| Why Buy New When a Used Car Will Do the
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| | During that high depreciation period, the
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| Same Things for Less?
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| | market value of the car could be less
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| What do you really get from a new car?
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| | than the balance due on the loan. In
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| Well, there's that new car smell. (It
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| | dealer's terms, you're upside down. And
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| also comes in a can.) And the sticker in
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| | you're vulnerable. Should your car be
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| the window, which tells everyone you just
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| | involved in a serious accident, and the
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| bought a new car. (Are you really that
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| | insurance company decides it's a “total
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| desperate for approval?) And don't forget
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| | loss” – it's been totaled – your
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| the fun of looking through the driver's
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| | payout from insurance will be less than
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| manual for the first time to learn about
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| | what you owe on the loan. You'll get a
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| all those knobs and buttons.
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| | check from your insurance company, but
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| Monthly Payments
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| | you'll still owe money out of pocket to
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| You'll also get a monthly reminder of
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| | pay off the car loan. Ouch.
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| your shiny, brand-new car: a payment
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| | Now, that's a worst-case scenario. But
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| notide for your car loan. The average
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| | keep in mind that no matter how good your
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| price of a new car passed $30,000 last
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| | experience is with a new car, it will be
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| year and is headed even higher. Do you
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| | expensive. There aren't just the new-car
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| have $30,000 in cash to buy a new car? Or
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| | payments with which to contend. There's
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| $20,000? Neither do I. Lower price is the
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| | new-car auto insurance. Lots more than
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| most important and most immediate benefit
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| | insurance on a used car. That renews
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| of buying a used car.
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| | every year.
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| There are plenty of others.
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| | Other New Car Expenses
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| Depreciation is Not Your Friend
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| | Some carmakers will void parts of the
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| New cars depreciate. Their price is
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| | warranty if you don't have your car
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| always going down. The moment you drive
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| | serviced at the dealership. There may
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| off the dealer's lot in that new car, it
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| | also be other dealer incentives you don't
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| probably loses 10 percent of its value.
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| | get if you haven't had the car serviced
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| Some lost as much as as much as 20
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| | at the dealership. I made the mistake of
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| percent. That's an immediate loss of
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| | taking my car to the dealer recently for
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| $6,000 – on average. Some cars will
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| | service. (My daily driver is a '98 Audi
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| incur greater initial depreciation. The
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| | A4 1.8T Quattro.) The labor rate was
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| personal finance experts say to buy
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| | $114.98 an hour. That's right -- $114.98,
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| appreciating assets – like houses,
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| | not $115. Somehow that made it even more
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| whose long-term value is likely to
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| | galling. I mean, that's more than I pay
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| increase – and lease depreciating
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| | my therapist. (Who knows – maybe
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| assets, like cars.
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| | mechanics will soon start working
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| There's a hidden danger in all that
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| | 50-minute hours and taking the entire
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| depreciation. Most new cars lose a lot of
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| | month off to go to the Hamptons.)
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| their value in the first year. Then, the
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| | The point is, you're locked into a
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| depreciation curve flattens out, and the
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| | high-cost structure with a new car.
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| car loses value more gradually. But
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| | Used cars are cheaper – and they're
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| you're paying off the balance of your car
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| | cheaper to maintain. That's especially
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| loan with the same monthly payment over
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| | true if you buy a carefully researched,
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| the life of the loan. So the loan balance
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| | thoroughly inspected, ready-to-drive used
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| decreases in a straight line.
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| | car.
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| The Danger of Being "Upside Down"
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