When shopping for a new versus used car, you need flexibility and patience. A new vehicle gives you the reassurance knowing that you're the only person who has owned the car, while a used car is easier on your wallet. Examine the pros and cons of each type before purchasing your next vehicle.
Buying New vs. Used
According to the National Automobile Dealers Association, the average person owns 13 vehicles during a lifetime, with each averaging about $30,000. If you purchased each of these vehicles used and they were three years old, during your lifetime you could save almost $130,000 instead of purchasing new.
When it's time to purchase a vehicle, you have numerous options. The obvious ones are the make and model, but you also need to choose between new and used. This decision can make a huge financial difference, as buying used is the cheaper option.
Advantages of Buying a Used Car
In addition to saving on financial costs by letting someone else take the depreciation hit on the vehicle, there are other advantages to buying a used car. According to The Balance, other advantages include the following:
- Best car for your money: Many times you can find a late-model used car priced at half the cost of a new one. Pre-certified dealer programs feature strong warranties as well.
- Resale value: You might be able to sell the car for almost the same amount you paid in a few years. You can also benefit from obtaining solid financing options through a credit union or bank.
Disadvantages of Buying a Used Car
On the flip side, there are disadvantages to buying a used car, and some reasons include the following:
- Reliability: The biggest downside of buying a used car is that it might not be as reliable or that you need to do more repairs on it. You don't know how the owner treated the car or why he or she traded it in.
- Compromising: You might also have to compromise on the car's color, features, and options to buy one with a better history or mileage.
Advantages of Buying a New Car
You can also opt for purchasing a new car, which comes with its own advantages according to Investopedia :
- Shopping is easier: All new vehicles are considered perfect, so you don't need to evaluate the condition. It's also easier to determine how much the vehicle costs, even if you still need to negotiate.
- More financing options: Automakers have numerous incentives to entice buyers. New car loans oftentimes have better interest rates, so you might pay thousands of dollars less than the sticker price after you negotiate and apply incentives.
- Advanced technology: Your new vehicle might achieve better gas mileage and have lower emissions. You might also be able to connect your technology to the vehicle.
Disadvantages of Buying a New Car
Although the biggest disadvantage of buying a new car is that you lose money the minute you drive off the lot, there are other reasons to reconsider this option:
- Depreciation: According to Nerd Wallet, the biggest depreciation occurs in the first two or three years. You're almost throwing away several thousand dollars you will never get back.
- Higher debt: Newer cars come with higher insurance costs since replacement values are higher.
Certified Pre-Owned Vehicles
With any used vehicle, unless you buy from someone you know, you don't know anything about the vehicle's maintenance. Having a mechanic check the vehicle can minimize the risk.
Another option is to purchase through a certified pre-owned (CPO) program. The CPO program gives you a compromise between the used car's lower price and the reliability of a newer vehicle.
According to Money Crashers, cars in the CPO program are usually less than three years old, have low mileage, and no history of major damage. They also must pass strict inspections. After approval, the vehicle gets a new warranty that goes beyond the original factory warranty one.
Do Your Research
When buying a used car, you need to do more research than you would when buying a new one. For instance, you must locate the car you want and then figure out how much it's worth and if the owner can sell it legally. Other tips to consider include the following:
- Shop around: Visit used-car locations, search for used cars online, and look through classified ads.
- Examine the book value: Check the prices of the models you're interested in. There are online sites available where you can look up this information for free.
- Look at the vehicle's history: Research the vehicle's history through online websites. These sites track down information based on the vehicle identification number (VIN).
- Check the title: When buying from a private seller, you run the risk that the seller isn't the legal owner of the car. To protect yourself, order a title history report from the National Motor Vehicle Title Information System.
- Get it inspected: Before you sign anything, get the car examined by a mechanic.
- Pay cash if you can: According to Consumer Reports, almost 11 percent of car ownership costs during the first five years are the loan's interest.
Tips on Purchasing a New or Used Vehicle
According to Experian, the average new car loan costs $29,880 for 68 months. This averages to almost $500 per month, so new car owners should expect to pay almost $34,000 during the loan.
On the other hand, used vehicles have an average loan amount of $19,100 for 63 months. This average monthly payment equates to about $365, and used car owners should expect to pay about $23,000. This is an $11,000 difference.
To help you save money on either new or used vehicles, use these tips:
- Check reviews and ratings for the vehicle you want. Also, look up complaints.
- Determine how costly it is to repair and insure the vehicle. High-end foreign vehicles oftentimes have parts difficult to locate, which adds to the repair cost.
- Take it for a test drive. Try to drive on a day with inclement weather to see how it handles.
- Be prepared to haggle on the costs. You might have more flexibility for costs with used cars compared to new ones.
When shopping for a new or used vehicle, it comes down to your personal preference and peace of mind. Newer vehicles typically cost more but come with the latest features, while used vehicles are more budget-friendly but might not be reliable. Determine what your priorities are and with either option, you're on your way to driving a newer (to you) vehicle.
Information and research in this article verified by ASE-certified Master Technician Duane Sayaloune of YourMechanic.com. For any feedback or correction requests please contact us at research@caranddriver.com.
Sources:
https://www.consumerreports.org/car-financing/more-people-are-taking-out-long-term-car-loans/
https://www.experian.com/blogs/ask-experian/research/auto-loan-debt-study/
https://www.investopedia.com/articles/pf/07/neworusedcar.asp
https://www.moneycrashers.com/buying-new-car-vs-used-car/
https://www.nerdwallet.com/blog/loans/compare-costs-buying-new-car-vs-used/
https://www.thebalance.com/buying-a-new-car-or-used-car-2385961
