Should you buy a new or used car?

Friends decide on a new or used car
February 28, 2022 | Jamie Smith

Buying a car might seem easy, but so many options mean more responsibility to stay within your budget. One of the biggest, and usually earliest, decisions in the process is whether to buy new or used. A new vehicle may have a fresh warranty and more modern technology, but is the higher price and greater depreciation worth it? Let's discuss whether you should buy a new or used car and their respective advantages.

Are new or used cars more cost-effective?

Determining whether a car is cost-effective requires comparing the car's main benefits to your driving needs. After that, you quantify that car's worth to you as best you can and compare it to the price. Depending on your goals as a shopper, a new or used car could be more cost-effective.

For example, you might decide to buy a used version of a car you like because of the price. However, used vehicles typically require more maintenance and upkeep as the years pass. A new version of that car might get you more features and a fresher condition, turning it into a better deal per dollar.

Advantages of buying a new car

It's easy to see the appeal of a brand new car. It has all the embellishments of the newest generation, features a full warranty, and often comes with trial periods for features like roadside assistance or Wi-Fi hot spots. Let's go over the major advantages of buying a new car over a pre-owned car.

Lower upkeep costs

Most common required service tasks and critical components like the powertrain are covered in full by a new car warranty. By contrast, it's generally wise to set aside a repair fund if you buy a used car. The warranties on used cars will be more limited, and you should expect to pay for more services on your own.

Smaller selection

There are far more used cars available on the market than new ones. You could call this an advantage or disadvantage, depending on your perspective. Yes, there are fewer options, but drivers can rest assured all of the options are in the best condition and are optimized above older vehicles. This can make buying a new car more expedient than hunting for a solid deal on a used one.

Peace of mind

This is arguably the main advantage of buying a car in mint condition. What's worse than planning a weekend getaway and then spending half of the week preparing the car? Or worse, what if you suddenly need emergency repairs or service in the middle of a trip? A new automobile should not give you these kinds of headaches, and if it does, the manufacturer and dealer guarantees are there to protect you.

Technology and Safety

Buying a new car might be the only way to get the latest features. Think lane-change warnings, adaptive cruise control or even built-in software that can alert you when someone (like your teenager) is speeding or driving without a seatbelt.

Build new/customization

Customization is a big advantage in purchasing a new car. If you desire a certain color, interior, or features, you may be able to build your custom vehicle online and then order it.

Increasing environmental standards

Most major nations in the world have a goal to burn fewer fossil fuels and be more sustainable. Perhaps your vehicle from several decades ago is no longer up to current emission requirements, and you want a vehicle that is sure to fit the new, rising standards. Since efficiency and green-friendly technologies only grow more advanced with each year, it would make sense to buy new and stay ahead.

Dealership financing offers

New cars cost more, and dealers generally want to sell their new vehicles before they're one or more years behind. They may provide specific financial benefits to new car customers, such as cash back or 0% APR financing. These incentives help lower the total cost and make the vehicle more accessible to buyers.

When you're better off buying used

Buying a used car, particularly a certified pre-owned (CPO) model, could be the better choice if you can handle the increased upkeep, plan on owning the vehicle for longer, or have less interest in cutting-edge features. When calculating monthly payments and down payments, used cars are almost always more affordable than a comparable new car. Here are the most notable advantages of buying a used car.

Like-new vehicles available

You might see some incredible deals on like-new pre-owned cars. Dealers with a certified pre-owned program sell vehicles almost indistinguishable from new models and only a year or so behind the latest model. If you are interested in a new model of a certain vehicle, consider looking for it at a certified pre-owned lot or online service. It's not literally new, but you might decide it's close enough.

Avoid depreciation

The newer a car is, the more of that newness it has to lose. In other words, new cars don't keep their value very well at first, losing around 20% of their value in the first year of ownership. If you want to keep your new car for many years, perhaps passing it down instead of selling it, this won't be an issue. But it can be frustrating to spend a certain amount on a car only to sell it a year later for an amount that doesn't even pay off the loan.

You can't finance the new car you want

If you can't afford the type of new car you want, or at least cannot get the right financing terms, dealers might be more generous with a used version. Since prices for used cars are lower, you have more room to figure out a personalized auto loan. For example, if you can definitely afford the financing for a used version of a car you want, maybe try to negotiate a slightly higher down payment or a shorter term, saving money on ownership.

Which is right for you? 

If you are interested in the newest features and technology, new cars make sense. The same is true if you want a car still under the best possible warranty. The only exception is if you choose a warranty-backed certified pre-owned vehicle, which combines the lower prices of used cars with the quality of new cars.

Buying a used car is usually the best choice for maximum value. For drivers who do not care about the latest features on the market, buying used is an easy choice. What's more, drivers who are more car-savvy might like to take an older vehicle and maintain its value.

If you are stuck on whether a new or used car works for you and you aren't quite sure how long you will keep your next car, just look at cars on both sides. If one catches your eye, ask yourself this: will you be able to reliably pay it off in three years? If not, look at more options.

Hopefully, you're confident about the differences between buying new and used cars. If you're afraid of buying the wrong vehicle, relax! Keep up the comparison shopping, and learn your tastes and financial situation, not just what kind of cars exist.

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