Shopping for a New or Used Car
It's time to replace your current car. But should you buy a new car or a used one? Consider the following advantages and disadvantages of each as you shop around for the vehicle that's right for you.
Buying a new car
Advantages. That new-car smell, a clean interior, and the latest technology and safety features...there's no denying the appeal of buying a new car. Aesthetics aside, there is an additional advantage to buying new: starting with a blank slate. You won't need to worry about how the previous driver treated the vehicle. Ownership of a new car comes with the freedom to decide whether to modify the vehicle, how much to drive it, and how much insurance to carry (although your lender may impose some minimum requirements if you take out a loan to buy the car). Bear in mind that there are also state requirements as to how much insurance you need.
The warranty on a new car is typically much better than a used one, offering you greater protection against any defects that may cause your car to malfunction in the first few years of ownership. A new vehicle also comes with benefits like roadside assistance, higher fuel efficiency standards, and the latest safety features. These features help make your car safer to drive, which can provide you with peace of mind.
Disadvantages. The major downside of buying a new car is the hit it will take on your wallet. New cars tend to cost more than used cars for the same make and model, and they also depreciate in value more quickly. In fact, a vehicle loses the majority of its value in the first few years of ownership.
And remember, your new car won't stay new forever. Eventually, the new-car smell will fade, dents and scratches could appear, and the interior will experience wear and tear.
Buying a used car
Advantages. Even if you can afford a new car, buying a used car can be a smart alternative. In addition to saving on the upfront cost, you're also likely to save on insurance because used cars tend to be less expensive to insure than new cars.
Compared to new vehicles, used vehicles tend to depreciate less rapidly. Chances are that a used car's previous owner paid for the bulk of depreciation.
Since most modern cars can go 100,000 miles or more with few mechanical problems, you might not even notice a difference between buying a late-model used car with low mileage and buying a new car.
Disadvantages. A used vehicle comes with many unknowns. You probably won't know why it was traded in or how it was treated by the previous owner. As a result, you may need to be prepared to pay for required maintenance sooner than you would on a new car. You'll want to have a reputable mechanic check out a used vehicle before you buy it. Though you'll have to pay a mechanic for this service, it could end up saving you from paying costly repair bills down the road.
Bear in mind that your choice of models and options is much more limited if you decide to buy a used car. If you have your heart set on a specific kind of car or certain features, this might mean that you'll need to spend a much longer time shopping around.
Whether you choose to buy a new or used car, make sure you consider the following questions as you go through the car shopping process:
- What do you like and dislike about your current car?
- How will you use the car? Will it be a commuter vehicle that's driven on highways daily, or will it be used less frequently around town?
- Do you need a larger car with a roomy trunk and plenty of seating to accommodate your family, or will a smaller two-door car suit your needs?
- What kinds of features are on your wish list? Do you want a car with the latest technology, or one with a leather interior? Is there a particular body style that you'd favor over another?
If you prefer to trade in your car for a new one every few years, explore leasing as an alternative to buying a new car. Monthly lease payments are generally lower than the payments on a loan to purchase the same vehicle. But leasing a car could mean that you're required to carry more insurance than if you purchase the car. Plus, lease contracts can be confusing, so make sure you know exactly how they work to avoid paying more than you need to.
Buying a car is an important financial decision. Do your research and understand how this purchase will affect you in the short term and the long term to make the most out of your new ride.