New vs. Used Cars: Which Should You Buy?
“Is it better to buy a new or used car?”
After you’ve decided what kind of vehicle you’re interested in and the amount of money you’re willing to spend, this is the question that most car shoppers ask themselves next.
So, which is the better option? The answer to this question is not always so simple, and the reasons to buy new or used aren’t the same for everyone. To decide which is the right option for you, consider these factors when you’re beginning your car shopping journey.
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Advantages of Buying New Cars
Incentives and Rebates: Auto dealers typically offer incentives on new vehicles, with cash rebates and low APR financing being the most common. Doing your research on these incentives ahead of time can save you thousands on a new vehicle. If you have a specific vehicle model or brand in mind, a quick Google search will show you what kind of incentives and rebates are being offered by that manufacturer. These incentives are offered to steer customers away from the competition, ensure they stay loyal to a brand, or even to move inventory on cars that aren’t selling as well.
Warranty Coverage: New car warranties are included in the price of all new vehicles, helping make sure your pocket is protected after making a sizeable investment. These warranties cover you based on years-owned and/or mileage driven. For example, in most cases a bumper-to-bumper new car warranty will last three years or 36,000 miles, whichever comes first, and a powertrain warranty can be anywhere from six years or 50,000 to 7 years or 100,000.
Your Pick of The Lot: Unlike used cars where selection may be limited, you’ll likely have your pick of the lot when buying a new car. While there are certainly a variety of used cars in the market these days, you’ll have better luck finding your perfect exterior, interior, and feature combination with a new vehicle.
Disadvantages of Buying New Cars
They’re More Expensive: Facing facts, purchasing a new car is more expensive than purchasing a used one. From the very beginning of the car buying process you’ll find that the sticker price on a new vehicle is higher than on a comparable used model. Similarly, because the sales price is higher on new vehicles, you’ll end up paying more sales tax at your time of purchase. Plus, new vehicles are can sometimes be more expensive to insure because they are more costly to replace, so you could end up paying higher-than-average premiums, too.
Their Value Depreciates: New cars lose their value at a much faster rate than used cars do. In fact, the second your drive your new car off the lot it will lose between 9-11% of its value. Within a year your vehicle will have lost around 20% of it’s value from the day you bought it, and within 5 years it will be worth 60% less than the day of purchase. Depreciation will slow down over time, which gives used cars an automatic point in the advantage category on this one. Not only will someone else incur the quick depreciation when you purchase a used vehicle, but it will also depreciate at a slower rate from the time of purchase.
Advantages of Buying Used Cars
They’re Less Expensive: We’ve touched on this in a previous section, but it’s important to reiterate as a major advantage of purchasing a used vehicle. Used cars are less expensive in many ways. Not only will you pay less in sales tax and possibly less in insurance premiums, but the initial sales price is also much lower. Edmunds data from 2019 shows the average used car price at $20,600, while Kelley Blue Book data shows the average vehicle transaction price at $38,900. That’s an $18,300 difference!
More Car for Your Money: Used cars can often afford you more bang for your buck. The plus side of a vehicle’s depreciation is that you can afford a more luxury vehicle or better equipped vehicle at price that fits your budget. For example, with a budget of $38,000 you could buy a brand-new mid-size SUV like the 2020 Ford Explorer or a used mid-size SUV like the 2017 Land Rover Range Rover.
Data on Vehicles: Vehicle data reports like CarFax make it easier now than ever before to learn about your used vehicle’s history, giving shoppers a greater peace of mind when considering a used car. Additionally, used cars have helpful aftermarket communities with hundreds of asked and answered mechanical questions, information about recalls, and additional support.
Disadvantages of Buying Used Cars
Little to No Warranty: One downside of buying a used vehicle is the lack of a warranty. Most used vehicles, whether they come from dealer or private sales, do not come with a warranty. Certain exceptions apply, such as Certified Pre-Owned warranties offered by manufacturers, but these warranties may not cover as much for as long. Some dealers may also offer dealership warranties, but these terms are subject to each particular dealership.
Maintenance Costs: Maintenance costs and repairs are something to consider when buying a used car, as these are hard costs that must be taken care of when they arise. No matter how well taken care of a vehicle is, some natural wear and tear is going to occur after 30,000 miles or so. Reviewing a vehicle’s history and having it inspected by a mechanic can help mitigate the risk of buying a “problem” car nowadays, but maintenance costs are eventually inevitable whether you’re buying new or used – they’ll just usually happen sooner with a used vehicle.
Sources:
https://www.daveramsey.com/blog/new-car-vs-used-car
https://www.cars.com/articles/benefits-of-buying-a-new-car-1420680890083/
https://www.cargurus.com/Cars/articles/10_good_reasons_to_buy_a_used_car
https://www.edmunds.com/car-buying/how-to-use-new-car-incentives-and-rebates.html
https://cars.usnews.com/cars-trucks/which-automaker-has-the-best-warranty
https://www.autotrader.com/car-shopping/4-questions-to-help-you-decide-on-a-new-or-used-car-167808
