When you’re in the market for a vehicle, one of the biggest decisions to make is whether it’s better to buy a new versus a used car. Do you go with the used car, which costs less, or the new model, which should last longer? Let’s take a look at the pros and cons of each option.
Benefits: With a brand-new car, you theoretically have the most peace of mind. Dealerships sell new cars with a factory warranty that covers any repairs (except regular maintenance). According to legalbeagle.com, the typical factory warranty lasts for three years or 36,000 miles, whichever comes first. You would not have to worry about costly repairs during this time.
Since the car is brand-new, you also don’t have to worry about damage caused by a previous driver; if you buy a used car, there’s always the chance that the previous owner had an accident that was never reported.
Finally, the interest rates on new car loans are lower than they are on used car loans. It’s less expensive to borrow $20,000 to buy a new car than it is to borrow $20,000 for a used car.
Drawbacks: A new car is more expensive than older models. It depends on the car, but you can expect to pay about twice as much for a new car as you would for a three-year-old car of the same model, according to Realcartips.com.
Keep in mind, too, that new cars initially depreciate much faster than used cars. A car loses about 30 percent of its value during the first year of ownership, according to Bankrate. This means you take a bigger loss if you have to sell a new car quickly after buying it.
Benefits: A used car is significantly less expensive than a new car, and it’s not impossible to get a reliable vehicle that can last for years. Dealers often offer extended warranties for many used car models that carry the same coverage you would get with a new car warranty. If an extended warranty is not included, you can buy one yourself for about $35 to $110 a month, according to howmuchisit.org.
Finally, used cars depreciate less quickly than new ones. The biggest drop in a car’s value occurs during the first two years of ownership, so if you buy a used car that’s more than two years old, its value will stay closer to what you paid.
Drawbacks: No matter how well-made a car is, over time, it starts to need repairs. You should expect more maintenance issues when you buy a used car. Since the car is older, it is unlikely to last you as many years as a brand-new car would. Finally, interest rates for used car loans are higher than for new car loans, so it costs more to borrow money.
Making Your Decision
Whether you’d be better off with a new versus a used car really depends on your personal preferences. If you have the extra money to pay more now, don’t want to have to deal with repairs and want your car to last as long as possible, new is the way to go. A used car can make financial sense if you want to pay less up front, just make sure to keep some extra savings on hand for repairs.
Whether you decide to buy a used car or a new car, purchasing a vehicle is a large financial investment. Taking the time to carefully weigh the pros and cons of each can help you make the choice that’s best for you and your budget. Good luck and have fun on the test drives!