Last year, I was stunned to tell you there were many situations where buying a new car was preferable to buying a couple of years old used car. But that’s been the reality because of a variety of market distortions.
Edmunds.com has now updated some breakthrough research done in the spring of last year, where they came up with a dollars and cents value of exactly how much you can save buying new vs. used. Their updated guide compares 1 year old vehicles to brand new rides and takes into account the cost of financing and interest on a loan. (It is a model-specific list, so you won’t find numbers for every car, yet it’s still a pretty lengthy tally.)
Historically, cars lost so much value the minute they drove off the lot that a used car was almost always a better deal. But there has been so much upset in the market over the past few years. First, Cash for Clunkers continues to distort the marketplace. In addition, the woes of GM and Chrysler meant that fewer cars went into short-term leases. As of this moment, GM is running the largest incentives in the marketplace on new product.
In addition, there’s an almost unprecedented thing happening right now where dealers may be doing their own ultra-low financing. Traditionally, interest rates on dealer loans had been much higher than what you’d get at a bank and much, much higher than at a credit union.
One key rule, though: Always get pre-approved for a loan elsewhere in case the financing the dealer is dangling in front of you blows up!