Next to buying a home, a car is one of the biggest purchases you’ll make. So, you’re probably wondering if it makes sense to buy a new car or go for something a bit older with a few extra miles on the odometer. There’s no right or wrong choice, but there are plenty of considerations that’ll sway your ultimate decision.
Pros and Cons of Buying New
Aside from that fresh-off-the-showroom feeling and little to no mileage on the odometer, buying a new car also gives you greater peace of mind. You won’t have to worry about any neglect on part of previous owners, pre-existing wear and tear or underlying issues like prior accidents or skipped maintenance. Any unexpected issues will also be covered by your vehicle’s factory warranty, with most warranties giving you at least 3 years or 36,000 miles of coverage for repairs and/or replacement.
It’s also easier to find the vehicle you want, especially if you’re looking for a specific trim level, equipment package, or color. If you can’t find what you’re looking for at the dealership, most can order your desired vehicle straight from the factory or work with another dealer to bring over the vehicle you want. The new car you’re looking for may also come with a host of rebates and other financial incentives, especially if the car in question is a slow-selling model or the final year of a previous generation. New cars are also cheaper to finance due to lenders offering more favorable interest rates when compared to used cars.
On the other hand, buying a new car also means having to deal with depreciation, which kicks in no sooner than you leave the lot with your new ride. During the first year of ownership, your new car’s value could plummet by as much as 30 percent and drop by 15 to 18 percent each year for the next few years. By year 5, depreciation has claimed 60 percent or more of your car’s initial value. If you plan on trading vehicles within the next few years and worry about depreciation, you may want to consider leasing instead of buying.
New cars can also be more expensive to insure than their used counterparts. If you’re financing your next new vehicle, your lender will require you to carry comprehensive and collision coverage until the vehicle is paid off in full. You may also need gap insurance, which helps bridge the gap between the remaining amount owed on the vehicle and the vehicle’s current worth if the vehicle is totaled or stolen.
Pros and Cons of Buying Used
Used cars often go for thousands less than their brand-new counterparts, making them the smart buy for anyone on a tight budget. Interest rates are a bit higher when it comes to a used car financing, but the lower loan amounts also translate to lower monthly payments, shorter loan terms and less chance of being “upside-down” or owing more than the car is worth. Being the second owner also means you get to dodge the substantial depreciation hit, making both short-term and long-term ownership less costly.
Going used also gives you an opportunity to buy more car for your money. For the cost of a brand-new compact SUV, you can step up to a used SUV that offers more space and more amenities. Some used cars may even have desired features that are absent from newer counterparts. However, you shouldn’t expect the latest in high-tech toys, like wireless charging or a heads-up display, in vehicles that are a few years old.
Used cars aren’t perfect, however. The older the car and the more miles it racks up, the more wear and tear you’ll face from the get-go. Spotty or non-existent service records can also cause some concern for used car buyers. Fortunately, companies like CARFAX and AutoCheck make it easier to look up a vehicle’s ownership, title, and maintenance history, which can help weed out unpromising finds. Buying a certified pre-owned vehicle can help take some of the uncertainty out of buying a used car since you’re getting a relatively low-mileage vehicle that’s rigorously inspected and reconditioned to like-new shape.
Depending on a used car’s age and mileage, you might miss out on factory warranty coverage. Aftermarket warranties can help fill that gap, but it’s an added cost and such coverage may not be as comprehensive as the original factory warranty.