When most people think about purchasing a vehicle, they default to the mindset of ‘buying new’. While many equate buying a new model year offering with better guarantee of long-term satisfaction, that’s not necessarily the case. Every day, newly-purchased (and relatively new) vehicles are brought in for maintenance or repair with surprising frequency. In many cases, it’s a relatively isolated incidence, while others might be a result of the manufacturer’s failure to work out the glitches in a new model year offering.
That said, anyone could work up a list of pros and cons of buying new versus used. (Okay, maybe not anyone…but someone who was really bored, and lacked the motivation to Google ‘pros and cons of buying new versus used’).
The simple fact is that there are countless benefits to buying used vehicles. This is especially true in certain geographies, for drivers of certain age groups, and those with certain kinds of lifestyles. Don’t believe me? Let’s use Colorado as an example. Why? Well, because when it comes to the kind of comes to used cars Colorado drivers understand the value.
A Closer Look at Colorado
In recent years Colorado had experienced a well-documented population boom, making it the second fastest growing state from 20010-2015. Peaking in 2015, it was estimated that Colorado had received as many as 101,000 new residents in the year prior.
Considering that a large number of these residents were aged 25 and under, the notable influx consisted significantly of students and young professions. As a result, Colorado was looking at an even greater number of residents (i) with conservative, or growing incomes (ii) a desire to explore their new surroundings and (iii) active lifestyles that embraced Colorado’s outdoor culture.
While the boom has slowed (combined with an exodus of sorts, for those resisting the influx) it does nothing to change the strength Colorado’s youth-based culture. And therein lies a perfect scenario for exploring the benefits of used and pre-owned vehicles.
The Downside to Buying New
First off, let me clarify that this is not a ‘bash piece’ where I intend to rail against purchase of a new vehicle. In fact, with many enticing vehicles being released this model year, it would be hard not to get excited by many of them. The point is simply to recognize the value of a pre-owned vehicle. After all, this year’s pre-owned may have been last year’s new.
What can’t be denied about new vehicles is the rate at which they depreciate. Have you ever heard the adage about how a vehicle begins to depreciate the moment it is driven off of the dealer’s lot? Well, it’s true. In fact, that immediate depreciation falls in somewhere around 11%.
This means that, if you purchased a new vehicle for $30,000, it’s might be worth less than $27,000 by the time you drive it off the lot. Drive it for a year, and it will have depreciated up to 25%; or up to 46% if you drive the vehicle for three years.
If you were to buy a vehicle for $30,000 and took excellent care of it, you might expect it to be valued higher than $16,000 if you were looking to trade it in after only three years. Considering that the dealership needs to make some sort of profit on its resale, you should expect even less towards the purchase of your new vehicle. Overall, not a great return on your investment.
On the Other Hand…
If you were looking to purchase a pre-owned vehicle, you might benefit from being on the flip side of the scenario. Consider the possibility of buying an excellently maintained three-year vehicle for around $16,000 even though it had originally sold for $30,000!
By allowing the previous owner to shoulder the lion’s share of the vehicle’s depreciation, you’ve empowered yourself to get more car for your money. It is because of this difference that many pre-owned customers are able to get more expensive vehicles and/or trim levels than they would have been able to afford if they had bought new.
But the benefits aren’t limited to depreciation. Pre-owned vehicles carry fewer incremental costs such as sales tax, registration, and insurance. This means that, not only are you paying less to buy the vehicle, but you could continue paying less to own it!
In addition, financing terms could be more favorable. Since the ultimate return on any car purchase is a long life after the vehicle is paid off, favorable financing terms may help you get there faster.
And if you’re concerned that an earlier model car comes with less guarantee of a long and reliable life, guess again. With better engineering and more diligent maintenance practices, cars are lasting longer than ever. With many running well over 200,000 miles it comes down to your own due diligence during the shopping experience. If you’re not skilled in terms of automotive inspection, ask someone who is (that you trust) to take a look.
Ask anyone, or just take a look around. If you’re living in Colorado, you will inevitably be surrounded by all-wheel drive Subarus, 4×4 Jeep and distance-friendly offerings like Toyota Camry’s.
With each of these perfect examples of vehicles that hold resale value and offer longevity, it’s no surprise that they are among the vehicles most prevalent in Colorado. It’s also no surprise that many new residents of Colorado have purchased them in-state.
Listen up, Colorado
Is a pre-owned vehicle the right fit for you? If even some of what was discussed above rings true, it might be worth further exploration. Don’t be afraid to resist the mindset that buying new will offer you a trouble-free experience. Consider the benefits of pre-owned vehicles, and find the right fit that will help you make the most of your Colorado lifestyle.