5 Reasons Not To Buy a Used Car Today

NEW YORK (MainStreet) — New cars are expensive. It is easy to spend over $30,000 on a Subaru Outback, or more than $25,000 on a Toyota Camry, and both cars are functional daily drivers, not glamorous style statements.

That sticker shock reality is driving more car shoppers to shop used. A word of advice: stop right there. There are compelling reasons not to buy a late model used car.

Chew on this: because demand for used cars is hitting new highs, so are used car prices, said Mike Rabkin, president of vehicle buying service From Car to Finish.

By some measures, used car prices are the highest they have ever been and are closing in on new.

Case in point: at North Scottsdale Mini Cooper, a 2013 Countryman Mini Cooper S is on the lot at $27,500 (VIN WMWZC3C55DWP21938). It has 11,930 miles.

On that same lot, a new 2014 Mini Cooper S Countryman is available at $27,900. Another is $28,725.

Do the math.

Need more convincing? Read on for five reasons why buying used is the wrong way to go.

Good, fresh used cars are scarce.

The recession is why, explained John Voelcker, senior editor at High Gear Media. New car sales plunged to 10.4 million in 2009, down from a more typical 15 million per year. Then, too, we are keeping our cars longer. Voelcker said the average age now is 12 years, the oldest cars have been since World War II.

The era of trading in after three, maybe four years of ownership is done.

This also is why prices on good used cars are so high. Big demand, small inventory, means a seller's market.

Used car warranties are not as good as new.

That used Mini Cooper S - a Certified Pre-Owned Vehicle - comes with a two year, 50,000 mile warranty. What's it cover? Mini Cooper, on its website, says: "the plan is not a Maintenance Program or an extension of the original 4-year/50,000 mile MINI New Passenger Car Limited Warranty. There are various items that are not covered by these warranties."

Reality: new car warranties cover more and, in almost every instance, a new car buyer can drive off the lot knowing he won't spend money on repairs for the next four or five years. That's budget friendly peace of mind, and used car buyers do not generally enjoy that level of assurance.

"Nothing drives like a rental."

That's car-lot cynicism, and the relevance is that many late model used cars lived their former lives as rental cars, driven often very hard by uninterested drivers.

Is that fact? Last year alone, Hertz sold some 27,000 cars from its inventory.

Some rental cars are sold directly by the used car companies at their own stores. Others are sold at wholesale auctions and may wind up on used car lots.

It is hard to issue a blanket condemnation of a kind of vehicle. But I have often rented cars and I have to say: I wouldn't buy one.

Enough said.

You will pay a higher interest rate on a used car loan.

From Car to Finish's Rabkin said that in almost all cases, new car buyers will get longer loan terms and lower rates.

Right now, Mini Cooper, for instance, is offering 0.9% 48-month financing. Thrown in, by the way, is three year "Boot to Bonnet" no cost maintenance. File that last point under why new car warranties just are better.

At Affinity Federal Credit Union in Basking Ridge, N.J., used car loans can be had for 2.9% for 36 months. That's a very good loan - good credit history required.

At other institutions, buyers with less than prime credit will pay 10%, maybe higher for a used car loan.

Even if the used car cost less than a comparable new model, the extra finance charges will wipe out any savings.

The used car salesmen will eat you alive.

Fact: the best, most cutthroat sales people at any car dealership want to sell used cars, because that is where the money is made.

On the new car side of the lot, the advantage is the buyer's. It is easy to know, pretty much to the dollar, what the dealer paid for his new cars. Add a small margin on top, and you have a fair price. Typical dealer profit on a new car sale is a couple hundred dollars, said High Gear Media's Voelcker - and that's not a bounty that will interest the top sales people.

There are no rules on the used car side of the lot. The buyer has no idea what the dealer paid for the vehicle.

It is easy to score a good new car deal.

It is very hard to score a good used car deal, because the other side has all the knowledge.

And that is why, ultimately, you are much better buying new now.

--Written by Robert McGarvey for MainStreet

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