When It Pays to Buy a New Car

Kip Tips

When It Pays to Buy a New Car

Sometimes certified pre-owned vehicles are more expensive.

Usually my husband and I buy used cars. But in 2009 when the government offered a special tax break for new car buyers, we bought a new minivan. The price difference between the new and used models of the vehicle we wanted was small, and the tax write-off sweetened the deal.

There are other times when buying a new car -- rather than used -- makes more financial sense, according to the June issue of Kiplinger's Personal Finance. Here's why:

Since the recession began, certified pre-owned (CPO) vehicles have been hot commodities. They offer an almost-new-car experience (extra warranty coverage, like-new condition and low mileage) for a used-car price. Last year, automakers added financing incentives as low as 0.9% to sweeten the deal even more and help justify the premium for certified vehicles, which fetch up to 10% more than noncertified vehicles.

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But that push, combined with low levels of leasing (the primary source for CPO vehicles) for the past few years, has driven prices through the roof. In some cases, a 1-year-old certified vehicle is more expensive than the new model. For example, Edmunds reports that you'd pay $428 a month (with a five-year loan) for a 2011 Honda CR-V, while you'd pay $440 a month for a certified 1-year-old CR-V -- partly because of higher financing costs. The difference over the life of the loan is $720. Older CPOs don't have the same price disparity, but they're harder to find these days.


If you choose a certified model, be sure you're getting the manufacturer-backed certified program. The car may have an official label, but if not, the certification should be in the paperwork. Be wary of dealer-certified cars -- they're often extended warranties in disguise and offer very limited terms.

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