3 Things You Should Always Buy Used
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Inflation is going up at least 2% a year. Your wages, however, are staying the same or maybe getting an annual increase of 0.5-1%, if you’re lucky. When this type of scenario happens, it means your purchasing power is diminished. This has an effect both on the cost of what you buy and on your ability to save money.
As an example, let’s say you are saving for a flat-screen TV that currently costs $400. Then, once you’re finished saving, a year has gone by…due to inflation and supply and demand, the TV may now cost $450. This means you have to save even more money to pay the increased price.
Before you think I’m now about to suggest dumpster diving as an option, there are other ways to access used items without sacrificing your dignity.
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So how do you manage to buy anything when everything costs so much? One idea is to buy things that aren’t new. One benefit of buying used goods is that, with the exception of certain items like antiques, most used consumer items don’t appreciate in value. In fact, some items (like vehicles) depreciate in value significantly. This means the purchase price of a used item at any given time may closely match your level of purchasing power. Another benefit is keeping unwanted used goods out of landfills.
Vehicles are often our 2nd most expensive purchase after our homes. Many clients I work with tell me that when they were considering the cost of the new vehicle they wanted, they didn’t consider the sales price very carefully. Nor did they consider the fact that new car values almost immediately depreciate after purchase. What was more important to them was whether they could afford the monthly loan payments. The problem with this way of doing business is that you aren’t considering whether the price of the vehicle is the price you want to pay. Nor are you considering the loan interest rate and how that will affect the total interest you’ll pay over the life of the loan.
Consider two people shopping for cars, we’ll call them Linda and Tom. They are shopping at the same dealership. Linda picks a used vehicle of 2 years and 40,000 miles while Tom wants a brand-new vehicle. Linda has done her research and is happy with the sticker price for the vehicle she has chosen. Tom only glances at the sticker price for the new car he wants and tells the salesman that he can only afford a maximum monthly loan payment of $450. Tom and Linda both have 640 credit scores.
Here are the numbers for the 2 cars they are thinking about buying:
As shown in the table, in order for the dealership to get Tom the vehicle he wanted without exceeding the maximum monthly payment Tom could afford, and taking into considering the 9% loan interest rate, they had to offer Tom a loan with repayment terms that were 2 years longer than Linda’s. This extension of the repayment terms means Tom will have to pay $5,177.10 more in interest than Linda over the life of the loan. If Tom, like Linda, was willing to buy a used car, he potentially would have paid his loan off sooner and paid less interest over the life of the loan.
Everyone loves their phones, tablets, laptops, and gaming systems. That’s understandable – these devices are convenient, fun, and some are necessary for operating in today’s digital world. However, the cost of buying these items new can be considerable.
If you’re on a limited budget but still want that electronic item, you might consider buying it pre-owned or refurbished. This is not as unusual as it may sound. Geoffrey Fowler of the Washington Post discovered that in 2018, 1 in 5 Americans bought used cell phones. In the case of smartphones, there may be a few used versions of the latest and greatest model. However, when you’re looking at new phones, you should probably expect to buy a model or two behind the current one. For example, the most current model smartphone may be $700 – $1,000 whereas a pre-owned smartphone may run from $300-500. And you don’t have to necessarily pay the full price at once. Most national cell phone carriers offer monthly no-interest payment plans for their pre-owned devices, the same as they do for the current model device.
For other pre-owned electronics, all the major electronic box stores (and Amazon) have pre-owned inventory for sale. So, with a little bit of research and a lot of patience, you might be able to get a pre-owned item that still has all the features you want but at a price, you can afford.
If you are a book lover, you don’t have to spend top dollar to buy your favorite book anymore. Many of us already know about used bookstores and even music stores that sell used CDs and records. But did you know that Amazon and Barnes and Noble sell discounted e-books (think $0.99 – $3.99)? If you don’t want to search for these deals, companies like Book Bub and Riffle will list and link to all discount e-book offerings at Amazon and Barnes and Noble. You can even sort by genre.
If you’re in college and some of your teachers use the same textbook each year, it might be worth checking out if the textbook is offered by a used textbook seller (talking to friends within your major is also worth a shot). Some companies will even allow you to rent a used textbook so you’re not stuck with the book after class ends.
Use an online auto loan calculator to determine the price point for the vehicle you can afford before you visit a dealership. Make sure you put in different interest rates so that you know the maximum interest rate you can afford. Then use an online depreciation calculator to see how much your ‘new’ car could depreciate after you buy it. It’s an eye opener!
Get preapproved for an auto loan for the amount of the car you can afford. Don’t let the bank or credit union approve you for a higher loan amount than you can afford because you may be tempted to spend the whole amount.
Getting your preapproval amount locked in means you can always go lower if you choose a car at a lower price, but you won’t be able to buy anything higher than the amount of the loan you are preapproved for.
Don’t let the dealership talk you into adding pricey extras into the loan. Unless it’s necessary for safety, you probably don’t need it.
Do your research on pre-owned electronics before you buy new ones. Make sure that the pre-owned item has the features you want and it’s not scratched or damaged. If you can’t find the pre-owned item at a physical or online merchant, also look at places that offer person-to-person used items like Facebook Marketplace, Craigslist, Sell, and LetGo.
Accredited Financial Counselor
In 2008, Ms. Torres-Gale was chosen by the Financial Industry Regulatory Authority (FINRA) Foundation to be part of a select group of military spouses. Through this, she received FINRA sponsored training from the Association of Financial Counseling, Planning and Education and became an Accredited Financial Counselor® in February 2012.
Full Bio | Connect With Dawn | LinkedIn
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