quality pre-owned cars on the market that you will be very happy with for years to come. Just think about everything else you can put under the tree with all of the money you save.