The Great Car Debate: Should You Buy New or Used?

Should You Buy a New or Used CarFor decades, our great nation has been fiercely divided over one all-important debate: Should you buy a new or used car?

You’ll find energized champions on each side of the aisle, defending their new vs. used car preferences to the death point of exasperation. They believe their way is the only way when it comes to cars. And, as presidential debate seasons ramps up, we thought it only fitting to dive headfirst into this heated debate ourselves.

Buying a car is not a decision to take lightly, which is why you should tread carefully before making any type of automotive purchase. If not, you could find yourself losing thousands of dollars and stranded out in the cold, literally.

How to Decide on a New or Used Car

Deciding whether or not to buy a new or used car involves many factors. Rather than make an impulse purchase based entirely on emotion, it helps to make a list of important factors to consider that will lead you to the most rational decision possible. A well-researched decision can save you time and money, so here are a few things to consider the next time you go car shopping.

Price

When it comes to the sticker price, it’s pretty obvious that new cars are far more expensive than used cars. Of course, you have to compare apples to apples. If you pit a new Toyota Corolla vs. a used Lexus, you’re results will be skewed. Also, keep in mind that you may need cash for a down payment. The down payment on a new car is going to be significantly more than a down payment on the less expensive used car.

  • The Verdict: This one isn’t really a contest. If you’re comparing apples to apples, buying a used car will win on price every time.

Value

Remember that price and value are two separate things. The price is the amount that you actually pay for something. Value is what it is worth, which can make it much more difficult to assess. For example, you may find value in the comforts of a Lexus that you don’t get from a Corolla. Thus, you’d get more value from buying a used Lexus than you would paying the same price for a new Corolla. You should always keep “market value” in mind, as well. According to Edmunds.com, on average, the market value of a new car loses a whopping 11% the second you drive off the lot. Over a five-year period, your car’s value will drop a total of 63 percent. No matter how much you love your new car, that type of depreciation can be difficult to swallow.

  • The Verdict: If you’re looking to get the most value out of a vehicle, chalk another one up for used cars. Regardless of whether your looking to get more for your money or actual market value, used cars are the clear winner. By letting somebody else take the largest hit in depreciation upfront, ultimately, you can save money on your purchase.

Maintainence

One of the best things about buying a new car is knowing you shouldn’t have to make any repairs on it for quite some time. The same can’t always be said for buying used, however. Repairs and maintenance on a used car can be costly. When you buy new, you shouldn’t have any issues for a while, and that is usually backed up by a hefty warranty. Buying used can be an adventure, and not in a good way. You never quite know what issues you may run into.

  • The Verdict: Score one for new car lovers everywhere. Of course, a lot depends on the make and model of the car you buy. However, if you’re worried about expensive maintenance costs, take comfort in the fact that those costs should come much further down the line with a new car.

Warranty

Speaking of warranties, all of the major car manufacturers offer some type of warranty on their vehicles. The beauty of buying new is that you get to take full advantage of them. Typically, bumper-to-bumper warranties will last 3 years/36,000 miles while powertrain warranties are 5 years/60,000 miles. Keep in mind that these warranties represent an either/or, which means they can expire rather quickly if you drive a lot. And, while nearly all new cars come with a warranty, used cars may or may not.

  • The Verdict: We’ll give a very slight edge to new cars here. If you purchased a certified preowned car, chances are good that the original manufacturer warranty will transfer to you. However, know that these warranties start on the date of the first purchase, not the date of the model. Always be sure to clarify whether or not the warranty is transferrable when buying a used car.

Reliability

Whether you are buying a new or used car, the last thing in the world you want is to be stranded on the side of a road somewhere. That’s where the reliability factor comes in. While you might think new cars are always more reliable than used cars, that isn’t always the case. A friend of mine recently bought a new car off the lot, and has had nothing but problems since. After about 2 months of hassle, the dealer finally returned her money and let her trade it in for something new.

  • The Verdict: Again, this is a slight victory for buying new. In theory, new cars should be more reliable, but it totally depends on each individual vehicle. In today’s market, certified preowned vehicles may be just as reliable as new models.

Insurance

The cost of buying a car doesn’t end the moment you drive off the lot. In addition to maintenance and repair costs, you also need to think about how your your insurance rates could change. New cars can cost a lot more in insurance premiums over time, with a small monthly increase of $50 adding up to an extra $600 per year. Whether you’re buying used or new, keep that in mind when you negotiate the final price.

Intangibles

When it comes to cars, it is hard to rule out the vanity factor. I mean, who doesn’t love the smell of a new car? Plus, it just feels really cool to pull off the lot in a car that nobody else has ever owned. And, you get to brag to your friends about your new ride, which is always a good time.

  • The Verdict: If you’re into this sort of thing, buying a new car may be for you. Of course, you can get most of those same warm fuzzies if you buy a used car off of a dealer’s lot. So, yeah, let’s call it a push.

It’s Your Call

Regardless of whether you decide to buy a new or used car, the most important factor is that you find the “right” car for you. While buying a used car might make the most financial sense in theory, it certainly won’t save you money if you buy a complete lemon. But, that doesn’t mean you should rush out and buy a new car either. These days, you can find many used cars that are just as reliable as some of the newer models.

The decision is yours. Shop around. Do your research. Then, do your best to make the most rational decision possible.

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4 Responses to “The Great Car Debate: Should You Buy New or Used?”

  1. Thank you for your post. I think your example of value is spot on. I would rather buy a used car that my be nicer than buy a new car that isnt so nice but is the same price. To me the nicer car has more value and will probably continue to hold a higher resale value.

  2. Fred MacMurray

    As with all articles of this type, it is far too simplistic to reach a conclusion. There is no right answer for whether used or new is better. One of the big factors, ignored by the article is that this will depend heavily on what brand and model you are considering. Popular Japanese models hold their value so well that buying one a couple of years old, hardly saves you any money. In fact, the Lexus dealer I bought my car from had a used car on the lot (two years old with 25K miles), identical to the new one I just purchased, with a price in the window that was $2000 MORE than I just paid for my new one. When I asked the sales guy how that could be, he said that people come in thinking they are saving money by buying used since the price is well below MSRP for a new one. What they don’t realize is that the new ones also sell for well below sticker and they are not really saving much buying used.
    On the other hand, a couple of years ago, I bought a CPO BMW 7 series. This car had a sticker price of $95K when new. I bought it three years old with 35K miles for $35K. In this case, buying used is obviously a far better option.

  3. With the low payments that I’ve seen advertised, I would think that many people would at least want to give leasing a look if you can fit in with their mileage requirements. I typically don’t advocate a lease, because at the end of the period you’re left without an asset that holds value plus rates could be much higher, but if you can get a lease payment that saves you several hundred dollars per month versus buying, it is at least worth considering to see if the risk might be worth it.

  4. Good article. Best value would probably be $5,000 to $6,000 range used, Japanese brands. Dump it if the engine or tranny goes bad. This shouldn’t happen, many of these makes can go 250,000 to 300,000 miles plus. So your maintenance would be batteries, wipers, oil changes, fluids, tires, brakes. Same as a “newer” or “new” car eventually. Just my opinion.

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