New or Used? The Choice Gets a Little More Clear

Every car buyer will eventually face the dilemma of buying new or used.

New-car buyers get a strong warranty, the peace of mind of knowing no one else has driven the car, and, of course, that invigorating scent that only new cars offer.

Used-car buyers save some money and know they are getting a great value on a car that’s already seen the bulk of its depreciation. Of course, there’s also the risk of hidden problems that could cost a small fortune to repair.

What’s the best way to go? There’s no right answer, but some of the latest research makes used look like a better option than ever.

NBC News says,

In the fourth quarter, the average amount borrowed to pay for a new vehicle jumped more than $1,000 to hit a total of $30,621. That is, $11,292 more than the average loan for a used vehicle during the same period.

There’s a lot to consider here. First of all, the gap between the cost of new and used cars is growing. The higher costs of new cars translate to longer loan terms, which means buyers potentially pay more in interest, unless they’re able to take advantage of a low-interest promotion.

A 2 percent loan on a $30,000 new car loan costs less than an 8 percent loan on a $20,000 used car. In this example, the used car would cost $4,332 in finance charges, while the new car would incur just $1,500 in interest over the life of the loan. Right now, though, interest rates are low on both sides, which makes a used purchase even more attractive.

From a strictly financial standpoint, it’s hard to argue against buying used. Car purchases are not just about finances, though. Emotions play a huge role, and sometimes the lure of owning something brand new supersedes any sound financial advice.

If you’re considering a car purchase, weigh your options. Shop new, then compare prices on the same model a few years older. You won’t get the scent of a brand new car, but the extra $11K in your bank account should be enough of a consolation.

Will your next car purchase be new or used?

-tgriffith

Find Certified Pre-Owned Cars and Used Cars in your area at CarGurus.

2 Comments

  1. A car is an important investment for many. Therefore it’s important to make an educated buying decision. It’s good to determine how much you are willing to invest in a vehicle, first. If you are planning to finance the vehicle, besides monthly payments, keep in mind fuel and insurance costs. New vehicle insurance premium is likely to be higher. Dig into what mechanical issues you may end up having to fix as the particular car model gets older. Decide what kind of car you are looking to own, what features are an absolute must and what are just “wants” that you can easily live without. If you opt to buy a used vehicle the chances are you’ll get the “wants” included in a price. Based on my personal experience, I found a certified used car program a good alternative to buying a brand new car. And I’ve happily owned both, a brand new Toyota and a certified pre-owned Honda.

  2. I would definitely agree that buying a used vehicle can be a much smarter way to go today. however, there are a few vehicles that have poor service records from 4-5 years old. pays to do your research on long-term reliability studies.

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