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Buying a New Car vs Used Car

Michael Jones

Auto Loan Expert

Buying a New Car vs Used Car

Anytime someone needs a vehicle they go through the exact same debate in their head. The debate is always centered on buying a new car vs used car.

 

This is an important decision. After all, you rely on your car to get you where you need to be, when you need to be there. But cars are more than just a means of transportation. They’re also a form of personal expression. The type of car you drive can tell people a lot about you.

 

That’s why we’ve put this handy guide together. We’ll look at the benefits and drawbacks of new and used cars. Then we’ll go into more detail to help you decide which option is right for you. Use this information to help settle the debate in your head and make the right choice for you.

New Cars at a Glance

New cars are a lot of fun. They offer a tremendous amount of advantages. However, that doesn’t mean that it’s a no-brainer. There are plenty of drawbacks when it comes to buying a new car. Take a look for yourself.

 

New Car Advantages

New Car Disadvantages

  • New Cars can Depreciate Quickly
  • New Cars Cost More
  • New Cars Limit Brand Options

Used Cars at a Glance

On the other hand, a used car also comes with its own set of benefits and drawbacks. Many of these have to deal with the cost of a used car. However, there are other benefits as well. Therefore, you’ll want to carefully review and compare the advantages and drawbacks of buying a new car vs buying a used car. These are the top advantages and disadvantages of getting a used car.

 

Used Car Advantages

  • Used Cars Are Cheaper
  • Used Cars Cost Less to Insure
  • Used Cars Can Mean an Upgrade
  • Used Cars Have Less Day-to-Day Stress

Used Car Disadvantages

  • Used Cars Also Depreciate
  • Used Cars Can Have Hidden Problems
  • Used Car Shopping is More Stressful

Buy A New Car If

We realize that’s a lot of information to go over. That’s why we put together this helpful guide to the different reasons you may want to get a new car. If these things are the most important aspect of your car buying experience, then a new car is probably the right choice for you.

 

You Want More Financing Options

There are lots of financing options for new cars. That means you’ll have more flexibility when you’re figuring out how you’re going to pay. There are several reasons that new cars have more financing options.

 

First, dealerships and car makers usually offer lots of incentives for purchasing a new car. This is especially true for the car makers themselves. This makes sense, as a car maker only gets paid the first time a car is sold. They don’t make any money when someone buys a used car.

 

Additionally, dealerships have an incentive to sell brand new cars. They usually have a higher profit margin compared to used cars. Also, selling a new car opens up space on the lot for another new car. That means even more profit for the dealership.

 

Banks and car loan lenders also tend to offer better deals on new cars. You’ll probably notice a lower new car interest rate versus used car loan rates. That’s because new cars aren’t as much of a risk for the lender. They’ll be able to sell the new car if you default on your payments. The new car will also have a higher value than a used car.

 

You Want Advanced Technology

New cars are great at having all kinds of bells and whistles. Let’s be honest, technology is advancing faster than it ever has before. That means new cars have features that wouldn’t even be considered possible as little as five years ago.

 

New technology also makes cars more comfortable and enjoyable to operate. You can sync your phone or music player to the car, letting you listen to the songs you want while driving. Cars also include video screens in the back seat for passengers and children to enjoy. Finally, new materials and construction methods make it easier than ever to get comfy while you’re seated in a new car.

 

You Want a Safer Vehicle

New features enhance the safety and the comfort of new cars. They make it easier to avoid accidents. They also increase your odds of walking away from an accidentally without any injuries. These advances include new materials and construction techniques. They also include things like lane drift monitoring, radar systems that automatically brake, backup cameras, and more.

 

You Want Low-Stress Shopping

Shopping for a new car isn’t as stressful as shopping for a used car. That’s because you know the car will perform just as it’s supposed to. All of its components are brand new. That means you won’t need to worry about what kind of history it has. You also don’t have to wonder how long the different parts of your car will last, or how well previous owners took care of the car.

 

Additionally, every model of a new car is the same. You don’t need to wonder which car was better cared for. You can focus on comparing the different features of the cars. That means you’re more likely to get the car you want.

Buying a New Car Tips

Just because you’ve decided that you want a new car doesn’t mean you’re done. There’s a few tips you should consider when you’re considering your new car purchase. These will help you save money and ensure that you get the most out of your new car purchase.

Buying a New Car vs Used Car

Best Time of Year to Buy a New Car

The first tip deals with when you should buy your new car. Obviously if you need a car now then you don’t have the luxury to wait. However, if you’re planning your next car purchase, then this is an important consideration.

 

The best time to buy a new car is just before the next year’s model comes out. That’s because dealerships will be eager to clear the previous model off the lot. That frees up room for the next year’s model. It also gives them more money to purchase the next year’s shipment.

 

As a result, lots of dealerships offer special deals on new car shortly before the next year’s model comes out. This is a great time to save a lot of money on a new car. In addition to overall cost savings, you can also get lots of perks and extras. These include extra money to put toward features and bonus packages on the car to make it even more appealing, safe, and comfortable.

 

Should I Buy Extended Warranty on a New Car?

Many dealerships offer extended warranties on new cars. However, as with most extended warranty offers, many people aren’t sure if they should spring for the extra protection.  After all, an extended warranty is something you never want to pay for, up until you need it and wish you had it.

 

The easiest way to answer this question is to ask yourself how long you plan to own the car. If you’re going to drive this car for the next 15 years, then an extended warranty might be in your best interest.

 

It’s also a good idea if you’re planning on using the car for yourself for a few years and then handing it down to your children. That way you can be sure the car will be working perfectly when your child starts driving for the first time.

 

However, if you’re not planning on keeping the car for the entire length of the warranty, then it’s probably not worth it. Most warranties don’t transfer to the next owner. Moreover, most people trade their car in at a dealership. The dealership will inspect and fix up the car after the trade in. If it’s in good condition, then they’ll offer their own warranty on it for the next buyer.

 

Buying a New Car Out of State

Another important consideration is where you live. There are some parts of the country where a new car is much more expensive than other parts of the country. This can even be true within a single state. That’s because regional preferences and supply and demand affect the price of a car.

 

If you want to make sure you’re getting the best deal on a car, then you should consider looking at out of state dealerships. The cost of shipping a car isn’t as high as you might think. That means it’s possible that the best deal might be to buy the car somewhere else and have it shipped to your home. As long as the cost of shipping is less than the amount you save, you’ll come out ahead.

 

One last thing you need to watch out for is registration. Some states require you to register a car you buy in that state. You’ll also have to register the car in your home state. That can lead to twice the fees. Therefore, you need to be sure to include the cost of registration and any other government fees in your calculations. A good auto calculator will include these factors.

Buying a New Car vs Used Car

Buy a Used Car If

While a new car is great, many people prefer to buy a used car. There are lots of reasons for this. Most of them have to do with the cost of the car itself and the cost of day-to-day operations. Moreover, a used car in good condition is just as good as a new car for most people.

Price is Most Important

The first reason to buy a used car is if the price is the most important thing for you. Used cars don’t cost as much as a brand new car. There is some risk involved. For example, you’ll need to trust or verify that all the vital components of the car are in good working order. Replacing a key part on a car can cause the price you pay to jump dramatically.

 

Additionally, used cars hold their value better than new cars. That’s because they aren’t as affected by depreciation. Deprecation is the term used when something loses value. Depreciation happens to almost any object you buy. For example, if you buy a computer, a year later that same computer will be worth less. That’s depreciation.

 

New cars depreciate much faster than used cars. In fact, most new cars depreciate as much as 20% the second you drive it off the lot. Depending on how much you pay for the car, that can mean you instantly lose thousands of dollars of value.

On the other hand, used cars depreciate much more slowly. That means when you go to sell or trade in your used car for your next car, you’ll get a price that’s much closer to what you originally paid for the car. That means you’re saving money.

 

You Want Lower Insurance

Everyone who drives a car needs insurance. Car insurance doesn’t just protect your car, it also protects you and your finances. That’s because it pays out damages if you’re at fault in an accident. It also pays to replace your car or fix your car if you’re in an accident.

 

It’s much cheaper to insure used cars than it is to insure new cars. That’s because the parts for used cars are more common. Also, people that have used cars tend to be more careful drivers. That means less accidents.

 

Additionally, used cars aren’t as attractive a target for theft. That means there’s less of a risk they’ll be stolen. It also means there’s less of a risk that your insurance company will have to pay out to replace your stolen car.

 

Finally, the cost of replacing a used car is much less than the cost of replacing a brand new car. This lower cost means you’ll save money on your insurance premiums. As a result, your used car will be cheaper to run day-to-day.

 

You Want an Affordable Luxury Car

Another reason to prefer a used car to a new car is if you want a luxury brand automobile. These expensive cars come with lots of extra features, performance, comfort, and status. However, a new luxury car can cost tens of thousands more than a standard new car.

 

However, this is one place where depreciation works in your favor. Getting a used luxury brand car means you can pay a lot less and still get the brand you want. All of the cars features will still be there. It will also still have great performance. However, you’ll be saving a huge pile of money relative to new car buyers.

 

If you choose this option, then you won’t necessarily be saving a lot of money compared to buying a new car. However, that’s compared to buying a new car that isn’t a luxury brand. If the badge on the car is important to you, then you should be sure to consider a used car for your next vehicle purchase.

 

You Want Less Day-to-Day Stress

Finally, used cars come with less day-to-day stress. Anyone who’s ever purchased or even borrowed a brand new car knows the feeling. Every other car on the road, every shopping cart, every bike, and every moving object looks like a missile heading directly at your car.

 

New car owners constantly need to worry about something putting a ding or scratch on their car and ruining its perfection. This can make using your car day-to-day an incredibly stressful experience.

 

It’s not just things outside your car either. The inside of a new car also can create stress. It can make you nervous about eating or drinking in the car. It can also make you leery of putting things inside the car for fear of scuffs, scrapes, and stains.

 

All of this means that you’ll get a more stress-free experience with a used car than a new car. Most used cars already have some small imperfections, or character. As a result, you won’t be as worried about the potential for your car to get minor damage, scuffs, stains, or scrapes.

Buying a New Car vs Used Car

Used Car Buying Tips

Once you’ve decided to buy a used car, you’re not done yet. You want to make sure you’re getting the best deal on the car. Additionally, used cars come with the risk of something going wrong on them.

Check Used Car Before You Buy

The first used car tip we’ll offer is that you should always have it checked out before you buy it. Most states have allowances to take a new car to a mechanic before the final purchase goes through. This might cost you a small amount of money, but it’s nothing compared to the price you’ll pay if you find out the car will need major repairs in the near future.

 

If a dealer won’t let you take the car to a neutral third-party mechanic to get checked out, then you should be cautious. This is a sign that they have something to hide. Remember, it’s always better to pay a little bit up front for piece of mind than it is to incur a huge unforeseen cost later.

 

Certified Pre-Owned Cars

Next, if you’re going to buy a used car, try to pick from certified pre-owned cars. These cars come from dealerships. They’re checked out and tuned up by the expert mechanics at the dealer. Most certified pre-owned cars come with a new warranty. That helps protect you from something bad happening.

 

Additionally, certified pre-owned cars are usually a great value. That’s because the dealership wants you to feel comfortable coming back to them for your next car. As a result, they’ll put in a lot of work to make sure your used car is in top shape before they put it on the lot for sale.

 

Buying a Used Car Out of State

Finally, you can benefit from buying a used car out of state. This strategy isn’t quite as effective as it is with new cars. However, the laws of regional preference and supply and demand still apply. For example, used trucks and work vehicles are usually cheaper in rural states and areas. That’s because there are simply more of them. At the same time, used compact cars are usually cheaper in more urban areas. That’s because people prefer that kind of car, so there will be more of them on the market.

 

The important thing to check is that shipping the car or driving it back home yourself will not overwhelm the savings you get. Carefully compare the total cost of the car purchase and transport to the cost of buying a car locally. If you can get a better deal somewhere else, then do that.

 

As you can see, there are great reasons to buy a new car. There are also great reasons to buy a used car. What’s most important is that you pick the reasons that most closely match your priorities. If you want the latest and greatest, then a new car is the way to go. However, if you want to get the best value for your money, then it’s likely a new car is the option that’s best for you.

 

No matter what you pick, make sure you shop around to get the best deal. Many times a dealership will be willing to lower their prices if you can show them another place where you can get a similar car for less money. Don’t be afraid to play different dealerships against each other. That kind of competition is what ensures that you, the customer, gets the best price on your next car.

 

FAQ

Buying a car is sometimes a stressful endeavor. There are so many choices and so many possible configurations that it can become a huge burden to the buyer. But one thing’s for sure, whether you are buying new or used, you want maximum value for your hard earned money. We’ve compiled a couple of tips to help you out and make this process a bit easier, so you can make a well-informed purchase.

PROS AND CONS: NEW VS. USED CAR

Thinking of buying a brand new or used car? Know the basic things you should consider before you make your purchase.

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What are the advantages of buying a new car as compared to a used one?
If you're looking at the same make and model, then almost everything favors the new one except for the price. But if you're comparing different models, then things like condition, resale value and others come into play.
Is it good to buy a second hand car?
Depends. A well-maintained model known for its performance and durability might be a better buy than a new car model that is untested in the market, but it might also be costlier in the long run.
What are the benefits of buying a used car?
The top benefit is low price. But a good model can also be easier to maintain due to simpler parts than newer, more complex ones. Used cars also generally no longer depreciates as much as new cars.
Should I buy a new or used car?
Depends on your needs. If you are knowledgeable about car maintenance, then a cheaper, used car might be better for you. If you are a super busy person with no time to do repairs, then a new car is for you.
What are some advantages of buying a used car over a new car?
Used cars, considering they're well-maintained, have been thoroughly tested. They are also less prone to being stolen, and their prices can almost always be negotiated.
Is it worth it to buy a new car?
Worth of a car or any other purchase depends on the priorities of the buyer. If convenience, easier maintenance for the first few years, and stature is important to you, then a new car might be the way to go.
Is it better to buy last year car model?
Yes and no. A model that is a year older might be more proven and tested and thus, a better buy. But it might also have revealed flaws that the newer model has been solved, which makes it less practical.
When to buy a new car vs used?
Buy a new car if you have the resources and don't have the time to worry about maintenance in the short term. Also, buy a new car if the model has been proven to have good performance.
Is it smarter to buy a new or used car?
It's smarter to buy a new car if it fits your current and near-future needs and budget. Remember, a car is a big investment that should not be bought solely as a status symbol or impulse buy.
What is the best new and used car to buy?
Go for models that have good track record, regardless of brand. If possible, do not buy all-new models that haven't been tested as much. And don’t be tempted with freebies; the car is the priority.
Would you buy a used car with a new engine?
Yes, if it's properly tested, maintained, and documented. Seek out a good mechanic to verify and make sure that the engine matches with the car. And test drive it thoroughly as well.

CAR FINANCING BASICS:

Know how cars are priced, how much you need to pay in interest rates for an auto loan, and other pricing information before purchasing or leasing a car.

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Are interest rates better on new or used cars?

Used cars generally fetch higher loan interest rates since they are riskier to finance since they have lesser lifespan. Also, used cars are generally bought more by persons with lower credit profile.

What's the average interest rate for a used car loan?

Interest rate ranges from 5%-7% for used cars, depending on how old the car is and the term of the loan.

Which credit union is best for car loans?

Depends on your location. It will also depend on your membership, as you will have to be a union member first before you can get approved for an auto loan. It may be harder to get car loans with bad credit at credit unions.

What is a good interest rate on a car?

Anything below the current national average, which is around 4% for new cars and 5%-7% for used cars.

Is it possible to lease a car with no money down?

Yes it is, but the rates will more likely be higher since there is higher risk for the lessor. Still, the rates can be negotiated depending on the length of the term.  

What are the benefits of leasing a car?

Leasing does not have a big upfront payment, which improves cash flow. It also allows you to drive premium models that would have been too expensive to buy. And you're also freed from costly maintenance. Check out our lease vs finance article for more info.

Is insurance higher on newer cars?

No. In fact, newer cars have lower interest rates because they are less likely to break down and lenders want customers to go for newer and more expensive cars.

How do you get the best deal on a new car at a dealership?

Do your research. Find out and compare prices from various dealerships, and know the details of the car you are buying so you'll know what to point out when it comes to negotiating.

Should I lease a new car or buy a used one?

Depends on what you are going to use the car for. If you're route is fairly regular and you're staying long-term in a place, then buy a used one. But if you travel a lot, consider leasing.

Is it easier to buy a new or used car?

If you have complete application documents, then it's the same for both. But if you have a few documents missing or have less-than-ideal credit history, then it's easier to buy a used one.

Is it cheaper to buy a new car or used car?

It is always going to be cheaper to buy a used car. However, consider as well the long-term cost of maintaining an older car compared to a new one.

How to buy a new or used car?

You can go straight to dealers or resellers, or you can now do it online. In the case of Tesla, you can but the car online and have it delivered right at your doorstep.

Do new car dealers buy used cars?

Highly unlikely. Dealers can trade on your behalf if your preferred car is in another location, but they only usually do this for new cars since it's hard to compare values of used cars.

What is the lowest price to buy a new car?

A car’s price will really depend on the brand and type, as well as they location you are in since states differ in their tariffs and taxes.

KNOWING A CAR'S VALUE

When buying a car, it is necessary to know not just what it is worth in the current market, but also it's value in the next few years. Read some of our tips to determine a car's value.

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What car depreciates the least?

The way depreciation value is computed varies, but cars that are known for toughness such as pickups or SUVs generally hold their value longer. Premium brands such as Jeep, Porsche, and BMW also tend to depreciate less.

Can you negotiate a new car price?

Yes, the sticker price at a dealership can be negotiated. You must have done your research and know that actual market value of the car so you can haggle for a better price. It also helps if you walk into the dealership with your own pre approved car loan instead of using the dealership's financing.

What car loses its value the fastest?

Cars that have low demand to depreciate the fastest. It may be because of bad reviews, faulty parts, or costly maintenance, but the bottom line is few are buying them, that's why they become cheap.

Which car brand has the best resale value?

Premium brands like Porsche, BMW, and Mercedes-Benz tend to have high resale values because of their track record and strong demand. Lower-end brands like Toyota are also valued because of their reliability.

Why are used cars more expensive than new ones?

Used cars are not more expensive than new ones when speaking of the same model, but they can become more expensive in the long run due to maintenance costs.

How much do dealers pay for new cars?

Depends on the make and model of the car, the location, and the dealership. Dealers can pay more for a car and have lower profits if they think they can sell a lot more due to high demand, and vice versa.

Which cars hold their value the best?

Depends on the type of car, but generally, premium brands and models have better resale value by virtue of being more expensive at the onset.

How do you haggle?

Haggling is an art, and varies greatly depending on your needs, the dealer, and the car you are eyeing. But you must always know as much detail about the car as possible so you know the probable areas for haggling.

What is Edmunds True Market Value mean?

It is a pricing matrix provided by car e-commerce site Edmunds that states a particular car's market value based on sales data.

What cars last the longest?

A car's longevity is based on numerous factors such as make and model, maintenance, usage patterns, location, and so much more.


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