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Roman Young
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How Much Does It Cost To Buy A Used Car [2021]

The average one-to-five-year-old car cost an average of $33,582 in December. While this number seems high, used car prices have actually been falling after two years of year-over-year price increases as a result of the global microchip shortage. According to a recent analysis of over 1.9 million used car sales, used car prices decreased 3.0 percent in December 2022 compared to the previous year.

how much does it cost to buy a used car

First you must choose between buying a new car and buying a used car. A new car may cost more but will come with a longer warranty and no history of abuse or neglect. However, new cars depreciate (lose value) almost immediately when they leave the new car lot, which means that if you can find a well-cared-for used car, it might be a good bargain.

Once a car is yours, it needs to be registered with your local government. Dealerships handle much of the process on your behalf, and rules vary by state. The basic fees are tax, title and license (TT&L) fees, but additional fees may apply depending on your state of residence. California offers a calculator to estimate the cost of registering a vehicle there.

Monthly payments are based on the average interest rates for new and used vehicles as of Q1 2022 and a 60-month term. Maintenance and repair costs for the first year of ownership are according to Edmunds.

Multiple costs are often cheaper when you buy a used vehicle rather than a new one. Everything from the price of car insurance to dealer fees will be less expensive when you buy a used vehicle. Depending on the vehicle you choose, the purchase price will also typically be less for a used car.

How does the cost of buying a new car compare to leasing the same car? And if you decide to buy a used car, how much would you save over buying or leasing a new car? Finally, what impact will those decisions have a few years from now when you're ready to shop again?

Leasing: The average lease cost is based on a compact SUV that sells for $28,633 and has drive-off fees of $1,981. For the lease's interest rate, better known as the money factor, we've used the average amount: 0.009583. This results in a $360 monthly payment for three years. We used the same numbers for the second three-year lease.

In terms of out-of-pocket spending, leasing costs $2,584 less over six years than buying a new car, excluding any maintenance and repair costs the new car might incur. The out-of-pocket cost of buying a used car is $5,547 cheaper than leasing and $8,131 cheaper than buying a new car. We have also excluded any repair costs for the used car.

When we deduct that used car equity from the out-of-pocket costs of acquiring the car, the long-term cost picture changes. Buying new becomes a better deal than leasing. But buying used is still the thriftiest way to go.

  • Length of ownership: For new and used cars, we used the current average car-ownership period of 79 months, or just over 6.5 years.

  • Length of lease: Most people lease for three years. We assumed the costs involved two lease cycles (72 months) to better match the 79-month ownership period for new and used cars.

  • Average new car loan term and interest: The average loan term for a new car in early 2021 was 68.3 months, or just under six years. We assumed a 72-month new car loan, which is close to the 68-month average and matches the length of leases in our leasing example.

  • Average used car loan term and interest: The average used car loan is about 68 months, practically the same as a new car loan. We used a 72-month loan to remain consistent with the other scenarios.

  • Source of the information: For each financing method, the average cost of the vehicle, interest rate, down payment and monthly payment are based on Edmunds data covering thousands of recent transactions across the United States.

There may be more maintenance required on a used car that's out of warranty, and its financing may be a bit more expensive. But, choosing a vehicle with a good predicted reliability rating and low ownership costs can help you saa tremendous amount of money.

Fortunately, used car buyers have more resources today than ever to learn about repair costs, frequent problems, and reliability. Information about certified pre-owned warranty coverage, average costs for common repairs, and predicted reliability ratings can be found in our used car reviews. You can see what issues drivers are dealing with by checking out dedicated owners' websites, such as for the Honda Odyssey minivan. If owners of a particular car are having problems, they're probably talking about them somewhere on the internet. Just search for the car's name and "problems" in any search engine to get an idea of common issues.

An oft-overlooked factor you should consider when shopping for a used car is the cost of auto insurance. Prices can vary substantially based on the model you choose. Our guide to car insurance is the place to find the cheapest insurance with the right coverage for your new-to-you vehicle.

When you buy a pre-owned car, you can get options and features at a fraction of the price they'll cost you on a new car. Option packages and higher trim levels don't command nearly the same premiums on used vehicles as they do on brand-new cars.

Not sure if you want to take the leap into a used car with no warranty coverage? There is a used car option that does have factory warranty coverage. Manufacturer-certified pre-owned cars (CPO cars) offer a blend of used-car affordability with manufacturer-backed warranty coverage. They're usually low-mileage cars that are just a few years old, with service records and no history of accidents. They are often cars returned at the end of leases, dealership service loaner vehicles, or vehicles driven by dealer or automaker staff.

Another benefit of automaker-sanctioned CPO programs is access to special used car financing deals. Used car loans typically cost more than new car financing, but a CPO financing deal with a low interest rate can dramatically cut the cost you have to pay on your auto loan.

Shopping and applying for used car financing is similar to getting a new car loan, but there are some important differences. Because lenders consider used car loans somewhat more risky than new car loans, you should expect to pay a higher interest rate. Lenders typically consider used car loans riskier for several reasons, including the fact that their values are less predictable. It's the car's value that acts as collateral on the loan. Used car buyers also may face higher repair costs, which can compete with making timely car payments.

Just as there are many places to get used car financing, there are various places where you can purchase a used car. Each has its strengths and weaknesses in terms of service, ease, and price. Like the car you want to buy, you should strive to learn as much as you can about the dealership or private seller trying to sell it to you. Checking the company out with your local Better Business Bureau or consumer protection agency is an easy way to find out about their track record. You don't just want to look at the number of complaints, but how they responded to correct the problems.

Evaluating a used car means using all of your senses (except maybe taste, because that would be gross). It should also include your sense of intuition, which will help you determine if something doesn't seem right.

Good mechanics will not only find issues that aren't apparent to most car shoppers; they'll also be able to estimate how much the repairs would cost. Their experience should tell them what problems are common to specific models and identify when collision repairs and periodic maintenance have been performed correctly. They will have access to databases that identify common issues so that they can focus their attention on those areas.

Buying a manufacturer-certified used car typically gets you factory warranty coverage, eliminating the need to immediately purchase an extended warranty. Other used vehicles are usually sold as-is, with no warranty past the car's original factory warranty. Once that warranty ends, or if it is already finished, you'll be on your own for repair costs. Consumer advocates almost universally advise against purchasing extended warranties. If you decide to anyway, be sure to compare the products available in the marketplace, their prices, and the companies behind them.

A guiding principle we follow at U.S. News & World Report is that you can't get a good deal unless you're getting a good car. That's why we've designed our new car reviews to answer the questions shoppers have when they're in the car-buying market. Our new car rankings and reviews are based on the country's top automotive journalists' consensus opinion, blended with quantifiable information about safety, predicted reliability, and other factors. Our used cars rankings add the cost of ownership to the list of factors we include. We don't accept expensive gifts or travel from automakers so that you can be assured of our impartiality.

When trying to determine how much is insurance for a used car, it helps to know the priciest vehicles to insure. These are the most expensive used cars to insure in 2023 with used car insurance rates by model.

Before getting quotes, map out what levels of comprehensive, collision and liability insurance you want. One question to consider is how much is full coverage insurance on a used car. This includes your liability insurance.

Value: Whether new or used, the value of the vehicle is critical to insurers when calculating your collision and comprehensive costs, since they may need to cover the cost if there is ever a total loss.

When the pandemic hit, automakers shut down factories or ran them with a much smaller workforce, limiting the number of vehicles produced. As the pandemic has started to recede, demand for vehicles has increased dramatically, but dealers continue to have an inventory shortage. That has caused a price hike for both new and used vehicles. 041b061a72

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