First time car buyers have a choice of buying a brand new car, or buying a used car. Which is better? There are advantages and disadvantages to either choice. Most people would rather have a brand new car with its new-car smell and latest style, but there are reasons that a new car might not be the best choice. Let’s take a look at the pros and cons of buying new and buying used.
Advantages of Buying New
- You get a brand new car with new-car feel and smell
- You get the latest styling, technology, and safety equipment
- You get a full manufacturer’s warranty
- You get the option to lease
- You may get special manufacturer-sponsored pricing and low rate financing
Advantages of Buying Used
- You save the high first-year depreciation of value
- If you buy almost-new, you may get the same styling and technology as a new car, at a lower price
- You get price flexibility by choosing between different model years, mileage, and condition
- You may buy “certified” vehicles with inspection and warranty – at a higher cost
To summarize, buying a used car can be a better value for your money but it comes with higher risks. Any used car purchase should include an extensive test drive, an inspection by a qualified mechanic, and a CarFax or CarProof Vehicle History Report. (CarProof is the Canadian standard and CarFax covers the US). Also consider buying an extended warranty (preferably from the vehicle manufacturer). If you’re considering an almost-new vehicle, make sure you can’t get the same vehicle, new, at about the same price, which can happen if the manufacturer is offering special promotional deals (particularly at the end of the model year).
My Opinion on the Debate
Even though I regretted it on my first car, I believe that conditions now favour buying new over used for most people most of the time. The exception occurs if you are paying cash. You can save real dollars by buying a two year old car and having the original owner effectively paying for the depreciation. But if you finance the used car, it’s very likely that the depreciation you saved on the purchase will be offset by the higher interest you will pay on a used car loan. New cars are coming with financing rates as low as 0% plus you may qualify for one or more special incentives provided by the manufacturer such as a Loyalty Rebate, or Grad Rebate, or First Time Buyer Rebate, or one of several other incentives. Most of these perks are not available on used cars.
For someone buying a first car, consider leasing as a way to lower your payment, lower your commitment, and keep you from negative equity in 3 or 4 years when your circumstances suggest a different type of vehicle. This way, you get to drive a new car with the newest technologies without handcuffing yourself with unmanageable car payments and long term debt.