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This 1 Move Could Save You $171 a Month

By Maurie Backman - Dec 2, 2020 at 6:00AM

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Here's an easy way to spend less and save more.

The front end of a row of parked cars.

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Unless you live in a city with a robust public transportation network, you likely rely on a vehicle to get around town, commute to work (once that becomes a thing again), and enjoy the freedom to go where you please. But the type of car you get can spell the difference between managing your expenses comfortably and struggling to stick to your budget. 

In fact, new research by The Ascent reveals that the average American spends $568 a month on a new car payment. By contrast, the average used car payment is just $397 a month. That means you might slash your monthly bills by $171 if you're willing to drive a used car rather than a brand-new one.

What can an extra $171 a month do for you?

While homes have a tendency to appreciate in value over time, cars almost always do the opposite -- they lose value the minute you drive them off the lot. And that's just one reason it often pays to get a used car over a new one. 

Furthermore, if you have a lot of expenses to grapple with, getting a used car can help you manage better financially. Not to mention that having less debt is preferable to having more debt, so if you're already carrying a credit card balance and other loans, keeping your auto debt to a minimum will help.

But let's say you're doing well financially, and can swing a higher monthly car payment without stress. Does it still pay to get a used car? Unless you really take pride in your vehicle and have your heart set on a specific model, yes. An extra $171 a month -- $2,052 per year -- could do a lot for your finances. 

That sum could help you:

And these are just a few examples. Furthermore, owning a used car may not just save you money on your monthly auto loan payment; it could also lower your auto insurance costs. The more expensive a car is, the more expensive it can be to insure, so you may find that your annual premiums are lower if you opt for a used vehicle. 

Buy with caution

When you purchase a used vehicle, there's always the risk that the car will be in worse shape than you think. New cars generally come with a warranty, so you're protected against certain repairs early on. But you can increase your chances of not winding up with a dud by buying from a reliable dealer, and making sure you get a certified used car. 

You can also verify vehicle details by using a service like Carfax. All cars have a vehicle identification number (VIN), and running the VIN of a used car you're considering will let you know if there are title or ownership issues with the car (you don't want to accidentally purchase a stolen vehicle), if the car has been in a major accident, and how much mileage the vehicle actually has. 

Tempting as it may be to drive around town in a new car, getting a used one could result in serious savings. And for that reason alone, it's worth compromising.

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