Why Should Millennials Buy Used Cars?

Why Should Millennials Buy Used Cars?

Millennials do things differently. They aren’t buying as many cars as much as their parents and grandparents, and have their own way to tackle big purchases. Millennials have two options – go for a new car or buy a reliable used model. Here are some reasons why millennials should stay in the used car market.

More Financial Burden

Purchasing a car is a big investment, and an extra car loan is a huge downside for millennials. Millennials’ average income is down by 21%. Unlike other generations, millennials are earning less than their parents, and they are also burdened with student loans. Older millennials that have children also need to set aside more money than younger millennials.

All of these financial statistics explain why millennials tend to shy away from new cars. These financial pressures can make a less expensive used car look like a very sensible choice.

Advantages of Buying Used Cars

·       Depreciation Is a Big Factor

As soon as you drive a new car off the lot, it loses 10% of value. By the end of one year of ownership, it loses 10% more. Even if you plan to sell a new car after one year, you will lose money on depreciation. For example, if you purchased a new car for $20,000, by the end of one year, it’s only worth $16,000. By the end of the first year of a car loan, you owe more to the loan company than the value of the car.

This is the primary reason why millennials should buy used cars. If they plan to buy a 5-year old car in good shape, they won’t have to spend as much on it if it was new because it’s already lost most of its initial value.

·       Car Loans Are Expensive

The average interest rate in the US is 4.21% for a 60 month loan. Your credit rating, the loan amount, and the repayment period can affect this average, though. Purchasing a new car means a bigger loan amount with higher loan cost over the time. The last thing any millennial would want is to get stuck with a large loan repayment that they have to pay on top of student loans.

·       Used Cars Are Quite Good  

There is nothing wrong with purchasing a used car. There are many good models that can give new models a run for their money. Many used car dealers take great care in repairing and refurbishing used cars to make them a smart purchase. Many used car dealers also provide a warranty for their cars.

Here, you can see purchasing a used car has several benefits. Millennials can easily fulfill their dream of purchasing a car without the burden of another loan.