Buying a New vs. Used Car

Monday, June 10 at 08:05 AM
Category: Personal Finance

Nothing beats that new car smell ... except perhaps scoring a great deal on the purchase price! A used car — even just one or two model years older — can cost considerably less than the newest version of the same car and may have more features. There are definite benefits to buying new, and just as many benefits to buying used. Before you embark on your car search, take a practical look at the benefits and drawbacks of buying new or buying used.

Nice and New
New cars will sport the latest and greatest features, newest colors and trendsetting perception. There is no question about maintenance history, prior accidents or driver handling. The euphoric feeling of driving off the lot as the premier owner of this new machine is unmatched ... except for the thought it's no longer new as soon as you drive off the dealer's lot.

The value of a new car drops thousands of dollars the day it is purchased. If you're planning to drive your new car into the next decade and beyond, then depreciation should have little effect on your decision; the value of your car is only relevant if you plan to sell it or trade it in. However, you may want to consider if you are in an accident the value of the car is what the insurance company will use to determine the amount of your payout.

Pondering the Pre-owned Option
Driving off the lot in a used car may not feel as glamorous as piloting a new car, but there are some definite benefits to being patient. For starters, all those bells and whistles that cost a premium in new cars often come standard, or at a considerable cost reduction, in used cars. Insurance premiums will be lower, and if you pay an excise tax in your community, then it will be lower as well.

These cost savings may come with a bit of risk. Buying used means someone else owned it, drove it and, maintained it (you hope). If you know the previous owner, then you may have peace of mind. Be sure to ask for all maintenance records, and have the car checked by a trusted mechanic. Buying a certified pre-owned car from a dealer will include a warranty, but you may also want to have it checked by a professional.

New car benefits

  • Latest features
  • Low miles
  • New car smell!

New car drawbacks

  • Highest upfront cost
  • Immediate depreciation in value
  • Higher insurance premium

Used car benefits  

  • Lower cost; slower depreciation
  • Shorter loan with lower monthly payments
  • Step-up opportunity — more bells and whistles for less money
  • Lower insurance premium

Used car drawbacks  

  • Unknown maintenance and service history
  • Second-hand; others have driven
  • Higher miles
  • Warranty may be limited

The views of this article are for general information use only. Please contact and speak with a subject expert when specific advice is needed.

Tags: Auto Warranty, Financial Education
Kelly Cyrus on 5/30/2014 at 12:01 PM

If you are a first time buyer or you have a low budget then "CPO" i.e. Certified Pre- Owned, is the best option for you. Its a good decision for the first-time buyers, to go for used cars. It will definitely help you to save your money. You don't need to spend a lot on your first car. However, you just need to research well before buying any used car. First find a good authenticated car dealer, in your area. Just tell them your requirement and budget. They will help you to arrange the car. You just need to prepare with your budget . Don't forget to pre-purchase verification of the vehicle you are going to buy. Check the VIN, warranty period, car history, etc. and also the car condition, color, wheels, engine, belt, air bag, mirrors, doors , etc.

*This comment has been edited by the blog admin.

Sierra Bell on 7/8/2014 at 9:00 AM
Its really informative post. Many people are confused whether buying a new or used one. In this post you have discussed lots of good points which will give us the confidence of buying a used car without the concerns associated with a used car purchase. But I think purchasing a New Car definitely has advantages like: -No worrying about how the previous owner treated the car. - All new cars come with a standard warranty to help with repairs.
andrews908 on 8/28/2014 at 11:06 AM
A common question arises in mind that what to buy, a new car or a used one. The question is bit difficult but not impossible to solve. The car makers are making new cars with latest features & advanced techniques. The cars are very innovative & full of comfort. But the costs of those cars are high. So it's not possible for everyone to buy those cars. On the other hand some shops are dealing with used cars with negotiable price which can be easy for all class of people. Used cars can give more fuel efficiency than a new one. The used cars are the older form of new cars.
D. Anthony on 6/29/2015 at 8:20 AM
Its a good post. People keep on thinking which car to buy,new or a used car. It depends upon the buyer's choice. Both have its own benefits and drawbacks. But this post will give them a idea.
Gabby on 11/28/2016 at 11:05 PM

Great article! I bought my used car four years ago at one of the used car dealerships in Kansas City and they were incredibly helpful! 

*Comment edited by Blog Admin to take out URL.

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