Are Used Cars Better Than New Cars
If you own a car, the sad reality is you will need to replace it someday. But the question is should I buy new or should I buy used? Are used cars better than new cars?
Which is better is a subjective question. Usually, it comes down to what’s best for you and what would be easier for you to live with. If you buy a secondhand car, you will want a used car checklist. A checklist will help you inspect the vehicle for damaged and worn parts that could be costly. Or you could hire a mechanic to do a pre-purchase inspection.
Then there are used car scams. Yes, some people want to take your money and leave you with a car with mechanical problems or worse. If you need to know more about used car scams, read my article “used car scams.”
If you are cautious, you can save a lot of money buying a used car and get the right car for you.
New cars depreciate quickly in the first five years of ownership. Usually, you’ll pay more for a new car than a used car. So, which is better, a used car or a new car?
Let’s take a better look at the pros and cons of owning a used car vs. owning a new car.
New Car vs. Used Car Pros And Cons
Deprecation Of New Cars
New cars depreciate an average of twenty percent a year after the first year. Some depreciate more, some less, but your purchase is losing value rapidly. After year five, the depreciation slows down. At ten years, you can safely assume the vehicle is fully depreciated.
Some people, including me, think buying a new car is a waste because you are buying an asset that will only depreciate. It will never increase in value.
Depreciation Of Used Cars
The older the car is, the more it has depreciated. You can buy a used car with many of the same features, including safety features, as a new car for about half the price after four or five years.
If you are more interested in the style of the vehicle than the year of the car, you can save a lot of money.
Price Of New Cars
The cost of living increases yearly, and the price of new cars increases yearly also. Buying a new car is expensive, and the payments can last for years, causing your cost of living to be higher.
Part of saving money is spending less and socking away the money you didn’t spend. Keeping your cost of living low is key to a successful savings plan.
In addition to the higher price tag, it’s more expensive to insure a new vehicle than a used one.
If you buy a new car (unless you plan) you will need to finance the car. If you are trying to save money being in debt will only hurt you. We need to strive to be debt free.
Price of Used Cars
Used cars are typically cheaper than new cars. Of course, it depends on what you buy. You can’t compare a 2013 BMW to a 2010 chevy volt. Insuring a used car is also cheaper, even if you finance it in full or part.
Warranty On New cars
New cars start with bumper-to-bumper warranties at 36,000 miles for thirty-six months to 60,000 miles or five years. These warranties cover all reasonable manufacturer defects and the power train.
You can get extended warranties for an additional price. If you get the right company, it’s well worth it. It’s also a plus when you go to sell the car.
If you own a new car, you can expect to pay less in maintenance and repairs than a used car.
The price of a new car will be higher than a used car.
Warranty on used Cars
You are buying a used car, but that doesn’t mean a warranty doesn’t exist. Ask the seller if there’s a manufacturer or third-party warranty on the vehicle.
It never hurts to ask.
Sometimes, you can buy an extended warranty on your just-purchased used car if there isn’t one already.
The price of a used car will be less than that of a new car, but you should expect to spend more for maintenance and repairs.
You can reduce the maintenance cost if you use a good used car checklist or hire a mechanic to do a pre-buy inspection of the vehicle. Either way you will be saving yourself trouble and money in the future.
Financing For New Car
Securing a loan for a new car tends to be easier than a loan for a used car. This is true in part because it’s easier to determine the value of the new car vs. the used car.
Other considerations are your credit score and credit history, and employment history.
Financing For Used Car
More used cars are financed in America, even though financing for used cars is harder.
Most people buy a used car, and the determining factor are the monthly payments.
Inspection Of New Cars
Usually, new cars don’t require an inspection because they are new, and you expect the car to work correctly. If it doesn’t, it’s covered under a warranty or a factory recall.
Inspection Of A Used Car
Used cars require an inspection before buying for two reasons. The first reason is to determine the mechanical integrity of the car.
The second reason is to inspect the paperwork and ensure it’s correct.
- Always deal with the original title, not a copy
- Ensure all the information is correct
- Run the VIN through carfax to ensure there are no negative comments
- Verify the VIN on the title of the vehicle
- Always pay with a cashier’s check
- Never pay with cash
Insurance For A New Car
Not only are you paying new car prices even though your car is now considered a used car, but you also have the new car insurance premiums.
The lender can require certain types of insurance on your car. Most require you to have full coverage until the car is paid off. This is so they will be paid in the event of a loss.
Because they are named on the lien as a loan, you get what’s left over. In some cases, it could leave you owing.
Insurance For A Used Car
If you finance a used car, the insurance requirements will be much the same as if you financed a new car. You need full coverage to ensure the lender gets him their money back.
The disadvantage to having full coverage is the expenses, and if you are in an accident, you may still owe more money after the insurance has been paid.
If you are in an accident with inadequate insurance, you could lose your car, receive no insurance, and still owe money for the car.
What Is Better, Buy A New Car Or A Used Car
We are all different. We see debt differently. We see new differently. Some people see debt as horrible and avoid it at all costs. Others see debt as a necessary evil.
Some want new, and others prefer used. So who is right and who is wrong?
It’s up to you, your values, and what you can live with. Let me discuss the advantages and disadvantages of buying a new car and a used car.
Advantages Of Buying A New Car
We assume the car is in good working condition because it is new. And because we bought it from the dealer. We expect the paperwork to be correct, and it is because the dealership doesn’t want to deal with making corrections or a lawsuit. We can get financing right there in the office.
Disadvantages Of Buying A New Car
The car depreciates more than if you bought a used one. Because it’s new, we will have a higher monthly payment than if you bought a used one. It will probably cost more to insure. Your car payments can last for years.
Advantages Of Buying A Used Car
The car has already depreciated; you’ll pay less for the car and insurance because it’s used. Insurance will be less.
Disadvantages Of Buying A Used Car
When you buy a used car, you must examine the car and paperwork closely and look for reasons not to buy that car.
Conclusion
There’s some debate as to which is better. Are used cars better than new cars? It’s a matter of opinion. Do you prefer to be debt free? Do you prefer new to old?