Guide To The Economics Of Car Buying- Debate On The Used and New Car Choice

Guide To The Economics Of Car Buying- Debate On The Used and New Car Choice

Financial matters always have been in the limelight in a rigid economy. You need to make sure that your money is spent wisely to give your family the best possible protection in case of a bad economic situation. Coming in the context of buying a new or a used car, there are numerous costs involved in the play. It is true that a used car comes at a lower price than that of a new car, but it is reliable to invest in a car that has already been run for miles? Where can you best spend your money during the car sales? This article aims at giving some rest to this ongoing dilemma of yours.

Used cars don’t depreciate at a rate experienced with new cars

New cars have always been able to add on to your status symbol, but used cars serve to a great extent in this respect as well. You need to invest in a way ensuring that you meet minimal or no loss at the end. Say you come across a for-sale used Hyundai i20 and are thinking of buying it. While it costs you some $16,000, the new model is available at $20,000. The difference here isn’t much for you to go for the new variant, but with the new one, you can expect a depreciation of $2000 as soon as you take it out from the showroom, on the road.

Calculation of the Compound Interest with New cars that make used cars worth buying

In the case of used cars, the rate of depreciation is low. Leaving the same, here is something you need to take into concern about a new car loan scheme. For your new car that costs around $20,000, you are making a down payment of $2000. Now the remaining $18,000 is being financed by loan for six years at a rate of 6% per. So what is the total amount of the new car for the loan span? If you add up the interest and the loan charges, you will find that $18,000 is turning up to somewhat $26,000. This is about $8,000 more. Hence the total amount you are paying for the new car being financed by the loan is $28,000 which is $8000 more than its actual price.

Other financial benefits you enjoy with used cars

If you go for used cars, the cost that you have to pay for it will be low, and hence the total loan amount along with the interest and financing charges will come very much within your budget and will also make sense. Such is the power of CI or compound interest. Apart from this, with a used car you also enjoy:

  • Low maintenance
  • Refinancing facility.


So if you are still wondering whether to go for a used car or a new car and also thinking of financing the same by loan, it is recommended to go with used cars, provided you want to save your hard earned money.

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