If you’re ready to buy your first car, you’ll want to consider all of your options, including whether you want to buy a new or used car. Before you purchase a new or used car, find out the advantages and disadvantages of both so you can make a decision that fits your needs and your budget.
Advantages of a new car
Buying a new car means you have all the benefits of being the first person to own the car. You don’t have to worry about previous wear and tear, and you can customize it to your style. A new car won’t have issues like lingering cigarette smoke, pet smells or stains. Plus, you can choose all the latest amenities like heated leather seats, Bluetooth audio and modern security features. Other advantages include:
- Reliability. You’re most likely starting from mile 0 – or at least less than 100 miles – so there’s less likelihood of immediate repairs or roadside breakdowns. Plus, some new cars come with roadside assistance under warranty for the first few years.
- Financing terms may be expanded. Some dealers will help set you up with a loan for five, six or even seven years. (This could also apply to a used car purchased from a dealership, but would not be available if you purchased from the previous owner.)
- Updated safety features. A new car will have the latest safety features, such as adaptive headlights, accident avoidance, backup sensors and side view assist, and will have been put through rigorous safety tests. Be sure to research car makes and models to see which ones have the highest safety ratings before you buy.
Disadvantages of a new car
When you buy a new car, you will have to pay service fees and taxes. These will also be present on a used car from a dealer, but not from a private sale. You may also pay a higher insurance premium, depending on your carrier. Other disadvantages include:
- Higher upfront price tag and monthly payments. While you can obtain financing to make your purchase more affordable, it’s important to make sure the monthly payment you’re taking on fits your budget. Examine loan terms and interest rates to find the one that suits you best. While this is also a concern when buying used from a dealer, a new car payment will likely be much higher.
- Rapid depreciation. A new car depreciates as soon as you drive it off of the dealership lot and continues to depreciate over time. Plus, accidents, wear and tear and the introduction of new technologies to the market can decrease your car’s resale value over time.
Advantages of a used car
The main advantage of a buying a used car is the price – it’s often significantly cheaper. To learn more about the average current resale value of the model you’re looking at and what to expect from a dealer or private sale, look up the car using Kelley Blue Book. Other advantages of buying a used car include:
- The option to buy from a dealership or owner. If you buy a certified pre-owned vehicle from a dealership, you often have more choices and better financing options. Plus, you can take your car to the dealership’s automotive repair center for maintenance or repairs. If you buy from an owner, you may pay less as you deal with them directly and save on any fees that may be associated with a dealership purchase.
- Someone else takes the largest hit from depreciation. As mentioned before, new cars lose value as soon as you drive them off the lot. In fact, some cars can lose 40 percent or more of their value within the first year. This means you can get much more for your money if you buy a car that’s a few years old.
- Buy a certified pre-owned car. This is a reconditioned used car. Automakers and dealers take models less than five years old, put them through extensive inspections, provide an extended warranty as well as other incentives, and sell them to the public through a dealership. You’re basically getting many of the benefits of a new car at a fraction of the price.
Disadvantages of a used car
Despite the great price, there are some disadvantages to buying a used car. Specifically, you don’t know the car’s history unless you purchase a report. And even then, you may not find out everything about the car. Other disadvantages could be:
- Aftermarket parts or alarms. You may not know what or how repairs were made by the previous owner. Aftermarket parts could inhibit functionality or cause problems for you down the road.
- Outdated systems. Used cars may not have the latest technology, safety and security features.
- No warranty. Unless you choose a certified pre-owned car from a dealer, you won’t receive a warranty to cover damage to the car. This could lead to increased repair costs.
Create a savings goal to buy a new or used car
Buying a new car, or a used car from a dealership, requires a sizable down payment, closing costs (including taxes) and possibly auto financing. Most down payment requirements are around 10% – 20% of the total price. For example, if you are buying a car for $30,000, the down payment could be $3,000 – $6,000. However, if you are buying a used car from the previous owner, you will likely need to pay the full asking price upfront, which averages around $15,000 – $16,000 depending on the age and condition, make and model, and mileage of the car. To prepare for the cost of buying a new or used car, consider opening a savings account online and set aside funds each month.
You have a choice to make: buying a new vs. used car. Consider all of the options above, then establish a savings goal and timeline to ensure you’ll have enough for the down payment of a new car or the total cost of a used car. Make your dream of buying a new or used car come true – start saving now.
Content was created and provided by RBS Citizens Financial Group.