Should I buy a new car or a used car?

Price.

Depending on the car’s make, model, and year, the price difference between a new car and used car can differ significantly. One would think a used car will always cost less than new, but this may not always be the case. Some new cars have significant incentives, specials, and even very attractive leases that may make the new car cost less than the used car. When deciding on a new car or a used car, remember that new cars typically have a greater immediate depreciation once you drive the car off the car lot. Studies indicate that most new cars depreciate 10-20% in value when driven off the lot. Among other factors, this estimate can vary depending on make, model, and negotiated price. It can be disheartening to consider you spent so much on the car just to realize so much value has been lost when you decide to sell. Don’t fret, though, because the value will eventually balance after a duration of time. If you plan to sell the car soon after you buy it, it may be better to spend your time researching a used car to buy. Used cars typically don’t suffer the same rate of depreciation so long as you negotiate a good deal and don’t overpay.

Maintenance.

Aside from your usual oil changes and tire rotations, a new car is relatively maintenance free for the first few years while it is covered by the manufacturer’s warranty period. Many new cars also come standard with a period of free maintenance from the manufacturer. For example, BMW offers 4 years / 50,000 miles of maintenance and Toyota offers 2 years / 25,000 miles of maintenance. Most car dealerships offer packages allowing consumers to pre-pay additional scheduled maintenance for new cars as well as used cars, so if you buy a used car, you can still purchase a maintenance package for it too. Many consumers do this to save from increased maintenance prices as well as for the convenience of not having to pay each time the vehicle is maintained.

Warranty.

Many new cars come with a 3 year, 4 year, or 5 year, manufacturer warranty coupled with an additional Powertrain Warranty of 5 years, 6 years, or even 10 years depending on the vehicle. At the same time, used cars typically only offer the remainder of the warranty dating back to the original in-service date from when the original owner first bought it new. Some car dealerships offer 30 days, 60 days or 90 days of warranty, but this is typically extremely limited. Because used cars typically have little or no warranty, some consumers are hesitant to buy a used car. Especially being that there is always the “unknown” when it comes to how well the previous owner took care of the vehicle – nobody wants a car with problems. If you get a good deal along with a low price on a used car, and you get the car checked out before buying it, so long as you are comfortable, a used car can be a great investment and can last for a long time. Don’t eliminate the thought of getting a used car without doing your homework and properly researching it first. You might be surprised to find out the used car is a better option for you.

Financial capabilities.

Keep in mind that financing a used car at a dealership usually requires a down payment to achieve reasonable payment plan options. On the contrary, many new cars offer rebates or incentive that can be used as your down payment to obtain reasonable payment plan options. Whether you buy a new car or a used car, it is a good idea to pay a down payment large enough to at least cover the cost of your tax and DMV fees. By paying these, you will finance less, have a lower monthly payment, and your vehicle will be in a better equity position. Whether you buy a new car or a used car, it is a good idea to check your local credit union for their loan terms. Sometimes credit unions offer lower loan terms than the car dealership. Knowing these terms will help your negotiation with the car dealership.

In summary, some people prefer a new car while others prefer a used car. There are many considerations for each. Do your research and have an open mind. What works for one person, may not work for another. In the end, make sure you are comfortable with your decision.