New Cars Versus Used Cars
Should I buy a new car or a used car?
Most people that are in the market for a vehicle will have this debate with themselves at some point. And often even after the purchase is made they still are not sure if they made the right decision. Clearly, there are pros and cons to each purchase choice. Let's take a closer look at both options so you make the best car buying decision for you and your situation.
While owning and driving a brand new car is an exciting experience, buying the right pre-owned car or truck can be just as great. And it almost always makes more financial sense to buy a used car.
PROS of Buying a Used Car
Greater integrity ~ Online vehicle history reports, research and pricing have made the Used Car industry more transparent and honest. This increased ability to research and gather good information helps to ensure you are choosing a quality used car and not getting ripped-off.
Lower purchase price ~ You can save thousands less than the price of comparable new vehicles. The average used car price is less than half the average new car price.
More selection ~ The number of cars and the availability of colors and options is much greater. Used cars outsell new cars by about 3-to-1.
Upgrades ~ You can get more car for less money. A stripped, brand new import will often be about the same price as a late-model, loaded luxury car.
Improved reliability ~ Auto Manufacturers in general have improved the quality and reliability of their vehicles in recent years, which means they last longer. Longer life and reliability of new cars translates into better quality used cars.
Warranty ~ The original factory warranty on most new cars is transferable to a second owner, usually at no charge. extended warranties and maintenance plans are also available for purchase on most used vehicles.
Certified pre-owned programs ~ Vehicles are sold "as new" and warranted by the Manufacturer. Buyers of certified pre-owned cars from an authorized dealer can purchase a late-model used car with the original warranty and may choose to purchase additional coverage.
Lower depreciation ~ New cars depreciate in value significantly, losing about 30%-40% of their value within the first 2-3 years of ownership, at which point the rate of depreciation starts to slow down. With used cars, the previous owner has absorbed the biggest portion of the depreciation. You buy at the beginning of the low-cost stage of the depreciation cycle, when most of the costs of owning and operating the car are reduced.
Negative equity ~ If your used car is financed with an auto loan, depreciation means that you will be upside down (you owe more than the car is worth). You will have less negative equity for a shorter period of time if you purchase a used car instead of a new car.
Lower sales tax ~ Lower state and local tax rates based on lower pricing.
Lower financing costs ~ By reduced fees and interest paid.
Lower tax, registration and license fees ~ Fees that are usually tied to the value of the car, which is less for pre-owned cars and trucks.
Lower insurance premiums ~ Also tied to the value of the car. Full coverage insurance, which is required for any financed vehicle purchase, is typically lower on a used car.
Shorter terms ~ Financing smaller amounts for less time can help you pay off auto loans sooner, saving you interest and finance charges.
CONS of Buying a Used Car
Repairs ~ The risk of costly, unwarranted repairs can be higher.
Reliability ~ With even normal wear and tear, reliability can be reduced.
Maintenance ~ Major maintenance and associated costs may be due (tires, battery, brakes).
Limited or No Recourse ~ Most used vehicles are sold "As Is", and there usually are no Lemon Laws or regulations covering used cars and trucks. Unless there is a transferable warranty or extended warranty, you have no recourse if something goes wrong.
Bad Credit ~ Buying a used vehicle is sometimes not an option for people with credit challenges. Each lender's requirements are different, but often a higher down payment or co-signer is needed to purchase pre-owned. Lenders consider things like the make, model, year, mileage and loan-to-value ratio for all used cars. Sometimes lenders will not finance used vehicles based on these considerations.
Before you buy a Used Car
Check the title and vehicle history of the car using a vehicle history service like Carfax.com
. By checking the title, you can learn if the vehicle:
Has ever been totaled in an accident or natural disaster
Is registered as a lemon
Has been repossessed
Had its odometer rolled back
Has been in a serious accident
If you are still interested in purchasing the vehicle after you've checked out the title, inspected the car, and taken it for a test drive, consider investing the cost of taking it to a trusted mechanic for a check over. A mechanic will be able to perform a thorough inspection, and let you know about costly problems before you make a purchase. Remember, with used vehicles, you can't take them back for a refund.
Everyone knows that "new car smell". Owning and driving your first NEW CAR is something most people never forget. Besides the "WOW feeling" there are a lot of great reasons to consider buying a NEW car or truck.
PROS of Buying a New Car
Pride ~ A new car or truck just has a way of making you feel good. Watching your reflection in store windows as you drive by. Looking out in the driveway just to get a glimpse of your new ride. Posting pictures of you and your new vehicle on Facebook so all your friends and family can see it. It's a one-of-a-kind experience, especially if it's your first time.
Improvements ~ New vehicles feature the newest technologies and advancements. They also meet all the current government and manufacturer standards and specifications.
Reduced Maintenance ~ A new vehicle won't need any major maintenance for the first several thousand miles, and then for the most part only an oil change and tire rotation. Some manufacturers even cover the cost of those routine maintenance items. The new vehicle likely won't need new tires, a battery, muffler or brakes during the first few years of ownership or longer.
Warranty Coverage ~ The manufacturer covers its new vehicles under warranty, typically for at least 3 years/36,000 miles, and many warranties last even longer. Under warranty, if something goes wrong it's the responsibility of the dealer and manufacturer to repair it.
Peace of Mind ~ If you encounter problems with your new car, you have legal recourse through state lemon laws in all 50 states. Prove that your new car is a "lemon" and you could receive a replacement vehicle or a refund of the purchase price. These laws apply only to new cars. You also can find out if your vehicle was returned to the used-car market as a lemon by looking at the vehicle's title and using a vehicle history service like Carfax.com or AutoCheck.com.
Roadside Assistance ~ In addition to a comprehensive manufacturer's warranty, almost all major brand new cars and light trucks come with free roadside assistance. Some automakers reimburse you or provide a loaner car / rental car if warranted repairs will take several days to complete or if you are broken down far from home.
Safety ~ New cars also tend to have the most up-to-date safety equipment and better safety records. As new government safety standards are enacted frequently, owning a new car or truck is the only way to know you are driving one of the safest vehicles available today. As safety testing reviews and results have become more readily available in recent years, there is a stronger emphasis on vehicle safety among consumers.
Rebates ~ Manufacturers routinely offer special rebates on select vehicles in their line to entice consumers to purchase new cars. These rebates usually range from $500 to $5,000, and can be used in lieu of a cash down payment in most instances, limiting or eliminating any out-of-pocket expenses associated with purchasing a new vehicle. For Bad Credit consumers, or people with negative equity in their trade-in, rebates can help reduce the amount financed and make vehicle ownership possible.
Lower Interest Rates ~ Auto loan interest rates are normally lower when you buy a new car than when you buy a used car. This is normally a difference of 1% to 3%. For Bad Credit buyers, a few percentage points in interest rate can be the difference between being able to afford a monthly payment or not.
Special Financing Rates ~ If you have excellent credit, you may be able to qualify for a special reduced rate auto loan offer from the manufacturer, dealership or lender - usually 0%, .9%, 1.9% or 2.9% rates. These special rate offers are only valid on new cars and can save you thousands of dollars. Free and cheap money!
Leasing Options ~ Leasing is usually reserved for people with good or excellent credit, and only available on new vehicles. Leasing is a great option for people that like to trade-in or drive a different, newer vehicle every 3 years or so. The advantages of leasing are a lower monthly payment, lower initial investment (in some cases), and you can get more car for your money.
CONS of Buying a New Car
Depreciation ~ New cars depreciate in value significantly, losing about 30%-40% of their value within the first 2-3 years of ownership. After five years, your new car may lose as much as 70% of its original value.
Negative Equity ~ If your new car is financed with an auto loan, the rapid rate of depreciation means that you will be upside down (you owe more than the car is worth). You will have more negative equity for a longer period of time with a new car than if you purchase a used car.
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