When looking for a new car, you have two main options: buy used or buy new
There are pros and cons to each method. Your choice will be based on various financial considerations, driving habits, and personal preferences.
Buying a used car is appealing to many people. Used cars are less expensive up-front, and they have the added benefit of not depreciating instantly (more on that later). Because you're buying a used car and saving sometimes up to 25-30%, you can usually afford to buy a higher class of car than you could if you bought it new.
If you do choose to buy a used car, there are some costs not typically associated with buying new. For example, you’ll want to have the car checked out by a trusted mechanic. You may need to do some maintenance work on the car much sooner than if you bought a new one. However, today’s cars are much more efficient and can go longer between scheduled maintenance visits than in years past.
Buying used also presents other financial benefits. Car insurance rates are often lower for used cars than new ones, and registry renewals are often cheaper. This can save you hundreds or more over the life of the car.
Buying a new car does have some advantages—and one major drawback.
First, the positives. You may be presented with more financing options and new-car incentives such as cash rebates and great interest rates when you buy new. While you are still likely to spend more than you would on a used car, you may spend much less than the first market price after negotiations, incentives, and rebates. There are also often benefits of buying from a new car dealer, such as service options or guarantees.
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New cars offer peace of mind and ease of purchase. There is no need to take it to a mechanic before you buy, and if it breaks down, most warranties will cover the cost of repairs for the first few years of owning the car. These warranties are usually based on mileage or years, whichever comes first, so be aware of the terms and conditions.
While new cars are expensive, they do offer a lot of the newest tech features for performance, safety, and comfort. Used cars will likely be older and may not have the features you're looking for.
The major drawback to new cars, however, lies in depreciation. Depreciation is when something loses value over time. Everything depreciates, but new cars suffer a big hit almost instantly. Basically, the value of the car drops dramatically as soon as it leaves the lot. In many cases, it drops by as much as 20%! That means if you were to buy a new car for $25,000, it would be worth up to $5,000 less the moment it became yours.