Narrow price margin between new and used compact cars increases shoppers’ options
As the nation becomes more concerned with fuel economy, the demand for compact cars continues to grow. These small, fuel-efficient vehicles are often affordably priced when they roll off the production line. They also retain their value better than other segments since they are highly sought after. According to Kelley Blue Book (KBB), there is a relatively small difference between new cars and comparable 1-year-old models, which could influence some car shoppers’ decisions when they are researching their next purchase.
“Used compacts have been in high demand with fuel prices nearly $3.42 per gallon nationally, and values have held strong as a result,” said Alec Gutierrez, KBB’s senior market analyst of automotive insights. “A consumer looking to save at least $100 or more per month on a used car would need to consider a model-year 2009 or older, which likely would have 50,000 miles or more on the odometer. While the difference between new and used pricing is relatively low for the segment, there are several models that offer nearly identical pricing whether new or slightly used.”
What’s the difference between new and used?
The average price for a 2013 compact car is $18,889, while a 2012 model costs around $16,465 on average. Assuming a driver secured a five-year car loan, the approximate monthly payments would be $339 for the new car and $303 for the used vehicle – resulting in only $36 in monthly savings.
KBB highlights the Toyota Corolla and Honda Civic, as buying a 1-year-old model of either car will save drivers about $20 per month. This makes purchasing a new model a viable option. The Toyota RAV4 and Chevrolet Equinox bore similar results. However, those looking to save a bit may want to check out the Hyundai Elantra or Ford Focus. The 2012 models will provide approximately $50 in monthly savings when compared to the cost of buying new versions. Meanwhile, the 2012 Ford Escape offered $60 in monthly savings over its new counterpart.
Other considerations for car buyers
While some used models may offer negligible savings compared to their new counterparts, there are other financial advantages to purchasing pre-owned vehicles. The depreciation rate of a new car is much higher than that of a used vehicle, which means that a new car’s worth will decline much more drastically than the value of a used model. Drivers planning to trade in their vehicles once their auto loan is paid off may want to look toward used models, even if the month-to-month savings does not seem like much, as they will get a higher return on their investment.