Buying a New vs. Used Car
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, 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 that 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.
Driving off the lot in a used car may not feel as glamorous as piloting a new car for the first time, 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, that 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, 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.
Whether you buy new or used, the car will be new to you. Be sure to choose one that fits your lifestyle, needs and budget.
New car benefits
• Latest features
• Low miles
• Best warranty
• 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 & whistles for less money
• Lower insurance premium
Used car drawbacks
• Unknown maintenance & service history
• Second-hand; others have driven
• Higher miles
• Warranty may be limited