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?
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...)
Lets do some math though, pretax of course.
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.