Frugal Living Tip #8 - Buy Used - Always

Reading the title of this edition of frugal living tips you are probably thinking to yourself, Thank-you Captain Obvious. Well, while the notion of saving money by purchasing used is not exactly groundbreaking, I'm here to remind you that the majority of us don't take this powerful saving tool far enough.

What do I mean by this? Start by taking stock of some of the possessions in your house. Sure, you got that sofa by replying to an ad in the local classifieds, that table lamp came from a garage sale, and those jeans came from a thrift store. But what about your TV, dishes, tennis rackets, winter parka? What about your car, or your house? Odds are the majority of the items in your household were probably bought new at the store. But just about every material good you own, regardless of how big or small, could have been purchased at a significant discount if you had bought it used.

The two most expensive purchases - a house and a car - are often purchased new, despite the immediate depreciation that occurs as soon as we sign the papers. But, wait a minute, houses are an appreciating asset, aren't they? This is true, in most real estate markets, however when you purchase new you will face the applicable sales tax. Here in Canada that is a 5% GST tax added to the purchase. Not exactly peanuts when applied to a $400,000 sale. Now you've paid $420,000 for your nice new home. Compare that to a five year old home with the same specs in the same neighborhood. Because it is not brand new they cannot justify pricing it at the same level as the new home down the street. Instead this home sells for $370,000, with no applicable sales tax. Purchasing the used home could have saved you $50,000! Project the interest paid on that extra $50,000 over the term of your mortgage, and you can probably double that number. A pretty hefty premium to pay just to have the privilege of being the first occupant.

Cars are even worse. Not only do you pay sales tax and freight charges on a new car, but they are a depreciating asset! As soon as you drive it off the lot its value starts to erode, and in five years, when you've finally finished paying for it, it will likely be worth less than half what you paid. The solution is simple: Let someone else pay that depreciation. Shop around, and read consumer reports on automobiles 3-5 years old. Look for gas efficiency and reliability above all. One of the major reasons people buy new cars (or even worse, lease!) is because they don't want to be hassled with maintenance problems. If you do your research carefully you can find a solid, reliable used car and enjoy nearly the same level of peace of mind, but at less than half the cost!

So, those are the big ticket items, but that is just the tip of the iceberg. Whenever you have a need or a want, get yourself out of the habit of heading down to the department store. Instead, start your search in the local classifieds (print and online), head to garage sales, thrift stores, flea markets. Everything you need is being sold used by someone somewhere, and often at a discount of up to 90% off what you would pay for it new. Even popular items will be sold at least a slight discount to their retail counterparts. Someone selling used items for the same price as new aren't going to do very much business.

Turn your search into a game. Comparison shop even among used goods, and try and find the absolute best bargain possible. You might have to wait a few days, but eventually you'll come across what you are looking for at a smokin' price. By applying this technique to every item you buy, from forks to fridges, you can cut your discretionary spending in half!

There is another bonus perk if you are purchasing goods directly from other individuals, rather than businesses. In most cases, they will not accept credit cards. Cash is king for person to person transactions. This forces you to only buy what you currently have money for - a great impulse check and yet another way to keep those credit card balances minimal.