Used-car Prices Falling: Should You Choose Used Over New?

If you're in the market for a gently-used or preowned car, you're in luck. Used-car prices are falling, according to Manheim, Inc. Last month sales decreased more than 9 percent from July, and it was the fourth consecutive month to see a decline. The average used car sold from an auto dealership for $10,883 in August, which is 1.6 percent less than a year ago and a 1.4 percent drop from July, CNW Research found.

The recent pro-buyer prices could be because of the recession, USA Today reported. New auto sales have increased since the recession and are forecasted to hit 16 million this year. The cheaper used-cars are in a response to this booming market.

Used versus new cars

There are benefits to buying a used vehicle but whether it's for you depends on your preference and budget.

By buying a used car, you avoid the 20 to 40 percent depreciation cost you'll have to deal with on a brand new car, Cars.com advised. Most people know their cars heavily depreciate in the first two or three years, but if you do the math, it may be better to skip that period and purchase a vehicle that's already a few years old. Because of this depreciation, if you have a solid budget, you'll be able to purchase a vehicle with more bells and whistles than if that money went toward the newest model of that car.

And if you're worried about the cost of your auto insurance, purchasing a policy for a used car is often cheaper.

There are downsides to buying used though too. It isn't a huge difference, but used-car loans can have slightly higher interest rates, according to MSN.

You'll also be taking a vehicle that is past its warranty, which means you have a greater financial responsibility for repairs and maintenance. However, if you purchase a factory-certified preowned vehicle, you may have a warranty to cover certain inspections, repairs and part replacements.

A used car will also be a few years behind on technology, and not just for the sound system. Safety features may be out of date too. Things such as electronic stability control, advanced air bag systems and LATCH child-seat restraints may not be easy to find in a car that's a few years old. If you're very interested in having the newest state-of-the-art features, a new car may be the way to go.