New versus used vehicles: How do you choose?

by Jennifer McDermott

Purchasing a vehicle is a very exciting financial milestone in anyone’s life. It’s a symbol of independence and lifestyle. The tricky question to ask yourself is: should you buy new or used? Both have their pros and cons when it comes to cost, reliability, warranty, and rates (just to name a few!), so how do you determine which will really fare best value?

Here are my tips on what you should consider when deciding whether to buy new or used.

Consider Safety and Reliability

Aside from cost, the safety and reliability of your vehicle should be at the forefront of your mind. What’s the point in investing in something that’s a) not going to last, or b) could be a detriment to your wellbeing?

The benefit of a new vehicle is that they incorporate the latest tech and safety features. For example, it is now mandatory for all cars sold in the U.S. to have some form of tire pressure monitoring, whereas older vehicles may not have these features. This is incredibly important if you’re new to the road or simply a cautious driver.

In terms of reliability, tech incorporated into new cars often have enhanced fuel efficiency, and reduced service and maintenance costs (however, it’s important to note that these can sometimes come in the form of expensive add-ons). If considering a used car, it’s also paramount that you obtain the car’s history. If the deal sounds too good to be true, it probably is.

Compare Loan Providers

As with any expensive purchase, you might need some extra help financing in the beginning. However, with so many auto loan providers available with varying rates and fees, it can be difficult to know where to begin. It’s a great idea to start by comparing providers to find the right financing option to suit your needs.

The next step is to consider how much the loan would cost for a new car or a used car. The average auto loan rate for a new car sits at 4.74% and 8.50% for a used car, with an average loan term of 68 months for a new vehicle and 63 for a used vehicle. If we then look at the average cost of a new vehicle ($36,400), against a used car ($19,232), when factoring in total interest, the interest for a new car only totals to $502 more than a used car. Although this is only an example, it pays to conduct a proper analysis when weighing up your options to be sure that you’re making the right decision.

Factor in Depreciation

Once you drive that brand new car out of the lot, it’s already lost value. It’s not ideal, but that’s just how it is. New cars lose their value quickly – a significant proportion within the first few years alone. If you’re worried about losing value on your investment, the good news is that with a used car, depreciation is slower. The dramatic loss has already occurred, which is what makes them a cheaper purchase in the first place.

With used cars, you don’t need to be concerned about immediate depreciation after your purchase. In terms of physical dings and dents, you’ll stress less about them with a used car, as it’s likely that the first (or even second) car-owner added some character already.

Assess Rates

When it comes to insurance rates, there are pros and cons no matter which way you look at it. If you’re considering a new car, insurance may actually be cheaper due to enhanced safety features, therefore lowering the rates. However, as it’s a newer vehicle, and therefore more desirable to thieves and vandals, insurance rates are often driven up higher.

That being said, it really does depend on the situation. For example, older vehicles are often targeted as they lack the modern anti-theft devices as featured in newer models. This makes them an easier target. However, if taking the used car route, insurance rates are usually reduced to accommodate the lower value of the vehicle.

When it comes to insurance, the amount you get covered for is ultimately up to you, to an extent. Although liability insurance is required more often than not, you can always opt for additional extras, like collision insurance, or comprehensive auto insurance, covering things like vandalism and damage not related to an in-car accident.

So, Which Route?

Deciding whether to opt for a new or a used car is sometimes a tricky decision, and there is no definitive answer. It depends entirely on the situation – the model, the make, the optional extras, the rates and fees at the time… there are so many factors. However, if you do your research, compare the options available to you, and most importantly, trust your gut, you’re sure to feel great about reaching this financial milestone!


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Jennifer McDermott is Consumer Advocate at personal finance comparison website finder.com. She has more than 12 years’ experience under her belt in the finance, lifestyle and travel industries where she’s analyzed consumer trends. Jennifer loves to uncover interesting insights and issues to help people find better.

Cheap and Expensive Cars to Insure

by Stacy Francis, CFP®, CDFA

When I bought my son a Scion Tc, a client told me over mid-morning mochas the other day, I didn’t anticipate that my insurance bill would skyrocket. I suppose I sort of assumed it wouldn’t make that much of a difference.

The key to staying clear of a situation like hers is to do your research before you buy. Overall, small, sporty, speedy cars mean higher insurance premiums – simply because they are involved in more accidents than bigger, chunkier, slower cars. Add a young driver to the equation (they are considered extra accident-prone) and your price tag will be hefty, regardless of what insurance provider you choose. Just for fun, below is a list of the five most expensive cars to insure – and the five cheapest.

Most expensive:

  1. Cadillac Escalade EXT 4WD
  2. Subaru Impreza WRX 4WD
  3. Hyundai Tiburon
  4. Mitsubishi Lancer
  5. Scion Tc (my client near died when I showed her this)

Cheapest:

  1. Ford Five Hundred 4WD (now called the Ford Taurus)
  2. Buick Rendezvous 4WD
  3. Buick Lucerne/Buick Rainier4 WD/ Honda Odyssey
  4. Ford Freestyle 4 WD/Subaru Outback 4 WD
  5. Buick Rendezvous/Honda Odyssey

So if cheap insurance is important to you, instead of the sports car, buy your teen a Buick! I know that my brother got a Trans Am when he was 16 and only 6 month later got a ticket for speeding at 40 mph over the limit! Yes that is right. The car went as did all future speeding tickets and by giving him a 10 year old clunker so did the high auto insurance bills.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

What Types of Insurance Does Your Family Need?

by Stacy Francis, CFP®, CDFA

One of the moms from the park called me last night, in tears. Not only had she come back to her apartment to find the door ajar and her things all over the floor – when she got hold of the landlord, he informed her that his insurance policy only covers the building structure – not the renters’ personal property. So when her valuables were stolen she lost not only many dear memories, but the money invested in them as well. If you are one of the many people confused about insurance, below are the most common ones to consider.

  1. Renter’s insurance. Renter’s insurance is the one the mom from the park now wishes people had told her about. It covers the things inside your house or apartment when you are renting.
  2. Homeowner’s insurance. Homeowner’s insurance is usually mandatory if you take out a mortgage, and recommended either way. It is also important to note that your homeowner’s insurance needs to be updated when you make major changes or renovations.
  3. Health insurance. This is a complex one with a myriad of different options. Shop around to see what type and provider and coverage would be most beneficial for your family.
  4. Life insurance. Many employers supply their employees with this type of insurance. In case yours doesn’t or not enough insurance is provided, you need to purchase it on your own.
  5. Auto insurance. If you have teenagers who drive, it is generally cheaper to add them to your policy than to get them policies of their own. Make sure everyone who drives your car is covered.
  6. Disability insurance. This, too, may be provided by your employer (or your spouse’s), but you may also need to purchase it on your own as most employers do not provide enough coverage.

Depending on your unique circumstances, other types of insurance, too, may be beneficial for you. If you have your own business, you will need additional types. You may also want to insure art and other valuables.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Steal These Four Habits from Extremely Wealthy People

This weekend, one of the moms from the park told me her two older kids had become obsessed with baseball games on TV. When their lack of productivity started to bug her, she asked them what was so fascinating about all that baseball.

“We want to be pros one day,” they told her, as though it was the most natural thing in the world, “so we are learning by watching the very best.” This, from two grade schoolers.

I though the concept was genius, so I decided to apply it to finance. Because apart from fat bank accounts, what really does set the very wealthy apart from the rest of us? What habits do they have in common that differs from the grand majority?

Here’s what I found.

  1. They are more likely to be business owners. Because let’s face it, while you can create a very nice life for yourself while on the company payroll, few employers will pay you enough to make you the next Bill Gates.
  2. They pay cash for their cars. Most people know that from an investment perspective, new, financed cars are some of the worst things you can get into, as their value drops like rocks during the first couple of years while your debt remains.
  3. They are smart about debt. Extremely wealthy people rarely carry balances on their credit cards – in fact, they are less than half as likely to be in credit card debt as the average person. They know that financing charges will eat your fortune faster than a herd of hungry lions an injured zebra colt.
  4. They donate to charity. Whether you believe in karma or not, helping those in need creates goodwill and a sense of generosity, which makes people more positive toward you. This promotes wealth.

 

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The Gas Issue

by Stacy Francis, CFP®, CDFA

I paid over four dollars per gallon at the pump today! While this may not impress Europeans, who have paid such prices for ages, the cost of oil certainly isn’t helping the US economy right now. Herds of people are making the switch from large SUVs to compacts – even hybrids. But in dollar terms, how much of a difference does it make what kind of car you drive?

Though the numbers vary slightly, the main consensus seems to be that the average American commutes 33 miles per day, between home and work. Nine out of ten drive a car. So say that your commute is 33 miles per day, and that you work 5 days per week, fifty weeks per year (gotta have a few days off). This adds up to 8,250 miles per year.

Now let’s look at cars. On one side of the spectrum, we have small Japanese hybrids such as Honda Insight, Toyota Prius, and Honda Civic Hybrid. These cars will get you 66, 57, and 47 highway miles per gallon, respectively. The other extreme is sports cars, or huge SUVs. A Hummer will get you 10 highway miles per gallon, a Dodge Ram 12, and a Lamborghini Murcelago 13.

So if you’re driving a Honda Insight 8,250 miles per year, at $4 per gallon gas, this will cost you $500. If you on the other hand go for the Hummer, and drive the same number of miles, your price tag will be $3,300. The difference is $2,800.

So while your car is likely to land you somewhere in the middle, with several thousand dollars per year in potential savings, it is not hard to see why to many Americans, bigger is no longer better.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The Commuting Issue

by Stacy Francis, CFP®, CDFA

This morning, I was stuck in my apartment elevator for 30 minutes. I spent this time, of course, thinking about commuting and happy that my commute is normally only 10 minutes and involves no cars, buses, trains or subways. I moved my apartment next to my office so that I could spend maximum time with my family and friends. I am one of the lucky few who enjoys the trip to and from work.

However, commuting is just one of those things almost all Americans deal with . . . yet few take an in-depth look at the true effects of commuting on their lives. Because not only can commuting be a hassle, a nuisance and a time consuming endeavor -- it can be expensive as well. Breaking it down into commuting cost and salary, you may find that your current situation is far from ideal.

Commuting costs are things like gas, car insurance and maintenance, train or subway passes or tickets – whatever applies in your specific situation. You may need to add another car to your household solely to handle the commute. Add to this the time you spend getting to and from work, and you should have a rough estimate of how much your time on the road costs you.

Then consider your salary. How much is left after you have paid taxes and commuting expenses? Could you get a similar job closer to home and save money? And if that is not an option, could you move closer to work and save money that way?

It is important to keep in mind, though, that these aren’t the only factors to consider. Where you choose to live and work is about much more than just money. When adding to the pot your children’s school and spouse’s commute, plus personal factors such as the fact that you happen to love your job and the community you live in, things get even complicated.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.