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Car Buying: New vs. Used
Date Published: Mar 11, 2021
When it comes to buying a car there are often quite a bit of decisions that need to be made such as which car do I want, how much do I want to spend, and so on. One of the first questions you may ask yourself is if you want to buy a fancy new car fresh off the assembly line or purchase a well taken care of used vehicle to call your own.
Depending on your current life situation, sometimes this may be an easy decision to make and other times it could be more difficult. In this article we will take a look at the advantages and disadvantages to each option and things to take note of as you begin to look for a new ride.
A Brand New Car!
Let’s face it, the idea of being the first owner of a slick, shiny, technologically advanced, new-car scented vehicle is pretty appealing. Aside from wowing your friends and family going the new car route has other pros to it, as well as cons.
A Brand New Car - Pros
Peace of mind: Majority of new cars have solid reliability records and you don’t have to worry about how it may have been treated before you bought it. If your new car happens to break down or something goes wrong, you can most likely have it taken care of for free under the included factory warranty that carmakers offer.
The newest technology: New cars will have the latest features for comfort, performance, and safety such as side-curtain airbags and structural reinforcements that used cars will lack. They also often offer roadside assistance programs and the highest fuel efficiency standards, keeping you on the road longer and away from the gas pump more (Smith, Investopedia).
More and better financing options: Automakers generally offer you a bunch of incentives like cash rebates to pull you towards buying a new car. New car loans will also typically have better interest rates than loans for used cars, mainly because the chance for mechanical deficiencies are often viewed as greater in used cars. Lower interest rates in new auto loans means that there is a good chance you will pay up to thousands of dollars less on the intimidating sticker price, once you negotiate a final price and apply the incentives.
A Brand New Car - Cons
Tough on the wallet: Aside from the cost being higher, and often significantly higher, buying a new car will also result in incurring higher debt and higher insurance costs because the replacement values are higher. Those high insurance costs will stick around as you put wear and tear on the car and it loses its new car feeling.
Depreciation: New cars of course cost more than used cars, but this isn’t the only factor that hurts your bank account. The other factor is an ominous sounding term called depreciation and it will hit you like a nasty pothole.
Let’s say you buy a new car for $30,000. As soon as you drive that car off the lot it will lose roughly $6,000 (20%) in value, and the mileage and wear and tear after the first year of ownership could cause it to lose 30% of its value or $9,000 pertaining to our example. If you try to sell the car three years later it will most likely be worth around $15,000 causing you to lose $15,000 in depreciation. Keep in mind though that not all cars depreciate at the same rate, this is the same for both new and used vehicles.
The Modest, Used Car Route
Pre-owned or used vehicles may not have the flash or social impact that brand new cars hold, but they more than make up for it in terms of practical financial reality.
Used Car Pros
Lower insurance rates: To no surprise, used vehicles are worth less money than new cars, which means that it will cost you less money in the purchase price and to insure it when you are signing up for collision and comprehensive coverage. If you don’t want collision and comprehensive coverage you can simply drop them and save more, but keep in mind that collision and comprehensive coverage pay for repairs to your car.
Used car depreciation: Let’s jump back to our previous depreciation scenario of the brand new car with an initial value of $30,000. If you were to buy that same car when it was three years old, you could get it for $15,000 and then three years later you could sell it for $10,000. The depreciation of the used version only cost you $5,000.
Registry renewals and upgrading: The cost of registering a used car decreases each year and because you can save at least 30%, you can shop in a higher class of vehicles.
Save money: In a report done by the National Automobile Dealers Association, the average person owns 13 cars in a lifetime, with each costing an average of $30,000. If each of those cars were three years old, instead of being brand new, you could save almost $130,000 throughout your life (Reed, NerdWallet).
Used Car Cons
Unreliability: While It’s not uncommon for some cars to deliver more than 100,000 miles before needing major repairs, used cars still have that factor that you are not entirely sure how they were 100% cared for the past. If the car you bought was treated well and is perfectly sound, you will most likely need to perform required maintenance sooner than on a new car.
Tougher shopping: When shopping for a used car, you can’t be as picky as when it comes to shopping for a brand new car, and buying a used car requires more leg work. It may be a bit more difficult to find a used car with the exact features and options that you would like. It can also be more difficult to figure out a fair price that you should pay for the vehicle (Smith, Investopedia).
New or Used?
When deciding on whether to buy a new or used car you need to base your decision off of a number of factors. You want to make sure you purchase a vehicle that is safe and reliable, and meets your lifestyle, wants, and need in terms of comfort and features. You also want to find a car that you are comfortable with financially in both the short and long-term.
Ultimately, there really is no bona fide right or wrong choice when it comes to buying a new or used automobile, you just have to travel the road that is right for you at the moment. Whichever decision you make, just remember to do your research, take your time, learn from the experience, and enjoy your new car.
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