It can happen to anyone, sooner or later. When the old clunker makes its last smoky sigh at the side of a road, you are faced with a very costly reality: You will need new wheels. Although a shiny new car might be attractive, your friend who knows everything says that buying used is better in the long-term. This is how you can decide which car is best for you.
Benefits of buying a new car
It’s hard to deny the appeal of a brand new car. From the fresh-car smell, shiny paint, clean interior and the “oohs and “aahs”, when you see it for the first-time, there is no denying its curb appeal. A new car is a status symbol in our culture that signifies your arrival (literally). A new car has other benefits than cosmetics.
Warranty protection and reliability. If something does go wrong with your new car, the warranty will cover it. You can also buy new and have no worries about the way it was treated prior to you buying it.
No cost roadside assistance. Many new cars include roadside help. This will save you money and avoid paying for towing costs if your vehicle breaks down.
The most recent features. All new cars will likely meet the highest fuel efficiency standards.
Get financing options that are attractive if your credit is good. This can make financing a new vehicle less costly than buying a used car.
Advantages and Disadvantages to Buying a New Car
New cars have their own set of problems.
It’s expensive to buy a car. You’ll likely end up borrowing more if you use an auto loans to finance your purchase and paying more interest.
Depreciates quickly. Newer cars appreciate faster than their older counterparts. The first few years of ownership are when a vehicle loses its most value. This is also true for vehicles that have been on the lot less than a few minutes. Some estimates put the loss at 20%. 1This is because you pay the retail price when you buy a car from a dealer. The car’s wholesale price is no longer worth it once you leave the lot. This is what the dealer would pay if you tried to sell the car back.
More expensive to insure. Used cars have higher auto Insurance costs because of their replacement value.
It won’t stay new forever. New cars are not always new. You’ll see your first scratch or nick in a few days, weeks, or months. The first year will see the floor stained and the doors damaged, but the sweet, new-car smell will fade away. The monthly payments will continue for many years.
Advantages of buying a used car
Pre-owned cars, to use marketing jargon for used vehicles, might lack the glamour of new cars. They do have their advantages.
Lower prices. A lot of the vehicle’s depreciation is already done by the time it arrives on the used-car marketplace (and has been paid for by its previous owner). You can get more car for your dollar by buying used.
Warranties available. Certain vehicles come with warranties that will cover the most costly components of the car’s drivetrain up to 200,000 miles. A dealer will likely sell you a certified preowned vehicle. This warranty extends the original manufacturer’s warranty. Although certified pre-owned cars are more expensive than regular used cars, they have been thoroughly inspected and cleaned up as necessary. If you are handy with a wrench, buying a car that requires some attention and time can drastically reduce the cost.
Cheaper to insure. You may not need to insure a vehicle you are financing. However, it may be required by a dealer that you have insurance. If you pay cash for your car, you might be able to save money on insurance.
Advantages of buying a used car
Used cars can still be expensive, regardless of whether they are under warranty. You don’t know the history of the vehicle or how it was sold, so you could end up buying someone else’s problem. Other concerns:
Cars with higher mileage are more likely to last longer. You may have to replace your car sooner than you planned if you purchase a vehicle with a higher mileage.
Limited selection. Sometimes it can be difficult to find the right vehicle for you.
Less consumer protections. You may not have the same recourse as you would with a new vehicle. Lemon laws are often only applicable to vehicles less than a year old and with a specific number of miles.
Do You Need to Buy a Used or New Car?
Consider both the upfront price and ongoing costs when deciding whether you want to purchase a new or used car. You may have to pay for the following:
- Deposit payment
- Closed closing fees, title and taxes
- Property tax
- Car insurance
- Oil and gas
In the first few years, a new car might be less expensive in terms of repairs. You may be ready to sell your car in when it starts to require major repairs or maintenance. You may pay more for maintenance, but you will be charged less interest if you buy it cash. When calculating the cost of buying new or used cars, consider all factors.
Remember that buying a used or new vehicle is not a decision purely based on financial considerations. Although used cars are generally cheaper initially, you may not be able get all the features that you desire without some compromises. It’s worth looking at both, unless you are in a hurry to buy. Compare the prices of the used and new cars, and decide which one you would prefer.
- New cars have the most recent safety features and are more likely to be reliable. However, they may come at a higher cost and require higher insurance.
- Because of the low depreciation in their early years, used cars are usually cheaper and may not require as much insurance.
- Although certified pre-owned cars can be more expensive than regular used cars, they may still be in near-new condition.
- Consider the ongoing costs of gas, maintenance, repairs and insurance when deciding between a new or used car.