Buying Used vs New: The Great Debate
Daily Slideshow: Every accountant will give you a different opinion on whether to buy a new Lexus off the dealer or a used one. First, you need to ask yourself some important questions and think short as well as long-term. You got to look at factors such as insurance rates, sales taxes, registration fees, and license fees. Plus, other expenses like fuel, regular and unexpected maintenance costs. And you need to evaluate the pros and cons of a new versus a used Lexus.
Depreciation Value After The Car Leaves The Dealership
Buying a used car, by implication, means that you're getting something that has had a previous owner or user. Whether the previous owner had leased it, financed it or bought it outright is immaterial at this point. You're now cutting a deal on it, which means the initial depreciation of the first owner(s) should be reflected in the asking price. It also means it will continue to depreciate during the time you own it. Depending on what options it has, how well its been maintained or how desirable it is, the rate may not be as steep as you may think, but you have to do your homework as to what conditions will lead to a slower depreciation.
Depreciation In Relation To Mileage
It's always good to get the lowest-mileage car as you possibly can, but that also means a higher price tag compared to an average-driven one. If you put on more than 15,000 miles in a year, you're getting into accelerated depreciation territory. How many miles do you plan on racking up during the time you own the car? Is there a second vehicle in the stable that you use for tasks like commuting or driving the kids to school? Do you do a lot of long-distance driving? The more miles you pile on in a set period of time, the faster the vehicle will depreciate due to accelerated use or wear and tear.
How To Get The Best Deal
Be prepared, smart and educated. Find out what current market values are by asking your banker to look into guides like Kelley Blue Book. Ask your insurance agent what the rates are for it. Search websites to determine which used models match your interests, but take into consideration the mileage and the location they're from. Speak with your financial providers (banks, insurance companies, etc.) about loans available and compare against dealer-financed plans. Read comments others have made about the model you are interested in to learn if there's a recurring theme of likes or dislikes. And study up on how to contend with salespeople—their tactics and methods—so that you're not distracted and can keep your eye on the prize.
What To Look For In A Used Car
Buying a used car means a lot of work. The responsibility is on you to inspect its condition. Ask to view previous owner documents and service records, especially if they were maintained by the dealership that originally sold the car. Does the car have an extended warranty that's transferable to you as the new owner? If you have a mechanic you trust, ask to let them look it over or at least get an independent inspection. If the dealer won't let you do this, move on. If it's been in a collision, there should be a record of it in insurance company databases. Reporting services like CarFax can also be helpful, and while you may have to spend money on the report, it may help you avoid making a costly mistake of buying a car with major issues.
Depreciation Value After The Car Leaves The Dealership
Horror stories have been heard about how a new car's trade-in value drops a third once you leave the dealer's lot. It's not quite that desperate, but there is an appreciable drop upon taking possession. Roughly 11 percent of the car's value evaporates when you turn the key after signing the papers. It will continue to depreciate for as long as you own it and even worse if you don't take care of it.
Advantages You Get With A New Car Such As Warranty
There are advantages of buying a new versus a used Lexus. The major one is the condition of the car. If it's new, you're not buying someone else's problem. You get all the latest improvements, technological advances, and everything else that may be lacking in a used car. Just as major is the provision of manufacturer's warranties, which have varying coverage periods based on time and mileage, so understand how your driving habits will play into this. If you plan on keeping the car longer than a few years or for the next decade, an extended warranty program—even if you have to shell out for it—can be a big plus down the road, which you might not get with a used car (unless the extended warranty can be transferred to future owners). Also, the dealer might want to keep you happy with the purchase, so you will trade it in after a few years and go through the process all over again.
How Long It Will Take Before Depreciating And Is It Worth The Extra Money
How long does it take for a car to depreciate? You will take an immediate hit as soon as you drive it off the lot, and it will continue to drop over the life of the car. By the time it's five years, it will be worth about 40% of what you paid for it new, while your taxes may not decline as much. Most vehicles will be depreciated down to nothing after 10 years. If you got a collectible model like an F-Sport, its depreciation may bottom out and start going back up by the time it hits 15 years; however, that doesn't mean a lot when you can be earning more in the markets versus sitting in the garage. During the first several years you were covered by new-car warranties, you probably took it into the dealership for regular services and you didn't have to worry about a high-mileage or the car breaking down on the road. There is something to be said for peace of mind and in essence, depreciation is the price for that luxury.
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