Having a money tree would make car shopping easier. But alas, that’s a pipe dream because every penny is hard-earned. With a limited budget, “How much car can I afford?” is a legitimate question to ponder. This determines whether you buy new vs. used cars. Remember that next to a house, a car is a big-ticket item that could impact your budget significantly.
Buying a car is a huge financial decision. You may keep your car for at least five years, making it a long-term commitment. Thus, assessing if you’re getting value for money in your chosen wheels is imperative. Of course, you’ll also want a car you’ll love and enjoy since you’ll be spending a lot of time in it on the road. Should you get new or used? Your unique life situation will determine the best outcomes. Take a closer look at the benefits and drawbacks of new and old vehicles so you can make the best choice.
Buying New or Used
When you shop for a car, you’re spoiled for choice because there are many new cars to choose from in dealerships. Similarly, you will also find many options in the secondhand market. Whether you look into getting new vs. used cars, it is a big purchase. So, before you take home your chosen car, evaluating what you need and can afford is vital.
If your financial status allows you to buy a new vehicle with cash or a super short loan term with minimal interest, this option should be worth it. But for most people with a meager income, a used car is the only option since most of them are cheaper than buying a new car.
Notably, some financially savvy individuals prefer a used car around three years old. That’s because experts say that a new car loses 20% of its value the moment you drive it off the dealership lot. Even if they have the funds, they don’t want to face that kind of depreciation. If you’re on the fence and don’t know what to select, it would help to take a closer look at the pros and cons of new vs. used cars.
Splurging on a New Car
Given that a new car depreciates the moment you drive it off the lot, buying a new car should only be done by people who can truly afford it. Those who have the funds enjoy purchasing their dream car. Nothing beats knowing you are the first owner, driving a fresh set of wheels. On top of that, buying new has the following benefits:
- Warranty: Factory warranty coverage is the primary advantage of getting a new car. This means your car is covered for performance or mechanical issues. This usually lasts for five years or 60,000 miles, whichever comes first. A new car owner doesn’t have to worry about breakdowns.
- New tech: When you buy a new car, you can take advantage of new tech designed to make vehicles safer and comfier. An old car means you miss out on these features.
- Fuel efficiency: You could get better gas mileage with a new vehicle. Because newer vehicles enjoy updated tech, which usually offers better fuel efficiency with the most miles per gallon.
- Longevity: A newer vehicle will last longer than an old one. After all, you’re getting it fresh with no miles on the odometer. There’s no wear and tear to worry about, so it could last longer than a car with many miles.
- Financing options: You have better financing when you buy a new vehicle. Sometimes, you even get a lot of incentives like zero down payment or very minimal interest.
Buying an Old Vehicle
When you’re buying an old vehicle, reliability could be a primary issue to contend with. Be ready to maintain or settle any kinks that crop up. It will not be a perfect vehicle since someone has already used it. Avoid a temperamental ride by evaluating the car history and having the used car checked by a trusted mechanic. That said, there are still many perks to going with an old car:
- Lower price: If you’re looking to cut costs, a used car is cheaper. If you buy a two- or three-year-old car, you can enjoy an almost new vehicle for way less than the price of a brand new one.
- Slower depreciation: Unlike new cars that depreciate immediately, an older car has a slower depreciation rate. This means you could sell the car eventually and recoup a big chunk of what you spent on it. In contrast, new cars drop rapidly in price, so you may end up owing more on your loan than the vehicle’s value.
- Lower insurance: Older cars enjoy cheaper insurance rates because they’re cheaper than new ones. Hence, parts are more affordable and cheaper to replace if totaled.
- Low registration fees: You can save money on registration fees if your state calculates the cost based on the vehicle age.
A car, whether used or new, is a substantial purchase that impacts your cash flow. Whether you get a new or new-to-you vehicle, you must research and compare your options to determine the best choice. So when going between new vs. used cars, what’s important is to buy a car that fits your budget.