Consider these factors before you take sides.
Oh my gosh! Ask 20 different people about the pros and cons of buying a new car vs. buying a used car and you'll most likely get 20 different answers split 50/50 on the reasons why they prefer to buy a new car over a used car or a used car over a new car.
When it comes to purchasing a "new to you" vehicle, there are many factors to consider, but in reality it simply comes down to two (with some gray area overlap in the middle); 1. Financial status, and 2. Personal preferences.
1. A person’s financial status is usually the number one deciding factor in a vehicle purchase. Not everyone can fit a $500 or $600 car payment into already their tight budgets. For people in this category, buying a used vehicle is the only way to go.
• (The gray area) People in this category can afford a new car payment in their budget, but would prefer not to add that added cost to their budget.
2. The "new car enthusiast." People in this category like/crave that new car smell and are willing to pay for it. They like that factory fresh sparkle and reliability accompanied by a full warranty and other dealership perks.
Let's take a look at some of the pros and cons on both sides of the fence. Spoiler alert: There is no clear winner in the new vs. used car war.
1. Purchase Price
Used — Traditionally, price has been the biggest advantage in the used car corner. Today, the used car discount might not be as large as it used to be. Some models of used cars are currently selling at historically high prices because there are less of them to go around. In short, it's a seller's market for used cars, but good deals can be found. You just have to be diligent and shop around.
New — The sticker price on a new vehicle will always be higher than its used equivalent. But, in addition to rising prices of used cars, automakers are narrowing the price gap by offering hefty rebates and other incentives on new vehicles. In some cases, dealers are knocking as much as $5,000 off the manufacturer's suggested retail price, which could actually make the new car cheaper than last year's used model.
2. Financing
Used — Two main considerations come in to play when purchasing a used vehicle. Are you planning on purchasing from a dealer or, are you planning on purchasing from an individual? One of the key factors when buying a new or used vehicle is to know your budget and to get pre-financed if you can.
While a used car may have a lower purchase price over new, it will likely come with a higher interest rate. Used car dealers and financial institutions typically don't offer the next-to-nothing annual percentage rates that you can get with a new car loan. For example, if you finance $20,000 at 4% APR for 60 months, you'd pay nearly $2,100 in interest charges. Do your due diligence and know what the long term costs of the loan will be for you.
If you opt for buying from an individual over a licensed dealership, the seller is going to want all of their money up front.
New — Break out your calculator. If you could get a new version of the same car with zero-percent financing (which means no interest charges), the used model would need to be at least $2,100 cheaper to make it a better deal.
3. Features
Used — Finding your perfect car in the pre-owned market can be a challenge as the pool of quality vehicles for sale is much more limited. You might have to settle for what you can get in a used vehicle in lieu of getting what you want based on availability.
New — Get exactly what you want. The brand and model of your preferred vehicle can be yours with all of the options, technology and colors you want! If you can't find exactly what you want at a dealership, you can order it directly from the factory.
4. Reliability
Used — Call it the mystery factor, but it can be hard to tell whether a used car has been babied or abused. Before buying any used car, have a trusted mechanic inspect it thoroughly and pay for a CarFax report, which can reveal if the car has a troubled past.
But know that even after taking these steps, nothing can predict that massive oil leak that's been waiting to happen, or that A/C compressor failure that could be coming soon, or the...., well you get the picture.
The good news though is that studies such as the Annual Auto Survey from the Consumer Reports National Research Center show that the general reliability of cars has improved over the last decade. Most vehicles should keep going long after their warranties have expired. For greater assurance, explore historical reliability ratings for specific vehicles through Consumer Reports and other auto services. Or, look into dealers' or a manufacturers' certified pre-owned cars, which have been rigorously inspected and carry a renewed warranty.
New — A new car can be described in three words: peace of mind. A new vehicle is fresh off the assembly line and it comes with the original manufacturer's warranty, the protection of state and federal lemon laws and free roadside assistance. In all likelihood, you'll be able to drive it maintenance-free (aside from oil changes, and air and cabin filters) for at least three years or longer.
Whether you buy a new or used car, consider purchasing an extended warranty to help protect you from expensive repairs.
5. Depreciation
Used — The lack of depreciation is another favorite point of used car enthusiasts. A new car tends to lose the biggest chunk of value in its first two years. After that, the resale price tag stops dropping so quickly. Buying a used car is a better investment, the argument goes, because the first owner bore the brunt of the depreciation.
New — Depreciation may be less of an issue if you buy a popular car that holds its resale value. For example, cars.com reports that certain brands, such as Honda, Mercedes-Benz, Toyota and Volkswagen, tend to have lower depreciation because of their quality and reliability records.
6. Insurance
Used — In general, you'll pay less to insure a used car compared to a new one. The simple reason is that a used vehicle is worth less, and therefore costs the insurance company less to replace or repair it.
New — Though it's not the norm, there are cases where choosing a new vehicle could actually save money on auto insurance. If the new model boasts significant safety improvements over its predecessor, for example, insurers could possibly deem it less of a risk and charge lower premiums.
There is no clear winner in the new vs. used war. It realistically, it comes down to your personal likes and your personal finances.
