Should you buy new or used? Be sure to weigh the pros and cons, do some cost comparisons, and consider what's most important to you before you make your choice.
New Vehicles - Advantages
- The excitement of a new car.
- Perfect condition.
- Low maintenance costs -- high reliability and a full warranty.
- Usually lower interest rate than for used car loans.
- Customizable features.
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New Vehicles - Disadvantages
- Generally a higher purchase price (and higher monthly payments) than for used cars
- Higher insurance premiums.
- Higher depreciation. New cars lose about 40% of their value within 3 years, at which point the depreciation starts to slow down.
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Used Vehicles - Advantages
- Lower depreciation. If you buy a used car, the previous owner has absorbed the biggest or steepest portion of the depreciation cycle. You buy at the beginning of the low-cost part of the car ownership cycle.
- Lower purchase price and lower monthly payments.
- Lower registration and license fees (which are usually tied to the value of the car).
- Lower insurance premiums.
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Used Vehicles - Disadvantages
- Possibility of major maintenance costs such as replacing the tires, battery, brakes, and muffler
- Reduced reliability.
- Less-than-perfect interior/exterior.
- Usually higher interest rates on loans.
- Higher risk. You can buy a certified pre-owned vehicle from a dealer, but private sellers rarely offer a strong warranty.
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