NEW CAR VS USED CAR - WHICH ONE SHOULD I BUY?
Trying to decide between a New and Used vehicle can be a hard decision. There are many things to consider when weighing your buying options such as: How much money will I save on the price between a New and Used car? What will the difference be in monthly payment, interest rate, and money down required? How much money will I lose to depreciation over the time I own my vehicle? With all these questions to answer lets look at some pros and cons of buying a New Car versus a Used Car.
Depreciation is probably the biggest drain on your money when looking at cost of ownership over the lifetime of you owning your vehicle. It's often estimated that you lose about 20% in value as soon as you drive off the lot after purchasing a new car, so on a $30,000 new car purchase you lose about $6,000 and that number will grow over time as the car accumulates mileage and has normal wear and tear. Where does the 20% in depreciation come from? Well, once you leave the dealership in your new car the car is no longer worth the retail value, (the value of a new car before it is tagged), it is now worth it's wholesale value. Let's take a look at a comparison between a New car's depreciation vs a Used cars depreciation.
New Car Depreciation:
Going with the example I gave above: you purchase a New car for $30,000 and sell it 3 years later for $17,000. That means the car cost you $13,000 in deprecation.
Used Car Depreciation:
Let's say you buy the same car as above but it's three years old when you buy it. Now, you purchased it for $17,000, after the initial depreciation. Three years later you sell it for $12,000. So the depreciation on the Used car only cost you $5,000. Meaning you saved $8,000 in deprecation on the used car versus the new one.
The $8,000 in savings might not be enough to convince someone to purchase a Used car but it is definitely still something to consider and at least weigh when making the decision. Isn't a New car more reliable and require less maintenance than one a few year older with more miles? That's not really the case anymore with the increase in vehicle build quality and technology.
Used Car Reliability:
Vehicles have never been more dependable and reliable than they are right now. It's not uncommon for vehicles today to get well over 100,000 miles before needing any major repairs, and vehicles commonly drive to over 200,000 miles before needing to be replaced.
All vehicles have regularly scheduled maintenance. Every manufacturer has a regular maintenance schedule that includes oil changes, tire rotations, and brake checks among a few other things, but today the mileage intervals are much greater between these than they use to be in the past. For example, oil changes use to be recommended every 5,000 miles and now they are recommended any where from every 8,000 to 10,000 miles.Even tires and brake pads last much longer than before.
Just looking at what we've discussed so far it's easy to see that a Used car is less expensive and the reliability and maintenance aren't quite the consideration they were before, but let's look at a few other advantages of Used Cars.
Used Cars Advantages:
Lower Cost to Insure:
When a vehicle is pre-owned, and therefore has a lower value than it's new counter-part, the vehicle cost less to insure with collision and comprehensive coverages. And if you pay cash you may only want to carry liability coverage that will cost you even less.
TT&L and Registration cost are less:
Since TT&L is a percentage of the price you paid for your vehicle a used vehicle will cost less to tag. Also registration for your vehicle decreases every year, so even though it gets less expensive on a New car, it already started out cheaper on the used one.
You can buy more car:
Because your saving the depreciation a New car received you can buy a higher class of vehicle or a vehicle with more options and technology than you would if it was new.
Getting a scratch or a door ding on a used car is a little less stressful than if you buy a new car. The first dent or scratch in a New car can be a huge bummer and upsetting.
If the Used car has any manufacturer warranty left or not there is still some unknowns you have to consider. You don't know how the car was driven or completely maintained by the previous owner or if there was a reason it was traded in or sold other than they just wanted or needed a different vehicle. Here are a few disadvantages of purchasing a Used car.
Used Car Disadvantages:
A Used car is going to have higher mileage than a new one, so it's possible that you may have to do a more expensive repair sooner than later or replace the vehicle before too long which could add to your overall vehicle cost.
Higher interest rate:
Pre-owned vehicles generally come with a higher interest rate than you would have on a New car,so you will probably pay more interest over the life of your car loan than you would if you purchased a New car.
There's only one used car like the one your looking at. With the difference of mileage, options, and how the car has been taken care of no two used cars are alike. This can make it difficult to find a used car that has everything you are looking for and is in the condition you are wanting.
We've talked a lot about Used cars, and while you can save quite a bit of money buying used there are still advantages of buying new.
New Car Advantages:
New Car Selection and Shopping is Easier:
It's easier to get the vehicle and options you are looking for. With a New car the condition is never an issue because it is new, and if it's not sitting on the lot it can be traded for or ordered. New car pricing is a lot easier to figure out too even though negotiating to that price can still be a pain and tiring.
New car interest rates are lower than on a Used car. Manufacturers also offer incentivized rates at times as low as 0.0% so saving that interest brings the cost of ownership a lot closer to what it can be on a Used vehicle.
New features and technology are put on New cars every year. Even when there's not a complete model change the technology almost always receives an upgrade, so you may have to wait a few years to find some of the update features and tech on a Used car.
Peace of Mind:
A New car will likely be more reliable than a Used car even though the reliability has gotten a lot better over the years. You have a New factory warranty on a New car if something does break down where you may not have any or have to purchase some warranty on a Used car. You can read through our warranty article, "Car Warranty, Is It Worth It" to see if an extended warranty is something that you may need.
So this brings us back around to the question:
Should I buy a New or Used Car?
When considering whether to buy a New or Used car consider both the up-front pricing and ongoing cost. And remember that it is not an entirely financial decision. While used cars tend to be cheaper, initially, it may be difficult to find all the features you want with a car in the condition you are looking for. So as long as you are not in a hurry to buy take your time to find the right vehicle for you, and be sure to do your homework to consider both New and Used. See what is available to you, compare the price difference, and find out which option, you and your bank account, would be most comfortable with in the future.
Shields OKC Auto Direct
Oklahoma City, OK 73149
OKC Auto Direct
Oklahoma City, OK 73109
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