Should you buy a new or used car? Make the right decision and drive away without regret.
It’s the age-old question that every car buyer needs to decide: buy new or get a used car? A new car won’t have the same risk or wear and tear as one that’s been used, but it’ll cost you more. A used car could be perfectly fine — especially if it’s only had one previous owner — or it could be a clunker. The price you’ll pay reflects this.
This guide runs you through both options so you can decide which is better and be confident that you’ve made the right decision.
What to consider when choosing between a new or used car
When you’re hesitating on whether you want a new car with all the bells and whistles or a used car with a lower price tag, you should start by comparing the major factors. We’ll cover the basics in the table below before going into more detail so you can make an informed decision.
|New Car||Used Car|
|Price||Generally costs more and depreciates immediately||Generally costs less and retains its value longer|
|Car options||Lots of options that you can customize to your needs||You’ll face a limited selection depending on your location|
|Important knowledge||Know how to avoid expensive sales tactics||Know what to look for in a used car and how to avoid a lemon|
|Financing options||More options with lower interest rates||Fewer options with higher interest rates and more stringent requirements|
|Information available||Manufacturer stickers, dealer documentation and up-to-date reports||Typically general information only, and private sales may have none|
|Warranty||Manufacturer and dealer warranties are available||Varies depending on the age and condition of a car|
The price difference between a new and a used car depends on the age, model and condition of the car. The easiest way to see how much you’re saving by buying used is to compare how much it goes for new.
Most cars depreciate by almost 20% as soon as they’re driven off the lot. So if the new car is in near-perfect condition it shouldn’t cost more than 20% of a new model. This means you can save a considerable amount of money by buying a used car that’s only a year or two old.
The average cost of a new car is around $30,000. You can generally save at least $6,000 buying used. But these savings come with a price. You’ll never know the full history and you won’t be able to customize the features.
When you buy any car, your options are naturally limited to whatever’s being sold. However, with used cars, you’re even more limited — you can’t buy what isn’t there. For example, you might find the right model in the wrong color or without a bluetooth option. Sure, you can change it, but it will cost you more.
On the other hand, opting for an new car provides you with more consistency. if you can’t find exactly what you want on the lot you can order it. Some manufacturers let you build the perfect car on its site. This can get pricey, but if you know what you want, it could be worth the extra cost. If you’d rather visit a lot, you’re sure to find plenty of models with all sorts of extras. You can do your comparison shopping right there instead of spending hours online hoping to find the right used car.
You’re at risk of buying a lemon if you don’t know how to check a used car thoroughly. Fortunately, you can find some tips on how to buy a used car to make the buying process easier. However, there’s really no substitute for genuine experience, so if you’re unfamiliar with cars and don’t have a trusted mechanic, it might be safer to buy new.
A new car will have up-to-date safety ratings, and you’ll know that it’s been in no major accidents that impact its reliability. If you’re not a car person, you can avoid the hassle of inspecting a used car and hoping the car history is accurate.
Financing options for new and used cars
There’s considerable overlap between used car loans and new car loans. Most lenders offer both to cover the range of consumers, but you’ll see a difference in the interest rates they offer. It’s likely that if you have decent credit and are looking to buy a new car, you’ll be given a lower interest rate than someone looking to finance a used car.
Since you’re still paying a premium for a new car, you may need to borrow more. This means that whatever you’re saving on interest could be negated by the higher price tag on your new car.
A used car may have a higher interest rate, but you’ll likely be paying significantly less than you would for a new car. The downside? Some lenders only finance a used cars under a specific amount of miles or under a certain age.
Secured loans can give you better interest rates because your using your car as collateral. This means if you default then your car can be repossessed by the bank. If you aren’t interested in using your car as collateral, there are still other ways to finance your vehicle. You may want to consider an unsecured car loan.
When you’re deciding between a new car or used car, consider financing options. After all, the terms you get will also be based on your credit score and ability to repay, not just the car you’re buying.
New cars come with a range of verifications and documentation from the manufacturer and dealer. Since you won’t have to worry about a previous owner, you can be fairly certain your car is in great shape — if it’s not, the manufacturer will be responsible for any mechanical problems.
There are plenty of used cars with a detailed maintenance and repair history, but a used car might also be fraught with problems you won’t notice until later. When buying a used car, get a car history check completed before finalizing your purchase. A history report should highlight any outstanding financing and service history, including if it’s sustained damage in an accident.
Don’t underestimate the importance of a manufacturer and dealer warranty. It makes a difference when you’re choosing between a used or new car.
A new car comes with a warranty that guarantees reliability and performance. Many manufacturers have car warranties of three to five years or 36,000 to 50,000 miles. This can apply to used cars — check with the dealer to negotiate a great deal for a car still under warranty.
If the original owner purchased an extended warranty then this could be included in the price of a used car. Always check the warranty documentation to make sure.
Older used cars won’t be covered by a warranty, which can make them a risky option. Base your decision on the age of the car, its condition, history and reports on reliability. These should guide you when you’re choosing between a few older vehicles.
Compare your financing options for new and used cars
Used cars are considerably cheaper, but you’re not getting the first-owner benefits that come with a new car. Take your finances into account, and be sure to take your time making this decision. After all, whichever you choose, it will likely be with you for at least a few years.
Frequently asked questions
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