Why Cheap Cars Aren’t Always Cheap — And Can Cost You More Long Term
The saying goes, “Price is what you pay, value is what you get,” and it's most in mind before any large purchase, when mistakes are harder to correct. The difference between price and value is important in any financial transaction and especially crucial if you’re about to fork over a lot of money on a big-ticket item, like a car.
When it comes to a low sticker price, you need to remove the rose-colored glasses and objectively assess the pros and cons of what you’re buying. Everyone wants a great deal, but things like durability, performance, quality and how well a vehicle fulfills or exceeds your expectations have to be considered.
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Here are the top considerations to weigh before buying what could either be a great investment or a potential lemon.
A Cheap Car Might Be the Most Expensive Mistake You Ever Make
“Used older vehicles check the box of a lower sticker price but can be a constant headache, which shows up later as frequent repairs, shorter part lifespans and more time in the shop,” said Michael Ouziel, founder and managing partner at MMO Law, a California lemon law firm.
The problem with cheap vehicles is that they often reflect the cheapness of their previous owners. Deferred maintenance can turn a deal into a failure if things like brakes, a new battery and a fluid flush are needed immediately. Worse, low-priced cars often hide more serious repairs.
“The hidden costs are where the real damage happens,” Ouziel added. “Complex transmissions, turbocharged engines and heavily integrated tech systems can drive up repair costs significantly, particularly when failures require specialized diagnostics or full component replacements instead of simple fixes.”
According to Luke Oswald, automotive specialist at the U.S.-based car-buying service Wheels Away, premium brands aren’t necessarily a better choice for bargain hunters.
“A common mistake I see is buyers being tempted by lower-priced used luxury vehicles from brands like Mercedes-Benz, BMW, Audi or Porsche, all without fully thinking about the long-term ownership costs," he said.
“These cars may seem like a bargain when you compare it to their original price, but you need to factor in maintenance and repair expenses because these are usually much higher than other vehicles.”
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Look at Reliability and the Total Cost of Ownership
According to a recent CompareMechanic blog post, there are several costs you have to consider besides price: Upkeep, insurance and fuel are the big ones, but in a larger sense, the post said, there's also the immediate and ongoing depreciation the second you purchase it.
Everything is more expensive now, from a gallon of gas to repair labor rates, but a car that fits your budget but not your needs isn’t worth buying. Reliability and total cost of ownership should be as important as price and can be determined using tools like Consumer Reports’ and RepairPal’s reliability rankings, and Edmunds’ Cost of Car Ownership calculator, said CompareMechanic.
Don’t Forget About Insurance Premiums
Most drivers know that car insurance is regulated at the state level, priced by ZIP code and dependent upon your driving record, age and credit score. However, the model you choose to drive can determine what you’ll pay in insurance and whether the deal you got was really worth it.
“A low sticker price on a car often induces a false sense of savings that is quickly undermined by the corresponding insurance premium,” said Joshua Morrison, president of Bad Driving Record. “Economy cars with high theft rates or parts costs that are disproportionate to their market value, and even models where the safety rating is quite poor, often face insurance premiums as high or higher than a far more reliable, expensive model over the same term.
“For example, a buyer who saves $8,000 on the original purchase but pays an additional $150 each month in insurance premiums will have effectively used up that savings after just five years — without even including pricey repairs."
Just because you’re buying a budget-friendly car, it doesn’t mean all the additional costs will be less expensive too. You should be scrutinizing a discounted or used vehicle as much as one you’d buy brand new.
“The best time to buy a car is when it's around five years old," Oswald said. "The car will have then done most of its financial depreciation but still be new enough to have a lot of life left in it and avoid any big repair bills.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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