Most times, a new car will be more reliable than a used one, even though pre-owned cars are much more dependable than in the past. If a new car breaks down, you can have it fixed for free under the included factory warranty, at least for the first 36,000 miles or three years that most carmakers offer. so before you get that dream car, you need to understand new car vs used car pros and cons, disadvantages of buying a used car, disadvantages of buying a new car and benefits of buying a used car.
Used or new cars; best option to buy
When it comes to buying a car, you have a variety of choices available to you. Not only do you need to pick the make and model of your car, you also need to decide if you want to buy a new or used car. This is an important decision and it can make a big difference in your finances over the next several years. It is important to realize that buying a car is not an investment. Your options may also be determined on whether or not you qualify for a loan or if you need to pay in cash.
The advantage of buying a new car is that you are buying a car that generally comes with a warranty. Most new cars will have very few repairs in the first few years, so you can focus only on the maintenance of the car. The dealer may also offer financing at a lower interest rate, which can reduce the amount of interest you pay over the life of the loan. These are the most basic advantages.
Another advantage is that the new cars will have the latest technology, which will mean that you may find cars with better gas mileage and lower emissions. You may be able to buy a hybrid and reduce the amount you spend on transportation each month. Additionally, the new cars tend to hook up to your phone and other devices with more ease.
disadvantages of buying a new car
The biggest disadvantage of buying a new car is that you lose money on it as soon as you drive it off the lot. A new car takes its biggest depreciation in the first two or three years. This means that you are basically throwing away several thousand dollars that you will never be able to get back. Financially it does not make a lot of sense to buy a new car unless you have money you do not mind losing.
Another disadvantage is if you buy a car that is a brand new model. There may be a year when they switch engines or alter the design and that model and year tend to have more problems. If you buy used you can avoid that issue.
benefits of buying a used car.
The biggest advantage of buying a used car is that you let someone else take the biggest depreciation hit on the car. You may be able to sell your car for nearly the same amount you paid for it in the next few years. You can still find good financing options through your local bank or credit union, and because you are not losing the money on depreciation, you may come out ahead of a zero interest loan that you would take out on a new car.
When you buy a used car, it is easier to save up and pay cash. You can also review the Consumer Reports and choose a model that has been performing well.
Another advantage is that depending on the model, your insurance rates may be lower on a used car as opposed to a new one. If you are in your early twenties and paying high insurance rates because of your age, this may be significant savings.
Disadvantages of a Used Car
The biggest disadvantage of buying a used car is that it may not be as reliable or you may need to do more repairs on it. However, you do have the option of buying a Certified Pre-Owned car through several different car companies. As technology has improved cars have become more reliable and many models do not need repairs until they are well over 100,000 miles and close to ten years old. This means that you can buy a car that is three years old and sell it in five years and you may not need to do any major repairs on it. Plus, you can sell it at a price very close to what you bought it for. You may want to set aside a little bit of money each month to cover any car repairs that come up.
Another disadvantage of buying used is that you may have to compromise on the color of the car in order to get the one with the better history and mileage. When shopping for a used car, you need to be more flexible and more patient as you hunt for a car. You can also expand your search and look for the best price on available cars.
Making the Decision
Everyone will need to decide for themselves what the best option is. No matter what you decide you should either pay cash or make sure that you can afford the car. A good rule of thumb is that you should be able to pay the car off completely in a three year time period. If you cannot afford the payments at this rate, you most likely cannot afford the car.
You should also do your research and make sure that the model you choose has good reviews and is reliable. If you know nothing about cars, then you should have a mechanic look over the car for you, particularly if it is used. Make sure you shop around for the best loan on the car if you are borrowing money to purchase your car.
While buying new cars is enticing, you should take a cold, hard look at how much you could save over time by buying used cars instead.
The average person owns 13 cars in a lifetime, each costing an average of $30,000, according to a report by the National Automobile Dealers Association. If each of those cars was 3 years old, instead of new, you could save nearly $130,000 during your lifetime.
The real money-saver in buying a used car is wrapped up in a sinister-sounding financial word: depreciation.
Depreciation: Car buying’s dirty little secret
Once you fully understand how car depreciation sucks money out of your wallet, you’ll learn how to save boatloads of cash over your lifetime. You often hear that a car loses 20% of its value as soon as you buy it. Yes, in just one minute, a $30,000 car will lose $6,000 as you gleefully drive off. By the end of the first year, mileage and wear and tear could bring that to 30%, or $9,000. Why don’t you feel this big hit? Because it takes effect much later, when you sell or trade in your car.
By the end of the first year, a new car loses around 30% of its value.
Take a look at two similar cars, one new and one used.
New-car depreciation: You buy the car for $30,000 and sell it three years later for $15,000. The car has cost you $15,000 in depreciation.
Used-car depreciation: Now let’s say you buy the same car, but it’s 3 years old when you buy it. You could buy the car for $15,000. Three years later you could sell it for $10,000. So the used car depreciation cost you only $5,000.
Now, if you’re paying attention, you would quickly say, “But driving a brand new car is much better!” You’re absolutely right. So, if driving a new car is worth an extra $10,000 to you, go for it. But don’t say we didn’t warn you.
Forget the old used-car stigmas
It used to be common for people to put down used cars by saying that it was just a way to buy someone else’s problems. That’s not true anymore. Here are two updates on old knocks against used cars of recent vintage.
Reliability: Cars have never been more dependable than they are today. It’s not uncommon for some cars to deliver more than 100,000 miles before needing major repairs.
Maintenance: All cars require regular maintenance such as oil changes, tire rotation, brake jobs. But you can drive today’s cars much farther in between these scheduled maintenance visits. Even tires and brake pads last much longer than before.
More used-car advantages
So it’s pretty clear that buying a used car is much cheaper and that cars in general are more dependable. But take a look at these other advantages:
Lower car insurance rates: When a vehicle is worth less, it costs less to insure it when you’re buying collision and comprehensive coverage. You can also drop collision and comprehensive coverage, which pay for repairs to your car, and save even more.
Registry renewals are cheaper: The cost of registering a used car goes down every year.
Move up to a luxury car: Because you can save 30% or more, you can shop in a higher class of cars.
Less stress: Got a ding in the door? Who cares? But when it’s the first dent in your new car, it’s a huge bummer.
While nearly everything about used cars costs less, buying a new car has its advantages.
New-car shopping is easier: All new cars are assumed to be perfect, so evaluating the condition isn’t a factor. No need to take it to a mechanic. Also, it’s easier to figure out what you should pay for a new car, even if the negotiation process is still a pain.
Automakers offer attractive car-buying incentives and new car loans have better interest rates.
More financing options: Automakers offer plenty of incentives to lure buyers, such as cash rebates. New car loans have better interest rates. This means you’ll likely pay thousands of dollars less than the frightening sticker price once you negotiate a final price and apply the incentives.
Advanced technology: New features for comfort, performance and safety are introduced in new cars every year. You’ll need to wait several years to get them in used cars.
Peace of mind: A new car will likely be more reliable than a used one, even though pre-owned cars are much more dependable than in the past. If a new car breaks down, you can have it fixed for free under the included factory warranty, at least for the first 36,000 miles or three years that most carmakers offer.
Prestige: Let’s put it this way: You don’t hear many people bragging about the used car they just bought.
An exception to the rule
Not all cars depreciate at the same rate. Some brands are known for holding their value exceptionally well. When you add in possible new-car incentives and low-interest financing, there are times when buying a new car doesn’t cost much more than buying a 1- or 2-year-old car.
You can find how much cars depreciate on several automotive websites, such as Kelley Blue Book’s 5-Year Cost to Own or Consumer Reports’ Cost of Vehicle Ownership.
What it means for you
Depreciation is a silent killer to your automotive budget. But by buying cars that hold their value, you can minimize the effects. If you’re still on the fence, use a car loan calculator to see how much less your monthly payment would be if you bought used instead of new.
And if you’re ready to buy, use our car-buyer’s cheat sheet to guide you through the shopping process.