Shopping for Cars: New Versus Used?

Q: When shopping for cars is it better to spring for a new vehicle or go the cheaper route and buy a used vehicle? What do I need to know about each kind of purchase? 

A: Any decision surrounding a purchase as large as a car needs to be made with careful research and consideration. There are pros and cons on both sides of the fence here. Your final decision, though, will depend on your budget, personal preferences, and particular needs. 

To make your job a little easier, we’ve outlined the pros and cons of each purchase type below. 

Pros of New Cars 

• Status symbol. The strongest allure of owning a new vehicle is its attractiveness. You don’t hear many people bragging about their just-purchased used car.
• Fewer repairs. With a new vehicle, you can assume you won’t be dealing with major repairs or maintenance issues for a while.
• Easier shopping. When everything is new, there’s no need to drag your car to the mechanic. It’s also easier to determine a fair price.
• More financing options. If you’re considering a new car, then you’ll be offered attractive incentives like cash rebates from the carmaker and better interest rates from the lender.
• Improved technology. Cars are getting more updates, and recent models have incredibly convenient technology, such as programmable settings, autonomous emergency braking, adaptive cruise control, blind-spot monitoring, built-in Wi-Fi hotspots, and lane-departure warnings.
• Automaker’s guarantee. All new cars come with warranty coverage for their first three years or 36,000 miles, whichever comes first.
  

New Car Cons

• Price. Of course, a new car is going to be more expensive. But it’s not just the price that puts you at a disadvantage — it’s the fact that you can get a perfectly comparable vehicle for much less.
• Depreciation. New cars go down in value as soon as they leave the lot. A new car can lose 20% of its value once it’s owned. At the end of the first year of ownership, your new car can drop another 10% thanks to the mileage you’ve clocked and the wear and tear.  You’ll feel this loss if you try to sell your car a few years down the line.
• Higher premiums. Insurance companies charge more for newer vehicles. You’re also more likely to want the maximum coverage and protection when every dent in your new car is enough to bring you to tears.

Pros of Used Cars

• Price tag. No one would buy a used car if it weren’t for the savings. According to the National Automobile Dealers Association (NADA), the average American owns 13 cars in their lifetime. A typical new car costs $30,000.  If each car is just three years old and costs $20,000, a driver can save $130,000 on car costs throughout his lifetime!
• Less depreciation. The savings on a used car don’t end at the dealer’s lot. With the previous owner absorbing the initial depreciation on the car during its first few years of ownership, your vehicle will only experience a minimal drop in price. You can save thousands of dollars in loss if you want to sell your car later.  
• Lower insurance premiums. With your car at a lower value, your monthly insurance premiums will be more manageable. You can also opt out of full protection when your car isn’t a new model anyway.
• Lower interest. If you choose to finance a used car, then you might have a higher interest rate. However, since the loan amount is lower, you’ll save in total interest payments over the life of the loan.
• Predictability. When purchasing a new car, you never know what future issues might arise. But, when you’re buying an older model, you’ll have a wealth of research and ratings available so you’ll know what to expect.
  

Used Car Cons

• Complicated purchase. You won’t be able to walk into a lot and walk out with your new car an hour later. With a used vehicle, you’ll want to get a vehicle history report, ask to see the vehicle’s service records, and bring it to a mechanic for a professional inspection.
• Fewer choices. When buying pre-owned, you don’t get to be picky about things like colors, upgrades, and features. If you find something in your price range that meets most of your specifications, then you grab it!
• Risk. Even if you do your homework well, you still run the risk of walking out with a lemon when you buy a used car.
  

It’s a multi-faceted decision, but by carefully weighing your options and personal preferences, you’ll drive off of the dealer’s lot with a real winner! 

Whether you choose to go new or previously owned, don’t forget to call, click, or stop by United Texas Credit Union to hear all about our auto loan options.

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Sources:

https://www.autotrader.com/car-shopping/4-questions-help-you-decide-new-or-used-car-167808

https://cars.usnews.com/cars-trucks/new-cars-vs-used-cars

https://www.iwillteachyoutoberich.com/blog/cost-vs-value-should-you-buy-a-new-car-or-used-car/