Are you in the market for a new set of wheels but don’t want to break the bank? Buying a used car may seem like a great option.
And nowadays, getting a second-hand car loan is not difficult. But it’s essential to weigh all the pros and cons before deciding.
This blog helps you to look at the various advantages and disadvantages of buying a used car so you can make an informed decision. So, let’s get started!
Pros of Buying a Used Car
Buying a used car can be a great money-saving decision. Here are some of the biggest pros of buying a used car.
- Lower Up-front Cost and Low Down Payment
- Lower Loan Amount
- Improved Credit Rating
- Better Variant in Less Price
- Lower Insurance Premium
- Warranty on Repair
1. Lower Up-front Cost and Low Down Payment
It’s clear, that buying a used car requires a much lower up-front cost than buying a new car. As a result, the required down payment is usually lower if you want to get your second hand car on EMI.
2. Lower Loan Amount
If you choose to finance a second-hand car, you will likely have a smaller loan than if you were to buy a new car.
This is because the purchase price of a used car is usually lower than that of a new car. So, less liability and more peace of mind!
3. Improved Credit Rating
Making regular payments on a car loan for a second-hand car can help build your credit rating over time. Credit profile and credit rating are critical for you to be able to secure loans for other large purchases down the road.
4. Better Variant in Less Price
When you buy a used car, you can get a better variant for a much lower price than what you would pay for a brand-new car of the same variant. Thus, buying a second-hand car helps you get your desired model within your budget.
5. Lower Insurance Premium
Insurance premiums for used cars are usually lower than those for new cars because the Insured Declared Value (IDV) of the new cars is higher. Also, used cars are subject to a lower risk of theft or damage.
6. Warranty on Repair
Many used car dealers offer warranties on repairs. However, you can take this advantage only if you buy from such a dealer, not from an individual. Also, this facility might not be available for a very old car.
Cons of Buying a Used Car
Of course, there are some potential downsides to buying a used car. Here are some of the troublesome cons of buying a used car.
- Less Reliability: Used cars can be less reliable than new cars since they’ve been used and may have some wear and tear. This means that they may require more frequent repairs and upkeep. Get a professional mechanic to thoroughly check the vehicle’s condition before purchasing it.
- Need to Deal with Non-familiar Individuals: Buying a used car from an individual seller can be a bit more of a hassle. You need to negotiate with the seller, research to ensure the seller is reputable, and so on. Thus, consider buying from a reputed used car dealer instead of an individual.
- Higher Interest Rates: The loan amount of a used car is usually lower, but second-hand car loan interest rates tend to be higher than those on new car loans. This means that the overall cost of the car will be much higher than the price you negotiated with the seller due to the additional
interest.
- No Discounts or Schemes: Unlike purchasing a new car, you won’t be eligible for any discounts, special offers, deals, or schemes when buying a used car. However, you can certainly negotiate and bargain with the seller, which you can’t do much in the case of a brand-new car.
Conclusion
All in all, key factors to consider when buying a used car can be a great way to save some money and get a functional vehicle. However, it’s important to be aware of the potential pros and cons so that you can make an informed decision. Also, you need to be more vigilant during decision-making to get a reliable vehicle.
Author Bio:
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge
the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a
true finance geek, and his friends love that. They always rely on him for advice on their
investment choices, budgeting skills and personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial
topics, so email him your questions at shiv@freopay.com.
