If you’re looking to buy a car, one of the first questions you have to ask yourself is whether you want to buy new or used. There are advantages and disadvantages to buying a new or a used car, and it’s important to understand the pros and cons before committing to a decision.
New cars are, understandably, more expensive, but they’re also far less likely to break down or require any major (and expensive) mechanical repairs. They’re also covered by a warranty so even if your car does spontaneously break down of its own accord, you shouldn’t have to foot the bill.
In the past, new cars were notably more expensive than used, and only certain people could afford to buy them. Now, though, the interest rates have dropped considerably meaning financing is a lot more accessible for the average person. While monthly payments still tend to be more expensive than on a used car, the difference in the long run isn’t all that substantial.
In some cases, you can drive a brand new car for only $150.00 more a month than you would a used car, and you’ve got a longer warranty. Just be aware of loan terms that exceed six years; sure, you’ll be paying considerably less a month, but you’ll also end up owing more on the car by the end of the loan than the car is actually worth (called an ‘upside down’ loan).
The downside of buying brand new, of course, is that within 2-3 years the value of the car will have seriously depreciated (meaning it’s worth far less than when you bought it). If you plan on keeping the car for a while, this isn’t that big of a deal. If you’re the type who prefers trading cars in after only a couple of years, you might want to look into leasing instead.
Conventional wisdom used to say that buying used was always preferable to buying new if you were on a budget, but that’s not exactly the case anymore. As was touched on above, dealerships offer far more affordable financing options now than they used to (often with offers of 0% interest on loans for up to two years). Unless buying new is completely out of your budget, it’s usually worth at least going to your bank and seeing how much you’ll be approved for on a loan.
One of the biggest pluses for used cars is the often considerable difference in price between a new car and a used one of comparable worth. The initial owner is the one who ends up absorbing most of the cars depreciation value within the first two years, meaning the second buyer gets a much better deal.
If you decide to buy used, absolutely make sure to do your research first. Look up the make and model of the car(s) you’re interested in and see what past owners have to say. Mini-coopers, for example, are apparently a poor investment as a second hand vehicle due to various mechanical issues. Even if you do find a used car that’s dependable and has great ratings from other owners, you’ll still be responsible for footing the bill for most repairs and won’t have the same peace of mind that comes from owning a car that no one else has driven yet.
Another used car option worth looking into is a CPO (Certified Pre-Owned Vehicle). While CPOs tend to be most popular/have the most value in the luxury car market, they’re definitely something to consider for someone who doesn’t want to pay for a brand new car but who wants the reliability and dependability that comes from a new vehicle.
CPOs are different from traditional used cars because they’ve been refurbished, inspected, and certified by a manufacturer or by another certifying authority. Generally speaking, they also include an extended warranty as well as special financing and other additional benefits (like roadside assistance, CarProof reports, and even the first oil change in some cases).
You can expect to pay more for a CPO than for a similar non-certified car in the same condition, which is why its ideal for higher priced luxury cars that are notorious for expensive repairs that you may not be able to finance.