New Cars Vs. Used Cars
Q: I’m thinking it’s time for new wheels. Should I spring for a new vehicle or buy a pre-owned one?
A: Choosing between new and pre-owned 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 new or previously-owned, don’t forget to call, click, or stop by NYU Federal Credit Union to hear all about our auto loans.]
Your Turn: Did you buy your car new or pre-owned? Are you happy with your decision? Tell us all about it in the comments.