Buying a New Car vs. a Used Car

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
  • https://cars.usnews.com/cars-trucks/rankings/used

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!