Should I buy a NEW or USED vehicle?Jul 30th, 2020
Should I buy a NEW or USED vehicle?
This article is your handy guide to help you choose: should I buy a NEW or USED vehicle? Quiz included!
Whether you are planning on paying cash, leasing or financing, one of the biggest decisions to make when purchasing a vehicle is should you buy new or used?
Why is this decision so vital? Depending on your driving habits and financial situation you could be leaving thousands of dollars on the table by choosing the wrong option for your lifestyle.
Knowing the advantages - and disadvantages - will arm you with everything you need to make the best decision the first time. Below we will discuss the pros and cons of each. Let's get started.
Advantages of Buying New
Buying a new car is more expensive than used but comes with a variety of benefits:
- You are the first owner. Beyond the great new car smell, you will have the satisfaction of knowing the true history of the vehicle.
- You get the benefit of a full factory warranty. While new car warranties vary, you get the full benefit of the manufacturer’s warranty that is included with the vehicle.
- A new vehicle is less likely to break down than an older car.
- As a car ages, the cost of each service generally goes up too. Reaching the critical high water marks often call for big ticket items such as new tires or a timing belt.
- Buying a new vehicle gives you access to the latest technology and safety features all backed by the warranty we talked about earlier. Technology is changing quickly and a new vehicle gives you all of the greatest and latest.
- A better interest rate. Most manufacturer’s offer a lower finance rate or lease rate along with new car incentives. This can give you a lower cost of borrowing compared to buying used. So, it is important to compare not only the up-front price but also the interest charges over the term of the loan.
- Customization options like choosing a specific colour, trim options, and accessories are also much easier when buying a new vehicle because you aren’t limited to one specific car at one dealership.
If you're just looking for the lowest payment, this is going to knock your socks off: It may surprise you to know that a new vehicle often has a lower payment than a similar used vehicle that has a lower sticker price. While this seems counterintuitive there are a couple of good reasons:
- A lower interest rate as mentioned above.
- A longer term available on new vehicles - sometimes up to 84 months allows you to spread out the payments over a longer time period.
- The ability to take advantage of a leasing program which can make the payment even lower.
Advantages of Buying Used
Many smart buyers only buy used vehicles. Here are some of the reasons why:
- The biggest advantage of buying used is the lower vehicle cost and reduced depreciation. Because vehicles typically depreciate the most in the first few years, used car buyers loose much less in reduction in value. The first owner has taken the biggest depreciation when driving it off the lot. Many new vehicles will depreciate up to 30% during the first year of ownership so savvy used car buyers prefer to buy a vehicle that is at least a few years old.
- Used vehicles are also less expensive to insure. Because the value is lower, the replacement value is also lower and accordingly, your insurance premium will be less.
- Used cars do not come with any additional new car fees like freight or transportation and pre-delivery inspection (PDI) which can cost you thousands of dollars.
- Rather than buy a new vehicle with a new warranty, you can often just purchase an extended warranty on the used vehicle that you are buying. You may end up with as good or better warranty coverage than even a new vehicle offers and still spend thousands of dollars less.
- All vehicles are used, the minute they drive off of the lot. Why worry about the odd imperfection, scratch, or ding if you are just looking for reliable transportation.
- Overall, the total cost of ownership is usually less. Even if you are financing your used vehicle and pay a higher interest rate, the thousands of dollars in upfront savings will usually result in a lower cost of ownership.
Ultimately, there is no right or wrong answer to the question of new versus used. It really depends on what is most important to you.