The game show host proclaims: “You’ve just won a NEW CAR!”
The studio audience screams in delight. The winner is standing there in shock, tears of joy streaming. Everyone at home is thinking, “Wow, what a lucky so-and-so!”
The phrase “new car” does enjoy a certain cachet. However, when you’re buying a vehicle with your own money, it might make more sense to get a used one. Let’s take a look at the pros and cons of buying new vs. used cars.
The Perks of Buying Used
First and foremost, used cars cost less to acquire. When you opt to be the second or third owner, you let somebody else absorb the depreciation that happens the moment a new car is driven off the lot. What’s more, with cosmetic changes typically being very slight year-over–year, you can often find a used car that looks exactly like its new counterpart, for much less money.
While laws vary from state to state, many of them free you of paying sales tax on a used car. And, even if you do, you’ll pay less because the purchase price is lower than for a new car.
Speaking of lower costs, you’ll also pay less to insure the used car than you will a new one — largely for the same reason. The value of the car is lower, so it costs less to replace it, which means it costs less to insure it.
Bottom line, the perks of buying used all revolve around lower costs.
The Perks of Buying New
You’re the first owner; the one who will set the tone for the way the car is driven and maintained. Further, you have the security of a new car warranty, in which the manufacturer will repair or replace any faulty components. You’ll also get a better interest rate on a new car loan from lenders, including RoadLoans. Refinancing a car with bad credit can be easier with a new car too.
Furthermore, many new cars have routine maintenance included in the price as well as roadside assistance should you ever run out of fuel, get a flat tire, or need a tow. New cars also tend to get better fuel economy, have more safety features and more up-to-date comfort and convenience equipment.
The Downsides of Buying Used
It’s a crapshoot. Someone who routinely drove it hard and put it away dirty could’ve previously owned it — then had it detailed when it was time to trade it in. Yes, CarFax reports mitigate this uncertainty to a degree, but things often go unreported.
The best way to take advantage of the lower price of a used car is to be in a position to pay cash for it. Financing a used car comes with higher rates of interest, so you’ll pay more for the loan than you would with a new car. Further, depending upon the price of the used car, you might well find yourself making the same or even a higher monthly payment than you would on some other new car.
You’ll also have to be patient and willing to shop extensively to get exactly what you want. Granted, you might get lucky early on, but you can simply order a new car built to your exact specification.
The Downsides of Buying New
Anyone familiar with the way retailing works will tell you a new car is going to be worth as much as 20 percent less than you paid for it the moment you drive off the lot. If you were to immediately reverse the car back into the dealership you’d be offered the wholesale price to buy it back.
This makes the depreciation factor one of the most compelling reasons to buy used over new. As we mentioned above, almost all of the other costs associated with new cars are higher too, simply because they cost more to acquire. You’ll pay more for insurance, you’ll pay more to finance it to term and you will, in all probability, take a financial loss when you sell it.
One more thing, eventually you’ll have a used car just the same. The new car smell will go away and the aura of “newness” will fade.
However, those higher costs will still be there.
Well, these are the primary pros and cons of buying new vs. used cars.
Which choice makes more sense for you?
