Buying a new car or a used car. This is one of the biggest questions that the average person will ask themselves every few years when looking for a vehicle. There are several different factors to consider with this decision. Let me help you sift through them as well as the pros and cons of buying a new car or a used car.
(1) Benefits and Drawbacks of Buying a New Car
Buying a new car can seem really awesome! After all, you will be the first one to put their bumper stickers on it, the first one to spill their coffee on the seat, the first parent to yell at their kids in the back to be quiet, and you will get to enjoy that new car smell.
However there are some major benefits and drawbacks of owning a new car that you need to consider.
Benefits of buying a new car:
- Manufacturer warranties.
- Typically slightly more fuel efficient.
- Typically have slightly better safety features.
- More bells and whistles.
- Cheaper routine maintenance.
- Customizable (if you order it).
Drawbacks of buying a new car:
- More expensive.
- Major depreciation in years 1-2 (this is a really big deal).
- Higher insurance costs.
- Higher costs for unscheduled maintenance (if not covered from warranty).
(2) Benefits and Drawbacks of buying a Used Car
Now that I have gone over the benefits and drawbacks of owning a new car, let me explain a used car’s benefits and drawbacks.
And to be clear, I will be talking about a “gently used” used car. Typically one that is 1-3 years old, with less than 100,000 miles.
The person who is trying to decide whether to purchase a used car or a new car probably is not thinking about purchasing a new car or a 15 year old car with 150,000 miles on it.
Benefits of buying a used car:
- Lower purchase price.
- Less depreciation (again, this is a big deal).
- Lower insurance rates.
Drawbacks of buying a used car:
- Higher routine maintenance costs.
- Higher chance of unscheduled maintenance.
- The car will likely last for less time.
- Typically slightly less fuel efficient than a new model.
- Typically has slightly fewer safety features than a new model.
- Usually no warranty.
(3) Buying a New Car or a Used Car
So here’s the bottom line. You can buy whatever you want. You are an adult. 🙂
But you came here because you want to be financially fit. So here is the real answer.
If you want the most bang for your buck, you should buy a 1-3 year used vehicle.
I know that things have been weird for the past couple years with the car shortage and the price of used vehicles being sometimes higher than their new counterparts.
But this will pass.
When you purchase a car, it WILL go down in value. So you will take a financial hit for owning the vehicle that you drive. The question is, how much of that hit do you want to take?
The older the vehicle and the more miles that it has, the less depreciation that you will take by owning it. But the trade off is that you will have higher maintenance costs, the car will last for less time and it may not have the features that you want/need.
But if you swing too far the other way than you risk paying too much for the vehicle and taking on a lot of depreciation up front.
In fact, it is not uncommon for a vehicle to lose 20% of its value in THE FIRST YEAR and about ½ of its value over the first five years.
If you are trying to go about the car buying process as savvy as possible, then avoid buying a new car and opt for the 1-3 year old model.
If you do this, you will still get most of the safety features of the new model, almost as good gas mileage, it might still be under warranty, and you will let someone else take on the high depreciation in the first year of owning the vehicle.
CAVEAT ALERT:
In these weird times that we have right now where vehicle prices are over-inflated and sometimes used cars are more expensive than new cars, NEVER pay for a used car more than you could buy the new model for.
For example, if you are looking for a Toyota Camry, don’t purchase a 2 year-old model for $38,000 when you could purchase a brand new one for $36,000. That would be silly. If you purchased the new one you would not only be paying LESS money for it, but you would also get all the bells and whistles that you want as well.
Final Thoughts
Buying a vehicle can be stressful. I get it. But other than buying a house, it is probably the largest purchase that you will make. And most people have to do it every few years or so. So make sure that you are making the right decision for your situation.
It is difficult to have a hard and fast “do this” or “don’t do that” guide for buying a vehicle, especially in today’s market. But these are the general guidelines and things that you should watch out for.
Make sure to check out my other articles on vehicle purchasing and ownership as well here. 🙂
I am here to help you!
You can do this!
Until next time!
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