When It Pays to Buy a New Car
Sometimes certified pre-owned vehicles are more expensive.
Usually my husband and I buy used cars. But in 2009 when the government offered a special tax break for new car buyers, we bought a new minivan. The price difference between the new and used models of the vehicle we wanted was small, and the tax write-off sweetened the deal.
There are other times when buying a new car -- rather than used -- makes more financial sense, according to the June issue of Kiplinger's Personal Finance. Here's why:
Since the recession began, certified pre-owned (CPO) vehicles have been hot commodities. They offer an almost-new-car experience (extra warranty coverage, like-new condition and low mileage) for a used-car price. Last year, automakers added financing incentives as low as 0.9% to sweeten the deal even more and help justify the premium for certified vehicles, which fetch up to 10% more than noncertified vehicles.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But that push, combined with low levels of leasing (the primary source for CPO vehicles) for the past few years, has driven prices through the roof. In some cases, a 1-year-old certified vehicle is more expensive than the new model. For example, Edmunds reports that you'd pay $428 a month (with a five-year loan) for a 2011 Honda CR-V, while you'd pay $440 a month for a certified 1-year-old CR-V -- partly because of higher financing costs. The difference over the life of the loan is $720. Older CPOs don't have the same price disparity, but they're harder to find these days.
If you choose a certified model, be sure you're getting the manufacturer-backed certified program. The car may have an official label, but if not, the certification should be in the paperwork. Be wary of dealer-certified cars -- they're often extended warranties in disguise and offer very limited terms.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Award-winning journalist, speaker, family finance expert, and author of Mom and Dad, We Need to Talk.
Cameron Huddleston wrote the daily "Kip Tips" column for Kiplinger.com. She joined Kiplinger in 2001 after graduating from American University with an MA in economic journalism.
-
Renting Is Cheaper Than Buying in All 50 States. How Does Your City Compare?
Renting is cheaper than buying, according to a new Bankrate survey. In 21 U.S. metros, the monthly cost of owning is at least 50% more expensive than the monthly cost of renting.
By Kathryn Pomroy Published
-
CVS Stock Plunges as Medicare Advantage Costs Spike
CVS Health came up short of Q1 earnings estimates and slashed its full-year outlook as medical costs surged. Here's what you need to know.
By Joey Solitro Published
-
5 Ways to Save Money on Vacation Rental Properties
Travel Use these strategies to pay less for an apartment, condo or house when you travel.
By Cameron Huddleston Last updated
-
10 Annoying Hotel Fees and How to Avoid Them
Travel Here's how to avoid extra charges and make sure you don't get stuck paying for amenities that you don't use.
By Cameron Huddleston Last updated
-
Gas-Saving Tips That Actually Work
These are gas-saving tips that will actually work for you and your car this year.
By David Muhlbaum Last updated
-
Want to Lease an EV? There's a Tax Credit 'Loophole' for That
Tax Credits If you're trying to decide whether to lease or buy a car, here's what you need to know about how the EV lease tax credit works.
By Kelley R. Taylor Last updated
-
Car Buying in a Topsy-Turvy Market
You need a new car? Good luck with that! What should you do? We've got some answers.
By Katherine Reynolds Lewis Last updated
-
Watch Out for Flood-Damaged Cars from Hurricane Ian
Buying & Leasing a Car In the wake of Hurricane Ian, more flood-damaged cars may hit the market. Car prices may rise further because of increased demand as well.
By Bob Niedt Last updated
-
Car Buyers: The 3-Day Grace Period Is Just a Myth!
Buying & Leasing a Car Many car buyers think they have three days after making a purchase to return a car. Here’s where they’re going wrong, and what they should do instead to get a decent used car.
By H. Dennis Beaver, Esq. Published
-
PODCAST: Car-Buying in an Inflated Market with Jenni Newman
Buying & Leasing a Car With cars both scarce and expensive these days, what to do if you want – or need – a new ride? Car-buying strategist Jenni Newman of Cars.com shares some tips. Also, more on the magical 9% savings bond.
By David Muhlbaum Published