Many ask what is the best time to buy a used car? The answer is actually a trick. Since our site is trying to help you get out of and stay out of debt, the best time to buy a used car is when you have enough to pay for it without getting loan.
On this page we will show you how to buy a used car without going into debt. On the new car page we explained the reasoning behind not financing vehicles and not buying new cars. The alternative way to purchase cars takes discipline and is actually the best time to buy a used car.
We will assume that you wanted to buy the 2005 Honda Accord that was used as an example on the new car page. Remember that the payment for this car was going to be $341.85 per month for 6 years. The car would be paid off in the year 2011.
Since you had decided that you could afford the $341.85 payment to the finance company, then we know that you can afford to pay yourself $341.85 into a savings account.
We round off this savings and do not account for any interest and assume that you save $4,000 each year. We will also assume that you can drive your current jalopy for one more year while you save this money.
- January 2006 you now have $4,000 saved and can afford to buy a 1992 Honda Accord. You have now reached the best time to buy a used car.
- January 2007 you can sell the 1992 for $1,400, add another $4,000 to it and buy a 1995 Honda Accord.
- January 2008 you can sell the 1995 for $2,000, add another $4,000 to it and buy a 1997 Honda Accord.
- January 2009 you can sell the 1997 for $2,300, add another $4,000 to it and buy a 1999 Honda Accord.
- January 2010 you can sell the 1999 for $2,600, add another $4,000 to it and buy a 2000 Honda Accord.
- In January 2011 you have reached the value of used car purchases where selling the 2000 and adding $4,000 to it will not substantially upgrade your car, so you continue to save.
- January 2012 you can sell the 2000 for $2,400, add $8,000 (two years of savings) to it and buy a 2006 Honda Accord.
Now we can compare the two decisions!
If you had bought the new 2005 you would have a paid off 2005 in 2011 and you would have paid interest ($3,623.40 to be exact) on top of the purchase price. Using our example you could have had a 2006 one year later in 2012 completely paid off and your money made interest for you while in your savings account.
These numbers are all conservative and you could do much better by continuing to save and delay your used car purchases longer than one year. This would be the best thing to do so that you do not keep losing value on selling cars.
For example, if you kept saving and bought a used car every two years you could have bought a 2008 Honda Accord in 2012 completely paid for. When you stretch out your used car purchases while continuing to save, you can purchase much newer vehicles. With this method you can always purchase newer used cars and never pay interest to anyone.
The key to making this work is the disciplined savings. If you have decided that you can make a new car payment, you can put the money in a savings account earmarked for used cars.
Also remember that since you do not have a car payment, if you have a financial problem like a job layoff etc., you will not have to worry about losing your vehicle. Driving paid for used cars is a wise financial practice. It is said that it is the millionaires that purchase and drive used cars. It is those in deep debt that drive new and leased vehicles.
As you have seen here the best time to buy a used car isn’t necessarily dependent on actual time but it depends on when you are financially ready.
Our last few vehicle purchases have also taught us that the end of the month may be the best time to buy a used car once you have the money. They seem to give better deals at this time but never before you can pay for it full in cash.
The prices for these vehicles all came from Kelley Blue Book. The purchase prices are just under the KBB retail value and the selling prices are just over the private party value. The values that ISGPLANNING.COM editor used were conservative and you could do much better, especially if you hold onto your vehicles longer while continuing to save.
I use the Honda Accord as the example but this could be done with any vehicle.