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A car shopper, presumably with fantastic credit, in his or her early stages of car shopping will usually start by deciding: Do I buy a new car? or do I try to be frugal and responsible and buy used?

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For some reason, the question "What kind of interest rates are available to me?" doesn't usually surface until after they are done falling in love with a pricetag.

Let me give you a scenario.

You have two cars, let's name them X and Y. 

X costs $20,500. It is 2 years old, and is very clean. It only has about 2 years and 10k miles left on its factory warranty remaining. It is at the X's Used Car Lot right across the street from "Y World of Boston".

Y costs $25,000 (not even factoring discounts and manufacturers incentives). It's brand new, and has gigantic balloons attached to the doors with "0.9% Financing" written in humongous text on the windshield.

(Must be a sale or something...) 

Wrong. 

Lets do some math though, pretax of course.

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60 Month Car Payment (No Cash Down)

X = $20,500 @ 4.5% = $382

Y = $25,000 @ 0.9% = $426

You have an average interest rate taken from 3.9-4.9% for used cars, as well as an average taken between 0-1.9% for new cars.

The salesman selling X comes back from the managers desk explaining how you're getting a fantastic deal and they have a promotion going on for the extended warranty as well for let's say $1000.

*Brain is racing*

Should you? Waste of money? Well wait, "What does it cover??"... 

Guess what? Now you're at $402!

Was it all worth it? Saving that few thousand bucks on a car that you probably didn't even really like all that much.

For $20 bucks a month? The difference isn't in the price tag my friend. It's all about the interest rate. New cars sell for a reason. They sell because they keep the industry moving. The used cars will end up in good hands, believe me... it's just not for you, though. There's better out there.

Take a walk across the street, get the color that you want. See if they'll include the rubber mats on the house.

You deserve it after all.

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