It’s your fourth visit to the mechanic in a month. You’re stuck in traffic for two minutes, and the temperature gauge lights up like the Fourth of July. It’s no easy fix—you know you’ll have to dip into those savings or swipe that credit card yet again. Replacing the car seems like the only logical answer. It’s natural to ask yourself, “Should I buy a new or used car?”
While there are plenty of reasons to opt for either, a lot of the decision-making will be financial based. For starters, the national average cost of a new car[1] is in the region of $46,000. This price seems to be on an upward swing as we face world events, material shortages, supply chain disruptions and fluctuating import costs. That said, it helps to weigh up the benefits and drawbacks of buying a new or used car.
What Are the Pros of Buying a New Car?
Apart from cutting-edge technology and the new car smell on your daily commute, there are a number of reasons you might want to consider a new car.
• The environment: Emissions laws and the option to source environmentally friendly fuel sources are one of the best reasons to consider a new car. For instance, emissions laws in New York[2] require most residents to test their emissions on an annual basis. Older vehicles don’t always meet these requirements and result in costly repairs.
• Peace of mind: A manufacturer's warranty is a major selling point when opting to buy a new car. If something goes wrong, in many cases, you can simply take the vehicle back for repairs or replacement Furthermore, these warranties have an expiration date which means they're unlikely to be offered on a used car.
• Simplified financing: While both new and used cars are financeable, new cars have a slight edge as financial institutions only need to consider the financial risk of the applicant. This often leads to favorable deals, such as a good interest rate for those with good credit.
What Are the Cons of Buying a New Car?
It goes without saying that if you’re buying a car purely for the bling and dazzle, there may be a risk of losing value of your investment. A new car will depreciate at a rapid rate and lose as much as 20% of its value[3] within the first year. There are plenty of ways buying a new car can cause unforeseen expenses.
• Above-average depreciation: Some cars depreciate faster than others, which means you lose money faster.
• A drain on your finances: It’s important to do the math and ensure that the repayments and down payment are affordable. Be sure to check items such as serviceability, the cost of maintenance plans and insurances and fuel costs.
• Features need to benefit you: If you’re going to opt for that shiny new two-seater, but you’re expected to do carpool, it might end up being a frustrating enterprise. Especially if it means your new wheels stay parked in the garage because it doesn’t meet your needs.
What Are the Pros of Buying a Used Car?
Pre-owned cars may get a bad rap as being less reliable and desirable than new cars. However, with some clever tips, you might find a decent ride at a great price and still enjoy all the benefits of a new car, except perhaps that new car smell.
• Slightly used cars have stacks of benefits: Demo models and cars that are still fairly new may still have benefits such as a manufacturer's warranties. Look for select preowned cars from dealerships that offer a good after-sales service package. You might also still enjoy great finance rates, especially if you’re able to fork over a down payment. Furthermore, you might still have access to all the safety features on your checklist when opting for a slightly used car.
• Cheaper insurance: Used cars have already had to weather some depreciation, which means that your insurance premium might come out slightly cheaper.
What Are the Cons of Buying a Used Car?
The danger of buying a used car is not knowing the driving record and habits of the previous owner.
• Wear and tear is for your pocket: While the seller is expected to disclose a rundown of all the known faults with the car, reasonable wear and tear is to be expected.
• Chance of buying a dud: In the motoring world, a bad car purchase is often referred to as a lemon. It’s far more likely to buy a used lemon than a new one.
• Simply not knowing: With a new car, it’s reasonable to expect issue-free commutes for a number of months or even years without having to do expensive repairs, especially when keeping up with services. Used cars can start giving hassles immediately after purchase with expensive repairs.
Is It Better To Buy a New or Used Car? Why?
When you’re in the market for a car, it’s important to evaluate your financial situation. Deciding between a new car and a used car will depend on your financial situation and personal needs.
A new car makes sense when:
• You have the means to purchase it with cash or pay a sizeable down payment.
• Used options won’t meet your specific needs in terms of availability. For instance, those who live in areas that require cars with a higher suspension and ground clearance might find it hard to locate a decent used car that fits this description due to the high demand.
A used car might be a better option if you’re looking to save on the overall cost of the purchase. However, it’s important to put money aside for possible repairs and maintenance. You may also want to consider a slightly used car, which still allows you to take advantage of the depreciation, but you’re more likely to get decent financing, plus access to longer-term maintenance plans.
A used car makes sense when:
• A new car is out of your price range.
• You’ve found a decent used car that qualifies for a maintenance plan and good finance and insurance rates, such as certified pre-owned cars from reputable dealerships.
• It meets your needs better than a new car.
• You have decent savings to take care of possible repairs.
Knowing When to Buy a New or Used Car
Whether you're replacing an existing car or looking to buy your first, it's normal to wonder, "Is it worth buying a new car?" The answer lies in your personal situation and whether you're able to afford it, and whether that car will meet your needs. A used car might just meet your needs, too, albeit at a lower cost.
