Buying a New Car vs. Buying a Used Car: Which Should You Choose?
When it comes time to buy a car, you have a variety of choices available to you. Not only do you need to pick the make and model of your car, you also need to decide if you want to buy a new or used car. This is an important decision and it can make a big difference in your finances over the next several years. It is important to realize that buying a car is not an investment Your options may also be determined on whether or not you qualify for a loan or if you need pay in cash.
Advantages of a New Car
The advantage of buying a new car is that you are buying a car that generally comes with a warranty. Most new cars will have very few repairs in the first few years, so you can focus only on the maintenance of the car. The dealer may also offer financing at a lower interest rate, which can reduce the amount of interest you pay over the life of the loan. These are the most basic advantages.
Another advantage is that the new cars will have the latest technology, which will mean that you may find cars with better gas mileage and lower emissions. You may be able to buy a hybrid and reduce the amount you spend on transportation each month. Additionally, the new cars tend to hook up to your phone and other devices with more ease.
Disadvantages of a New Car
The biggest disadvantage of buying a new car is that you lose money on it as soon as you drive it off the lot. A new car takes its biggest depreciation in the first two or three years. This means that you are basically throwing away several thousand dollars that you will never be able to get back. Financially it does not make a lot of sense to buy a new car unless you have money you do not mind losing.
Another disadvantage is if you buy a car that is a brand new model. There may be a year when they switch engines or alter the design and that model and year tend to have more problems. If you buy used you can avoid that issue.
Advantages of a Used Car
The biggest advantage of buying a used car is that you let someone else take the biggest depreciation hit on the car. You may be able to sell your car for nearly the same amount you paid for it in the next few years. You can still find good financing options through your local bank or credit union, and because you are not losing the money on depreciation, you may come out ahead of a zero interest loan that you would take out on a new car.
When you buy a used car, it is easier to save up and pay cash. You can also review the Consumer Reports and choose a model that has been performing well.
Another advantage is that depending on the model, your insurance rates may be lower on a used car as opposed to a new one. If you are in your early twenties and paying high insurance rates because of your age, this may be significant savings.
Disadvantages of a Used Car
The biggest disadvantage of buying a used car is that it may not be as reliable or you may need to do more repairs on it. However, you do have the option of buying a Certified Pre-Owned car through several different car companies. As technology has improved cars have become more reliable and many models do not need repairs until they are well over 100,000 miles and close to ten years old. This means that you can buy a car that is three years old and sell it in five years and you may not need to do any major repairs on it. Plus, you can sell it at a price very close to what you bought it for. You may want to set aside a little bit of money each month to cover any car repairs that come up.
Another disadvantage of buying used is that you may have to compromise on the color of the car in order to get the one with the better history and mileage. When shopping for a used car, you need to be more flexible and more patient as you hunt for a car. You can also expand your search and look for the best price on available cars.
Making the Decision
Everyone will need to decide for themselves what the best option is. No matter what you decide you should either pay cash or make sure that you can afford the car. A good rule of thumb is that you should be able to pay the car off completely in a three year time period. If you cannot afford the payments at this rate, you most likely cannot afford the car.
You should also do your research and make sure that the model you choose has good reviews and is reliable. If you know nothing about cars, then you should have a mechanic look over the car for you, particularly if it is used. Make sure you shop around for the best loan on the car if you are borrowing money to purchase your car.