Should You Buy a New Car or a Used Car?
Published April 19, 2016
There has always been an intense debate over whether it is better to buy a new car or a used car. People tend to be firmly entrenched in one camp or another. It is a very difficult decision to make.
There are pros and cons to both types of purchase. You need to weigh all of the factors and analyze your specific situation in order to decide what is best for you.
Pros of Buying a New Car
The biggest benefit of buying a new car is that it is... new. Of course I didn't need to tell you that, but there are some major benefits to it being brand new. First of all, there is no wear and tear on any of the parts. You don't have to worry about whether or not it has been maintained properly.
Second, and possibly even more important, is that you will be covered for the maximum amount of time by the manufacturers warranty. For no additional cost, you are covered for anything that breaks (as long as it isn't due to abnormal use or abuse) for at least the first 3 years or 36,000 miles. Many manufacturers offer coverage for a lot longer, especially when it comes to the drive train.
You will also have the latest and greatest features in safety, convenience and entertainment. It is the same as with any product, the newest version will have the latest technology.
Cons of Buying a New Car
When compared to a used car of the same model, the only real con to buying a new car is the price. New cars will always be significantly more expensive than their used counterparts. Cars depreciate a lot as soon as they are driven off the lot, when they immediately become used cars.
Pros of Buying a Used Car
The biggest benefit to buying a used car over a new one is that you will get more car for your money. Since equivalent models will be cheaper when bought used, you can buy a higher end car on the same budget.
A side benefit is that when you buy a used car, a significant portion of the depreciation has already happened. This means that over time, the car will be worth a higher percentage of what you paid for it when you sell it or trade it in.
Cons of Buying a Used Car
The first thing you should be worried about when you buy a used car is how well it was maintained by the owner. Unfortunately, there is no way to know what kind of maintenance was done unless they had it serviced by a shop that reports to companies that provide vehicle history reports. It doesn't help if you have a super duper certified pre-owned car with a 50,000 point inspection. They don't disassemble the engine to see if there is abnormal wear on the internal components because the oil wasn't changed regularly.
Mechanics can't possibly find all issues. Everybody has had a car with a random, difficult to reproduce problem. There could be a rattle or weird electrical problem that only happens on occasion and never happens when you take it in to be fixed.
You also don't know if something was done that could void the manufacturers warranty or an extended warranty. Did the prior owner use the car to drive for Uber? As Jeff Ostroff wrote about recently, driving for Uber can void warranties. Did the prior owner change the chip to give the car a high performance upgrade? Even if they switched back to the original chip before selling it to you, damage may have been done and the manufacturer will be able to tell what caused it.
We have also seen an increase in odometer fraud. Since pretty much all cars have digital odometers, it has become easier to roll back the mileage. The popularity of ultra low mileage leases has increased the incentive for people to perform this fraudulent task. Some people treat a roll back as part of their regular maintenance, like it was an oil change.
A key reason you might want to avoid used cars is simply because they are used. All cars will eventually have parts that fail and require expensive repairs. If you plan to keep your car for a long time, buying used means that those failures will start to happen sooner. You can protect yourself to an extent with an extended warranty. However, once you cross 100,000 miles, it will be very difficult, if not impossible, to get coverage.
Finally, you never really know why somebody traded their car in or is selling it. Is it just time for an upgrade or were they having problems and got tired of dealing with them?
Beware of Too Good To Be True Used Cars
If you decide on a used car, make sure to watch out for vehicles that are too good to be true. Sometimes, a car has been in an accident but the circumstances don't lead to a police report being filed. These cars will be fixed and then put on the used car market.
One thing that you can do to try and spot these repairs is to see if the paint looks too perfect. Pay particular attention to the front bumper and the leading edge of the hood. If there are no nicks from pebble strikes or bug etch marks at all, it is a good sign that the vehicle has been repainted.
You can wash and wax a car 3 times a day and you can't keep the finish looking like it was just painted. Any car will develop minor blemishes in the finish. Birds crap on cars, bugs hit cars, small pebbles get tossed off the road and countless other possible things in the environment cause minor damage.
I'm also very leery about cars that are available because the original owner traded in a new car in less than a year. While there are some legitimate reasons for somebody to do this, I am always skeptical. The one bit of protection you have is that a vehicle that is very new will still be covered under the original manufactures warranty, unless it has a ton of mileage on it. In that case, you probably don't want it anyway. Even with this protection, I'd rather not deal with the potential headaches of having to keep coming in for repairs.
Toss-Up: Insurance Cost
One consideration that is usually more of a toss-up is the cost of car insurance. On the one hand, you can sometimes save on a used car because it is older and less valuable. However, new cars may have more advanced safety features which may lower your insurance rates.
Insurance costs between new and used vehicles are hard to generalize because the rates depend much more on specific makes and models. One thing to keep in mind is that if you buy a used car in the same model year as a new car and they are equipped the same, the insurance cost will be about the same. The insurance companies don't care that you paid less, they only care about the current value. There may be a very small savings if there was significant mileage on the used car even though it isn't very old.
Different Buying and Negotiating Strategies
The strategies for buying a new car are completely different than they are for buying a used car. When you are buying a new car you will get multiple dealers to compete against each other as we talk about in our in our new car buying guide. This strategy works because once you choose the make and model that you want, you will be buying the exact same car no matter where you get it from.
You always have a legitimate option to walk out and go somewhere else. The dealer knows that you have that power and you can use it to negotiate a great deal.
When it comes to buying used cars, you will have to do much more research and the negotiation will be much more difficult. First you have to determine not only the make and model you want but also the year. Every single vehicle you look at will be unique and will have its own unique history. You will need to investigate that history so we recommend getting a21 day, 25 report package from AutoCheck.
We give you a step by step strategy in our guide to buying a used car. You will start by searching for inventory using high quality, easy to use sites like RydeShopper, TrueCar, Edmunds and Cars.com. Each site might have different inventory so the more you search, the more likely you will be to find something you are interested in.
Sometimes the car you find will be at a dealership and sometimes it will be listed by a private party. The negotiating strategy will be different depending on which one you are dealing with. Luckily for you, we have a page that teaches you how to negotiate with though sellers. We teach you how to vary your strategy based on whether you are dealing with a dealer or private person.
About The Author: Lyle Romer is a consumer advocate, Founding Contributor and Vice President of CarBuyingTips.com. A 20 years veteran of the auto industry with a high level of expertise, Lyle has been researching all aspects of the automotive sales industry.
Lyle's expertise and research played a vital role during the creation of CarBuyingTips.com in 1999 after years of industry research. He carefully observed every aspect of his own car buying experience as the internet began to take a foothold in the process. He also designed the site to make sure that consumers had easy access to the best consumer advocate education.
Lyle has been an auto industry insider since 1999. He also has worked with other automotive websites to help improve their offerings based upon feedback from CarBuyingTips.com users. He covers important industry events and gathers off the record sources while attending industry conventions.
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