When looking for a new car, there are pros and cons to buying new or used. Your choice will be based on various financial considerations, driving habits, and personal preference.
Buying a used car is appealing to many people. Used cars are less expensive up-front, and they have the added benefit of not depreciating instantly (more on that later). When buying a used car and saving sometimes up to 25-30%, you can typically afford to buy a higher class of car than you likely could if you bought it new.
If you choose to purchase a used car, there are some costs you should be aware of. For example, You may want to pay to have the car checked out by a trusted mechanic to ensure there aren’t any hidden surprises under the hood. Buying used could mean you’ll need to do some maintenance work on the car sooner than if you bought a new one. However, today’s cars tend to be more efficient and can go longer between scheduled maintenance visits than in years past.
Buying used can also present financial benefits. Car insurance rates are often lower for used cars than new ones, and registry renewals are often cheaper. This can save you hundreds or more over the life of the car.
Buying a new car does have advantages—and one major drawback.
First, the positives. You may be presented with more financing options and new-car incentives such as cash rebates and lower interest rates when you buy new. While you are still likely to spend more than you would on a used car, you may spend much less than the first market price after negotiations, incentives, and rebates. There are often benefits to purchasing from a car dealer, such as service options or guarantees.
New cars can offer peace of mind and ease of purchase. There is no need to take it to a mechanic before you buy, and if it breaks down, most warranties will cover the cost of repairs for the first few years of owning the vehicle. These warranties are usually based on mileage or years, whichever comes first, so be aware of the terms and conditions.
While new cars are expensive, they do offer a lot of the newest tech features for performance, safety, and comfort. Used cars will likely be older and may not have the latest features you’re looking for.
The drawback to buying a new car, however, lies in depreciation. Depreciation is when something loses value over time. Everything depreciates, but new cars suffer a big hit almost instantly. Basically, the value of the car drops dramatically as soon as it leaves the lot. In many cases, it drops by as much as 20%! That means if you were to buy a new car for $25,000, it could be worth up to $5,000 less the moment it became yours.
Whether you choose to buy new or used, be sure to budget wisely and leave room for unexpected repairs, maintenance, and other costs associated with operating a vehicle.
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified banker who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial, tax or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.