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Should I Buy a New or Used Car?
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Buying new versus used is a question every car shopper faces with no one right answer. New cars offer reassurance not to mention that intoxicating new-car smell. Used cars almost always cost less but may need repairs. Examine the pros and cons before making your choice.
5 advantages of buying a used car
More people buy used cars than new ones: More than 39 million used cars were sold in 2020 compared with 14.2 million new vehicle registrations during the same period, according to Experian. Here are a few reasons why:
No new-car depreciation
Most vehicles lose about half their value by the time that they’re five years old, and sometimes even earlier. At three years old, the vehicle has about 75% of its lifespan remaining, a “sweet spot” when you could get the greatest lifespan for the lowest price. Older cars might cost less but would have less life left, on average. The chart below breaks it down.
|When is the Best Time to Buy a Used Car?|
|Car Age||Predicted Lifespan Remaining||Estimated Car Value Remaining|
|1 year old||92%||80%|
|3 years old||75%||50%|
|5 years old||58%||40%|
You’ll not only pay a lower upfront cost for a used car, but maintaining one is typically cheaper, too.
Lower price: The average new car costs nearly $40,000 while used cars are about a third less expensive: $22,351 at the end of January 2021.
Lower insurance costs: It typically costs less to insure a used car than a brand-new one.
Lower registration fees: Many states charge registration fees or taxes based on the vehicle’s value or age. New cars with higher values tend to cost more.
Lower loan fees: The cheaper the car, the less you’ll have to borrow to pay for it and pay in interest charges, freeing up your finances for other expenses.
It’s much easier to become “underwater” or upside down on a new car, which is when you owe more on the loan than your car is worth. This can cause problems if you want to sell the car or it’s stolen or totaled in a car accident.
That’s less of a worry with used cars. Plus, if a child throws Cheerios like confetti in your back seat or a shopping cart scrapes the side panel, you may be less stressed knowing the car is used already.
Rather than get a new Toyota, you could look at a used Lexus. Buying used means you could save money and/or afford to shop in a higher class of vehicle, one with a luxury nameplate or a model with a higher trim and more features.
You’ll have access to a wealth of information on a used car that you may not have on new models, including common problems and other history you could research.
Relatively high resale value
Because a bulk of its depreciation is in the rear view, you may be able to sell the car in a few years for close to what you paid for it.
5 advantages of buying a new car
Despite the higher price tag, buying a new car does have its pluses:
Despite the fact that there are a greater number of places to buy a used car, you may have to sacrifice the exact paint color or features that you want. A dealership, on the other hand, will most likely have the new car you’re looking for or be able to get it. A new car can be ordered with the precise combination of model, color and features you want.
Automakers offer deals on new cars, including rebates and 0% APR financing for those with great credit. Even if you don’t qualify for a promotional annual percentage rate (APR), most auto lenders offer the lowest rates to those who buy the newest cars.
Peace of mind
Most new cars come with at least a three-year, 36,000-mile basic warranty. And even though it’s possible to buy a used car with some of its original factory warranty remaining and purchase an extended car warranty, some manufacturers offer longer warranties that only apply to the first owners. For example, Kia offers a 10-year, 100,000 mile powertrain warranty that drops to five years, 60,000 miles for subsequent owners.
With no need to look up a vehicle history report or independent inspections to arrange, there are fewer steps to buying a new car. Even though most dealerships will start the vehicle registration process with your state or local government for a new or used car sale, private-party buyers will have to do all of this legwork on their own.
Dealerships will even help you line up your financing, but remember, the only way to know if you’re getting a fair rate is to bring your own auto loan offers for comparison.
Newest technology could mean state-of-the-art fuel efficiency and advanced safety features in addition to drool-worthy infotainment and connectivity, such as Mercedes-Benz’ 56-inch touch screen that runs almost the whole width of the car.
New vs. used cars: Which one is right for you?
A used car makes sense if budget is your main concern.
But some used cars are more reliable than others. Research the cost of ownership for the specific model you want. Kelley Blue Book (KBB) and Edmunds will estimate its average maintenance, repairs, insurance and other costs over five years.
If you’re unsure what car you should buy, KBB provides a list of “winning” models that have the lowest cost to own.
A new car might make sense if peace of mind is more valuable to you.
If you’ve saved up a large down payment, plan to keep a car for many years and qualify for new-car incentives like 0% APRs or cash back, a new car might be a good bet. Maybe you don’t have the time it takes to research a used car.
There are other ways to get a new or near-new car. Certified pre-owned (CPO) vehicles are used cars certified by the original automaker and protected with their own warranties. Leasing is another way to get a new or CPO vehicle with lower monthly payments.