Buying a car is typically the second-largest purchase you make (after your home). Many consumers often struggle with the question, “should you buy a new or used car?” Although there’s no one-size-fits-all answer, more Americans tend to buy used cars. Nonetheless, it’s essential to consider the pros and cons of both options.
The Pros of Buying a New Car
Many people advise against buying a new car, but there are various advantages that consumers often overlook:
Customizable
A new car is entirely customizable, from the seat material to the exterior color. You can handpick all the bells and whistles when buying a new vehicle. Most car manufacturers have a “build your car” feature on their websites, allowing you to design the car entirely online. You can expect to wait roughly six to eight weeks for a factory-order vehicle to arrive at your local dealership.
No Accident History
There’s a common misconception that all car repairs appear on a CARFAX report, but that’s not the case. If a vehicle owner does any DIY repairs, they don’t have to report them to CARFAX. Therefore, the only way to be 100% sure that a car was not involved in any accidents is to buy new. Mind you, buying new doesn’t mean you can’t end up with a lemon (that’s always a possibility). Instead, purchasing new means, you can have peace of mind knowing that you won’t run into underlying damage.
Warranty
Virtually every new car comes with a warranty that lasts for three years or 36,000 miles (whichever comes first). These warranties cover the cost of repairing damage from normal usage – they don’t cover the cost of repairing your vehicle if you get in an accident. You also have the option to purchase an extended warranty for additional protection.
Better Technology and Safety Features
New vehicles often have more advanced technology and better safety features. A new car might suit your best if you value things like automatic emergency braking or advanced driver assist systems. Nevertheless, buying a new car doesn’t necessarily mean it’s safer than a used one. You should check a vehicle’s safety ratings before buying any car (new or used).
The Pros of Buying a Used Car
Reports show the shoppers are three times more likely to buy a used car than a new one. Here are some of the key reasons individuals prefer used vehicles:
Cost
Undoubtedly the most obvious advantage of buying a used car is the cost. The average price of a new vehicle in the United States is $27,500 (note: the cost sharply increased at the onset of the COVID-19 pandemic). On the other hand, the average price of a new car is $46,000. Therefore, buying used over new means, you’ll save roughly $18,500 without considering depreciation, maintenance, and insurance.
Cheaper Insurance Premiums
Generally, the higher the price of the car, the higher the premiums. Used vehicles are often cheaper to insure, depending on your driving history, location, and the model and make of the car. However, newer vehicles with advanced safety features could also drive down the price of your insurance.
Fewer Hidden Fees
Dealerships may try to hit you with more hidden fees when purchasing a new car. These sneaky charges include advertising, dealer, and trade-in fees. If you buy a used car directly from another individual, you won’t have to worry about any of these fees. But, if you buy the used car from a dealership, you should remain vigilant and ensure the dealership isn’t charging you deceptive fees.
Less Depreciation
A new car loses about 10 percent in value when you leave the car dealership! In other words, a brand-new $50,000 sedan would depreciate $5,000 in one day. On the other hand, a used car will depreciate between 15 to 20 percent in the first year (compared to a new car’s 20 to 30 percent depreciation rate). Thus, if you had to sell a used car shortly after purchasing it, you wouldn’t lose as much money as you would with a new car.
The Cons of Buying a New Car
Be it price or insurance premiums; there are various downsides to buying new cars:
High Depreciation
As mentioned, a new car loses a significant amount of value the second you take it home from the dealership (approximately 10 percent of its value). If you decided you didn’t like the new car for some reason and wanted to sell it, you could be out thousands of dollars in a short timeframe.
Cost
A new car will always cost more than a used car, but it’s up to you to decide if the extra cost is worth it. You’ll have to shell out around $46,000 for a new car – a record high. However, you do have the option of completely customizing the vehicle.
Higher Insurance Premiums
You may have to pay higher insurance premiums depending on your lender’s requirements, where you live, and the cost of the car. For example, most lenders require you to have comprehensive and collision coverage, which costs much more than just liability insurance.
Dealership Fees
A dealership can nickel and dime you with hidden fees if you’re not careful. These costs typically include destination, inspection, and documentation fees. Moreover, a dealership may try to sell you various things you don’t need, including an extended warranty, tire-and-wheel protection, and extra detailing.
The Cons of Buying a Used Car
Buying a new car isn’t for everyone. Keep the following disadvantages in mind:
Not Customizable
When you buy a used car, what you see is what you get. You can’t pick the color, the interior finish, or any of the extra perks. At the same time, it can be tough to find a vehicle with all the features you want. It’s not unheard of for used car buyers to drive a few hours to another city solely to purchase a car that meets their needs.
Possible Accident History
Before buying a used vehicle, you should always get a CARFAX report (you’ll either need the VIN or license plate). This report lets you see the car’s title, accident reports, mileage, and previous owners. However, there’s no 100% guarantee that an accident or repairs will appear on a CARFAX report. There’s no surefire way to know if a used car was involved in an accident, so there’s a risk that you may need to make repairs in the future.
May Not Have a Warranty
If you purchase a used vehicle with a factory warranty, the warranty will transfer with the sale. The factory warranty will cover the car for three years (since the original owner purchased it) or once the vehicle has 36,000 miles. Many dealerships also offer extended warranties on a used car, but be prepared to pay a couple of thousands of dollars.
Buy a New or Used Car: Which Choice Makes Sense for You?
Deciding between a new or used car boils down to various factors: what you value in a vehicle, your budget, and the warranty, to name a few. Before purchasing a car, be sure to view your current budget, spending, and interest expenses on your Chunk account. Our collection of spending and debt simulation [ew2] tools can ultimately help you decide if it makes more sense for you to buy a new or used car.
[ew1]Search volume: 190; difficulty: 61
[ew2]Search volume: 60; keyword difficulty: 32