So you've made the decision that it's time for a new car - but with prices what they are today, you think maybe getting a used car is the way to go. You're not alone - lots of consumers are making the same decision. After all, why pay for all that depreciation that occurs the moment you drive off the lot? Is the "new car smell" really worth it?

 

But how do you navigate the world of used cars? Not only are there ample online mega-stores, but practically every dealer out there has at least a few used cars on the lot, not to mention online classifieds and buying direct from the owner.

 

We've put together a few tips that might help when looking for a used car. These aren't the only things to look for, and we'll keep updating this post over time. But to start, consider the following:

 

 

Sounds obvious, right? But the key is to check the ratings and satisfaction scores for used cars versus new cars. A certain brand or model might perform perfectly well for the first few years, but then have a history of maintenance issues. Notice any makes or models that always seem to have a headlight out? Chances are, if you buy the same brand, you'll have the same problems.

 

 

You've seen the commercial, but really, it's a good idea. Every CARFAX report checks for title problems, ownership history, and accidents. If you've narrowed your choices down to two cars, and discover that one of them has been in an accident, and had three drivers, it helps make the decision a little easier.

 

Some of the things a vehicle report can find for you:

 

 

 

You may have heard that a new car loses thousands of dollars in value as soon as you drive it off the lot. Not many people sell a car with only a few miles on it, but if you had to, even if your car only had 100 miles on it, you'd still lose thousands in value compared to the new car sticker price. The rate at which the car loses value year over year is the depreciation schedule or depreciation curve.

 

There are multiple methods for calculating depreciation, but simply put, a car loses a high percentage of its value in the first year, and continues to lose value over time, but at gradually declining percentages year after year. Depreciation for automobiles is generally around 15-20% per year. But in that first year, it gets even higher - up to 30% or more.

 

As an example, let's take a car that costs $30,000. A simple depreciation for that car is below.

 

New car	$30,000
After 1 Year	$21,000
After 2 Years	$17,850
After 3 Years	$15,173
After 4 Years	$12,897
After 5 Years	$10,962

 

As you can see, a new car can lose half it's value in only a few years! But in those years, a typical driver might only go 30 - 40,000 miles, and possibly less. After only a few years, the car might seem close to new - and drive like it too.

 

Here's the real kicker, and one of the main reasons buying a used car makes sense:

 

 

If you are old enough to remember cars from the last couple decades of the 20th century, I'm sure you can picture it - rust spots, fenders falling off, electrical systems going... But in the last 20 years, and particularly in the last decade, the state of automobile manufacturing has increased to the point that some manufacturers offer 100,000 mile powertrain warranties. It's not clear if we're at an inflection point where cars will start to retain their value longer because they are inherently better, or if market conditions have driven the price of used cars up recently. Either way, there's still a great opportunity to save lots of money and get a car that is practically new.

 

Stay tuned for our next post where we explore three key techniques you can use to get the most when buying a used car.