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Money Matters Blog

Tuesday, September 18, 2018

The Pros and Cons of Buying New Vs. Used Cars

When you’re ready to buy some new wheels, should you spring for a new vehicle or buy a pre-owned one? Choosing between new and used cars can be a complicated decision. To make your job a little easier, we’ve outlined the pros and cons of each purchase type below.

Pros of New Cars 

  • Status symbol. The allure of owning a new vehicle is obviously its attractiveness. 
  • Fewer repairs. You can assume you won’t be dealing with major repairs or maintenance issues for a while. 
  • Easier shopping. There’s no need to drag your prospective new car to the mechanic to check it out. 
  • More financing options. You’ll be offered attractive incentives, like cash rebates from the carmaker and better interest rates from the lender. 
  • Improved technology. Recent models have incredible technology, such as programmable settings, autonomous emergency braking and adaptive cruise control. 
  • Automaker’s guarantee. New cars come with warranty coverage for their first three years or 36,000 miles, whichever comes first. 

Cons of New Cars 

  • Price. Of course a new car will cost more. But, what makes it more painful is the fact that you can get a comparable vehicle for much less. 
  • Depreciation. New cars go down in value as soon as they leave the lot, often by 20%. At the end of the first year of ownership, your new car can drop another 10%. 
  • Higher premiums. Insurance companies charge more for newer vehicles. 

Pros of Used Cars 

  • Price tag. It’s not unusual to find a used car in decent condition with a price tag that’s 30% lower than a similar brand-new model. 
  • Less depreciation. With the previous owner absorbing the initial depreciation on the car, your vehicle will only experience a minimal drop in price. 
  • Lower insurance. With your car weighing in at a lower value, your monthly insurance premiums will be lower. 
  • Lower interest. If you finance a used car, you’ll likely have a higher interest rate. However, since the loan amount is lower, you’ll save in total interest payments over the life of the loan. 
  • Predictability. When buying a model that’s been around for a few years, you’ll have a wealth of research available on your car and can know what to expect. 

Cons of Used Cars 

  • Complicated purchase. With a used vehicle, you’ll want to get a vehicle history report and bring it to a mechanic for an inspection. 
  • Fewer choices. When buying pre-owned, you don’t get to be picky about things like colors and features. 
  • Risk. Even if you do your homework well, you run the risk of walking out with a lemon when you buy a pre-owned car. 
Whether you choose to go with a new or previously-owned vehicle, don’t forget to check with Community Financial for your auto loan. Learn more and check today’s rates at cfcu.org/auto.

Your Turn: Did you buy your car new or pre-owned? Are you happy with your decision? Let us know in the comments.

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