Just because it’s time to buy a new car doesn’t mean you can’t buy used. Customers buying used cars in Washington, D.C., can see big financial benefits. Not only are they liable to spend less on their next vehicle, but used cars come with other perks.
7 Reasons to Buy Used Cars in Washington, D.C.
Buying a barely-used car is an affordable way to get a luxury vehicle without paying an over-the-top price. Look to buy a car that is a couple of years old to get the best deal. Oftentimes, you’ll find used cars have the original manufacturer warranties and other perks. Best of all, a car’s price plummets within a few years of its release.
1. Save on Upfront Costs
First things first: Used cars are cheaper than new cars. As time passes, the car racks up mileage and wear, and the value of the once-new vehicle rapidly depreciates. Cars depreciate on average between 15 percent and 25 percent each year in the first five years of ownership, according to Edmunds.com. For cars five or more years old, you’ll get a steep discount of about 60 percent off of the original sale price. Consider the typical costs today for the following vehicles:
|Kia Optima LX||$23,090||$14,995||$9,500|
|Mercedes Benz ML350||$48,300||$31,995||$26,950|
*Data taken from car manufacturers, Autotrader.com and TrueCar for the Washington, D.C. area. Prices subject to change based on inflation and local inventory.
2. Lower Interest Costs
One benefit to buying a used car in the Washington, D.C., area is your loan amount will be smaller, and you can even opt for a shorter term, resulting in lower total interest paid at the end of your car loan term. While some banks and credit unions will have a higher interest rate for loans on used cars versus new cars, the amount of interest you pay long term could still be less because of the lower price of the vehicle.
DVA Federal Credit Union, for instance, offers rates as low as 1.89% APR for terms between 49 months and 60 months; 1.39% APR for terms between 37 months and 48 months; and 1.14% APR for terms up to 36 months.
3. Minimize Depreciation
A new car depreciates the minute you drive it off the dealer’s lot, losing on average 11 percent of its value. By buying used, you’re getting a car that has already lost most of its value, meaning you won’t lose nearly as much money during your ownership of it as you would if you had purchased it new.
4. Lower Car Insurance Rates
Insurance typically costs more for new cars than used cars. The more expensive the car, the more it can cost to replace or repair it in the event of an accident or theft. Used cars have lower overall values, which translates to lower monthly insurance premiums.
5. Pay Less in Excise Tax
In Washington, D.C., the excise tax you pay depends on your car’s fair market value. For vehicles 3,499 pounds or less, you’ll pay 6 percent of its fair market value. For vehicles between 3,500 and 4,999 pounds, you’ll pay 7 percent of its fair market value. If you buy a used hybrid or clean fuel vehicle, you will be eligible for an excise tax exemption for your first period of registration.
6. More Places to Shop for a Used Car
When you want to buy a new car there’s only one place to go: the dealership. And unfortunately, no matter what type of car you want, chances are every dealership in the area will be offering cars for around the same price. Meanwhile, you can buy used cars from a large number of places, from eBay to Craigslist and even family members and friends.
7. Drive a Nicer Car for Less
The car you drive can say a lot about you. But just because you can’t afford this year’s brand new Mercedes or Audi doesn’t mean you can’t still make an impression. Because a car depreciates so much in the first few years of ownership, Washington D.C., area locals can afford to buy nicer used cars than brand new ones. You can have a stylish, safe car — if you’re willing to buy a two-year-old model.
Locals Save Money on Used Cars in Washington, D.C. Area
With average rent between $1,500 and $1,800, gas at $3.37 per gallon, and utilities costing about $150 per month, many Washington, D.C., residents are looking for ways to save money. Among the thousands of commuters are people who need to replace their old cars, whether it’s to save money on gas, reduce their insurance costs and monthly loan payments, or to simply update their ride. By buying used, locals can save thousands of dollars.
DVA Federal Credit Union is a GOBankingRates client.