Buying a car is a big decision. You want something reliable, spacious enough for your needs, and preferably in a style you will enjoy for years. A big part of this decision can be whether to buy a new car or a used car. As a young adult, there are so many things to be saving for. While a car is most likely a very necessary purchase, you don't want to spend extra money you didn't have to that could be saved for a home or travel fund. Let's look at some of the pros and cons for buying a new car or a used car.
Buying a New Car
Positives
- No history: you don't have to worry about looking for accident histories or wear and tear
- Latest technology: each year’s cars are coming out with new technology to make you safer and make your drive more enjoyable
- Newer cars can be more fuel efficient
- Can pick and choose what features or color you want
Negatives
- Depreciation: a car’s value depreciates the most in the first 3 years
- Higher auto insurance cost for higher cost vehicle
- Tech makes repairs more expensive
- Must be bought through a dealer: if few dealers around, ability to negotiate price goes down
- Sales tax: taxed on entire price you pay: meaning a more expensive car will cost more in taxes
Buying a Used Car
Positives
- Less expensive: the upfront cost, auto insurance, taxes, and interest can all be less
- No big depreciation hit: new cars lose value the moment you drive it off the lot
-
Easy to explore a car’s history with the use of companies that give out history reports
- Title history, record of maintenance, number of owners, collision and repair info
- Reliability record: used car rankings and reviews can help determine which cars will requite less maintenance, hold value best, and save you money overall
Negatives
- History reports are thorough, but they are not perfect
- Used cars sold as is: can't return if it has unexpected problems
- Limited or no warranty coverage
- Can't be as picky: may have to compromise on a few things such as color or mileage
Check out this video from Bank of America that breaks down the cost comparison even further:
https://bettermoneyhabits.bankofamerica.com/en/auto/buy-new-used-car
Certified Pre-Owned Vehicles
- Blend some of the advantages of new and used cars
- Gently used, usually only a few years old, low mileage, and no major accidents
- Closely inspected
- Typically, leased returns or vehicles driven by employees of the dealership
- Can get special low interest financing deals on CPO cars
Reminder: Keep your credit score high!
-
Your credit score can affect
- Your ability to get a car loan
- The interest rate given to you
Regardless of whether you get a used or new car:
- Make sure your credit score is high
- Have a down payment ready to decrease the loan amount you need
- Do your research to figure out what you really need in a car and what you can go without
Safe travels - whichever you choose!
