Financial matters have never been more important in a tough economy. Spending our money wisely is the best protection any family has against recessions and a bad economy. When it comes to buying a new or used car, there are a lot of cost issues at play. Obviously, a used vehicle has a lower purchase price than a new car, but is it worth having a vehicle with accumulated miles? Where is money best spent during car sales?

Let’s break down some of the numbers: New Car Sales

As an example, take a new car sold for $20,000 with a $2,000 down payment and the rest financed for 6 years at 6%. What is the total cost of this vehicle over the life of the loan? With interest and finance charges, that remaining $18,000 principal becomes almost $26,000 after six years. So that new car ended up costing a total of $28,000 when the price tag said only $20,000.

That is the power of compound interest. While interest can grow your 401k and savings, it will also build debt elsewhere.

Monthly Payments And Maintenance

One of the benefits of a new car is that the total purchase price is spread out over many months, making it affordable. New car sales typically require less maintenance costs in the first few years of ownership and are covered under warranty if something happens. But what price do we end up paying for those benefits?

Take a typical monthly car payment of $300. A used car has no monthly payment, but may require more maintenance. How much will $300 a month pay for maintenance? All the routine work that a car requires is much less than that; four oil changes, two tire rotations, and some replaced filters, fluids, and accessories can cost $300 for a full year. With the other 11 months of finance payments, a used car could have a complete engine tune-up, buy a new set of tires, clean the drivetrain, redo the front and rear brakes, then get an alignment and a new fuel filter. . .

As you can see, the cost of owning a used vehicle is much less than a series of monthly payments over the life of a car loan. When you add up all the numbers, used cars really are the cheapest option.

Another used car benefit

Some people are skeptical of used car sales for various reasons, but they are not always true. For example, there is a myth that older cars consume little fuel. In reality, the new fuel mileage standards have been in place for so long that used cars are technologically not far behind their new counterparts. A well-maintained vehicle, used or new, will have great gas mileage. The same can be said for many amenities and features; they’ve been standard on even base models for years and are showing up on most used vehicles.

Some people have to have the latest model, but for those on a budget, used car sales are the affordable option.