Let’s be honest with ourselves. Unless you recently signed a major contract with Nike or a professional sports team, chances are you won’t be buying an expensive new car anytime soon. Most of us who are looking to purchase our first car have loans, debt, more schooling and other things to pay for before we decide to spend a single penny on a vehicle. We want — no need — to get the best deal for our money.
There are some things that you need to consider when you begin your car search, but one of the biggest questions to ask yourself is do you want a new car, or a used one? Each has its pros and cons. A new car comes with a warranty and a clear car history. Chances are, the car won’t be in the shop for a good year or two, and you won’t have to deal with the hassle of having to go without wheels for weeks on end when the repair shop tells you that the part you need is out of stock. However, a used car is much softer to your account balance and has already depreciated in value (which won’t hit you as hard) if you try to resell the car.
New Car Advantages
• Factory warranty. A new vehicle has much better coverage.
• You can choose all the gadgets and doo-dads you want. In one word: customization.
• Lemon Law coverage. If it’s proven to be defective, you have some legal recourse to be reimbursed or compensated.
New Car Disadvantages
• Sky high prices, both up front and/or monthly.
• Depreciate quickly (i.e. lose value just driving it off the lot). Many new cars lose 40 percent of their value in the first three years.
• Insurance rates for young drivers with new cars are astronomical. You might be able to afford the car but not the insurance payments, making the car unaffordable. Visit insurance.com to compare quotes.
Used Car Advantages
• Lower, more affordable prices. Borrowing and making monthly payments might not be necessary, saving you money on interest.
• The depreciation is less dramatic. If you take care of the car, it will retain more of its value if you need to sell it.
• More options. Whether it’s an ex-wife dumping her former husband’s car, an elderly person no longer able to drive or some other unusual circumstance, people are always selling cars. Visit autotrader.com, cars.com or even craigslist to shop around.
• Get more for your money. A car that is a few years old can be purchased for almost half of the original price and still have many new safety and convenience features.
Used Car Disadvantages
• Repairs. Be it worn out bearings, exhausted exhaust systems or hot air conditioning, something usually needs to be fixed or upgraded — almost guaranteed. Plan to include repairs into your purchase price.
• Little or no warranty. If it breaks, the cost is coming out of your pocket.
• Resale value. Cars that have had two or three owners become harder and harder to sell.
If you do your homework, a used car can be every bit as reliable as a new car. It might not be as shiny, but it is more affordable and practical, especially if it’s your first car. Plus, you can buy a lot of car wax from what you saved to spruce it up. Even buying a car that is just a year old can be exponentially cheaper than buying it right off of the lot. But if you’re stuck on buying a new car, look up the price of the car and visit kbb.com to compare it with the price of the same model one year earlier — and you may begin to reconsider.