Is Buying A New Or Used Car A Better Option?
Whether you’re considering buying a car for the first time or are a veteran automobile shopper, you may wonder whether a new or used car makes a better option. The answer, perhaps not surprisingly, turns out to not have a straightforward yes or no. It depends entirely on the person and their situation. But we will go over the factors that can help you decide whether a new or a used car works best for you. Starting with the biggest factors and then discussing the pros and cons of each option, as they both have good and bad qualities.
Budget
The single biggest factor in your choice of a new or used car will obviously come down to your budget. Sad to say, but if you have less than $300 a month or $10,000 in cash, a new car just won’t be an option. Leasing might work, but that does not equal buying a car. Leasing can become a rather complicated process, so we will leave that out of consideration for the purposes of this examination.
So you have to take a good hard look at your finances and determine whether you can really afford a new car or not. Clark.com recommends not buying a new vehicle if you can’t afford the payments on a 42-month loan term. That seems a little short to me, as a 60-month lease term seems fairly standard. But their suggestion that extending the loan term doesn’t mean you can magically afford the car remains valid. And I have heard of some ridiculously long loan terms for a car, like 9 and 10 years! If that puts it within your budget, you still can’t afford that car.
A used car can also allow you to get a nicer quality vehicle for the same price as a new or newer car. Perhaps you can get an older luxury vehicle instead of a new compact car. So that should figure into your decision-making process when it comes to buying an automobile. You may get more vehicle for less money when you shop used.
Depreciation
The other big elephant in the room when it comes to buying a car: depreciation. Depreciation just means the loss in sale value over time, essentially. And one of the biggest strikes against purchasing a new car for most people. There’s the old chestnut about a new car losing 20% of its value the second you drive it off the lot, and while that isn’t strictly speaking true, it’s also not very far off either. Cars lose most of their resale value in the first few years, the first two to three especially.
A used car, on the other hand, only loses around 10% or less each year, assuming it is more than three years old. That means you’ll probably get about what you pay for it, if you sell it sooner rather than later. A used car means not only can you get more or a nicer car for your money, but also that it won’t lose much value while you own it. So that marks two big things in favor of buying used over new. But those don’t make or break the new vs. used car proposition, as the next two factors land squarely on the side of new cars.
Maintenance and Repair Costs
New cars shine, figuratively and literally, in this category. You can’t beat new cars for low maintenance and repair costs, as they are brand new. You don’t have to worry about previous owners. And if problems develop with your new car, lemon laws protect you in that case. New cars often have warranties that pay for most maintenance and repairs within the first three years at least. Funny how that also marks the timeframe when cars have the most depreciation. Almost like those warranties have some major kind of value. As well as the value of no one else owning it before you.
That uncertainty remains a problematic factor for used car purchases. Another old chestnut goes that buying a used car just means buying someone else’s problems that they gave up on fixing. And there can be some level of truth to that. But you will definitely spend more on both repairs and regular maintenance with a used vehicle. Regularly scheduled maintenance tends to become more involved and costly over the life of a car. As well as increasing the likelihood that a major repair will become necessary as a car ages. So a used car will have a lower upfront price, but will likely cost more in terms of maintenance and any potential repairs.
Features and Options
Another win for the new car option. If you want the latest and greatest in technology and safety features, obviously you’ll need to get a new car. With the fast pace of technology, even a five-year-old car can be very outdated when it comes to tech features and safety upgrades. Airbag replacement used to be a concern, but enough time has passed and developments made that you don’t need to worry about any car made after 1998. Airbags from then on should last the lifetime of the vehicle. And even airbags from before then most likely won’t have any problems. But new safety features and requirements get added and updated constantly.
If you want cruise control, lane keeping, blindspot indicators, and all the various connectivity options, a new car has got you covered. The majority come with large touchscreen displays as well, and those just keep getting bigger and better each year. So if you want the latest gadgets, you will need to buy a new car. But downsides exist even there. The high cost of repairing all that fancy tech in new cars never gets talked about, and that turns into major repair bills in the future. If getting your cracked phone screen replaced is both expensive and a hassle, I’d hate to get a cracked car touchscreen fixed.
If you want simple and reliable, used cars may have the advantage here. Manual door locks and windows last forever and any repairs usually end up both easier and cheaper to fix than their fancier counterparts. The good news is that airbags, air conditioning, and automatic transmissions are in no way considered new tech, so you won’t have to forgo all conveniences and safety even if you get an older car.
Financing and Insurance
This one can be something of a mixed bag for both options. While financing typically comes with a lower rate on new cars compared to used, you can often have trouble securing it with less than stellar credit. But for used cars, while the rate can go higher, you typically end up spending less in interest over the life of the loan anyway due to the much lower purchase price. So this one ends up six of one, half a dozen of the other.
Insurance, if you want to be cheap, definitely goes to the used car for the advantage. You can just the minimum liability coverage required by law for your state. (Our article on required insurance covers just that topic.) A financed new car will definitely require you to have both collision and comprehensive coverage in case anything happens to your brand-new vehicle. And it will definitely add up, as new cars have the highest value and the highest insurance premiums because of that. But sometimes, doing the financially responsible thing because you must can have value. Either way, the new car will cost more and the used car should end up cheaper.
Whether You Buy A New Or Used Car, Max Cash Can Help You Get Financing And Insurance!
We always work to find new partners so that we can give you the best deal from just one application. If you want to finance that new or used car, Max Cash has you covered with multiple ways to get the financing you need. Whether you need to refinance your car loan, apply for a new one, or even purchase a car you currently lease, our partners can help you find the loans you need to buy that new or used car. Start an application today and you could have a loan offer in minutes!
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