New Cars Vs. Used Cars
Should you buy a new car or a used car? That is the question. It’s an age old conundrum that every car buyer has to face, and neither answer is right or wrong. It all depends on your wants, needs, budget, and appetite for risk. Let’s take a look at the costs and benefits of buying both new and preowned vehicles, so that you can make the right pick when you begin your car-buying adventure.
There’s also a third choice, called a certified used car, but we’ll discuss that later.
Advantages of New Cars
Some buyers find the new car smell intoxicating and would never consider buying used.
There are a lot of benefits of purchasing new. You can get the latest technology, including things like Apple CarPlay and Android Auto. Most new cars come with Bluetooth phone connectivity, so you can use your phone legally while driving, without having to purchase an aftermarket Bluetooth interface.
Advanced safety features and driver assistance technologies have made great strides in the last several years, and now you can get safety tech, such as autonomous emergency braking, adaptive cruise control, blind spot monitoring, and lane departure warning, even on affordable cars such as the 2017 Kia Forte and 2017 Toyota Corolla.
Fuel efficiency has been steadily improving as new models are introduced, so there’s a good chance that the SUV that is new today will outperform the efficiency of a similar model that’s older. Fuel costs are a major component of a car's total cost of ownership.
You’ll know that there’s no wear and tear on your new ride, that it has never been in an accident, and that there’s much less chance that there are any uncorrected recalls. You won’t have to worry about whether a car’s previous owner neglected to change the oil, or parked by braille.
Automobiles come from the factory with warranty coverage for at least the first three years or 36,000 miles, whichever comes first. That gives you a predictable cost of ownership over the first few years you own it, without much risk of a huge repair bill.
Purchasing a new car is easier than buying used. With so many versions of the model you want at the dealership, you’ll likely find the car you are looking for on the lot. If not, your local dealer can trade inventory with another dealer to find the exact model, option list, trim level, and color you are looking for.
Manufacturers also offer special financing incentives and lease deals on new cars that aren’t typically found on preowned models. If you do the math, some zero percent financing deals can bring the total amount of money you’ll pay for the car down to the level of used cars with traditional financing. If you are seeking a loan from a bank or credit union, you will generally be offered a lower interest rate on a new vehicle than you would on a preowned model.
Disadvantages of New Cars
The biggest problem with choosing a new vehicle is that you will typically pay a whole lot more for the car when it is new than you would for a comparable used model. And the higher costs don't stop with the price. Because its value is higher, you’ll also have to pay much more in sales tax. The check that you write to your insurance company will be bigger as well.
It’s not unusual for a new car to lose 20 percent of its value the moment you drive it off the lot, so if you don’t pay at least 20 percent down, you’re liable to owe more to your lender than it is worth.
Advantages of Used Cars
The greatest advantage of going used is that the original owner will have absorbed the costly depreciation that occurs in the first few years of ownership. Their pain is your gain, however, as it will allow you to save thousands or tens of thousands of dollars on the cost of your car. You can either budget much less for your vehicle purchase or take a new-car-sized budget and buy a bigger or fancier model than you would otherwise be able to.
In other words, you could take your Nissan-sized budget and buy a secondhand Infiniti instead. You might be able to take your Ford Focus-sized budget and get into a larger preowned Ford Fusion for the same amount of money. You'll be able to get a discount on desirable options as well. Features such as navigation and leather seats don’t add as much to the price of a used vehicle as they do to the price of a new one.
Since the value of the vehicle will be lower, you’ll also save on your sales tax and insurance premiums. If you are financing, you’ll probably save in total interest payments, as the loan amount that you’re paying interest on will be lower, even if the interest rate is a bit higher.
By looking at the research and rankings for the car you are considering, you’ll know where there are potential problems, and you can avoid them. By the time a new model has been on the market for a couple of years, there will be some good predicted reliability information available that you can use to compare models.
Disadvantages of Used Cars
Talk to new car buyers, and many will tell you that they don’t purchase used because they feel like they're just getting someone else’s problems. Depending on how it was cared for, they may be right. You need to take a couple of extra steps in the car-buying process to check the history of any used car that you're considering.
First, you will want a vehicle history report from a company such as Carfax, which will identify any major auto accidents or title issues. Then you’ll need to spend a bit of money on a prepurchase inspection from an independent mechanic to identify any significant operating issues with the car and see if there is any evidence of crash, flood, or fire damage. Though the check will cost money, it is cheap insurance against a big repair payment.
If the car is more than three to five years old, it is unlikely that you will have any warranty coverage, unless you buy an extended warranty yourself, so you’ll be financially exposed if any major repairs are needed.
When you buy a preowned car, you won’t be able to be as picky about features or color as you would be if you were ordering a new car from a dealership. There are lots of sources available to find used cars, but if you want an Obsidian Blue Honda Pilot EX-L all-wheel drive with navigation, you’ll either have to compromise or you’ll be waiting a long time for one to become available in the right condition for the right price.
Also, buying used isn't necessarily a financial slam dunk with every car. You have to buy the right car to take advantage of the previous owner’s depreciation. Some vehicles hold their value really well over the first couple of years, so you won’t save a ton of money by purchasing them used – especially if there are generous new car financing deals available.
A Third Option: Certified Used
Somewhere between buying a brand new car and buying a used car is the certified preowned (CPO) car. Certified used cars are relatively new cars with low mileage that are sold by their brand’s dealership network. They’re handpicked cars that have not been in a major collision and have been inspected and refurbished by the dealer prior to being offered for sale. Most importantly, they will have taken the first couple years' depreciation hit. They will be sold almost like a new vehicle, but at a lower purchase price.
Certified used cars come with warranty extensions that are honored by their manufacturers’ dealers. You might see “Certified” stickers on cars at independent dealers, but a truly certified used car is backed by its original manufacturer and must meet their rigorous standards for resale.
Naturally, a certified used car comes at a higher price than comparable used cars that aren’t certified, but often they are available with used car financing deals that aren’t available in the wider used car market.
More Shopping Tools From U.S. News & World Report
When you decide to buy a new or secondhand car, you should arm yourself with information to get the best car deal and protect your wallet both now and years down the road. In our new car rankings, you can see how cars, SUVs, and pickups stack up against their peers. Our used vehicle rankings allow you to see how cars compare in different years, and against each other.
Buyers can also use our car payment and affordability calculators to plan their car-buying budget. If you opt to go with a new car, our Best Price Program saves buyers an average of $3,279 off of MSRP.