What is the difference?
When it comes to buying a car, you have several decisions to make. Not only do you need to choose a make and model, but you also have to decide whether you want to buy a new or used car. A new car may have a better warranty and the latest technology, but it is likely to be more expensive than a used car and will depreciate faster.
The difference between buying a new car and a used car
New cars usually come with a warranty. The warranty should cover most major issues and repairs that arise in the early years of ownership. However, most new cars won’t require many repairs in the first few years, so you can primarily focus on maintenance.
In comparison, used cars may not be as reliable as new cars due to their age. You may need to perform more repairs on a used car, and these repairs are unlikely to be covered by a warranty as they would be in a new car.
However, you have the option of buying a certified pre-owned car. A certified pre-owned car has been inspected and re-sold by the manufacturer and may even come with a warranty.
As technology improves, cars have become more reliable, and many models don’t need repairs until they have exceeded 100,000 miles. By that time, the car may be close to 10 years old. This means you could buy a three-year-old used car and sell it after five years without having to perform any major repairs on it. You might even be able to sell it for a price very close to what you paid when you bought it.
Note: If you buy a used car, you may want to set aside a little money each month to cover any repairs that arise.
You can also review consumer reports and other unbiased reviews to choose a model that has proven to be reliable.
Price
New cars generally cost more than used cars. To make the purchase more appealing, the seller may offer financing for the new car at a lower interest rate, which reduces the amount of interest you pay over the loan period. Some sellers may even offer no-interest loans for new cars.
While you won’t find no-interest loans for used cars, you can still find good financing options through your local bank or credit union.
Note: Your options may be determined by whether you qualify for a loan or if you’ll need to pay in cash. It may be easier to save cash to buy a used car since it costs less.
Insurance
Your insurance rates may be lower on a used car compared to a new car. One reason is that it doesn’t cost as much to replace an older model compared to a brand-new one.
If you are in your early twenties and are paying high insurance premiums due to your age, you might be able to save money by buying and insuring a used car instead of a new one.
Technology
New cars will have the latest technology, which means you may find cars with better fuel efficiency and lower emissions. There are more hybrid options available too, which can reduce the amount you spend on transportation monthly. Additionally, improved technology can make it easier to connect your smartphone, listen to music, or find your way using GPS.
Depreciation
It is important to realize that buying a car is not an investment. Cars are assets that depreciate in value over time. When you buy a new car, it loses value the moment you drive it off the lot.
Advantage
Buying a used car means you allow someone else – the previous owner – to absorb much of the depreciation on the car. By purchasing a used car and maintaining it well, you may be able to recover a lot of your costs when it comes time to sell the car.
Which is right for you?
If you are more concerned about the latest technology than the price, a new car may be the right choice for you. If you prefer to drive a car that is still under warranty, then a new car makes more sense as well. The only exception is if you opt for a certified pre-owned vehicle that comes with a warranty.
If you prioritize a lower price and good value, buying a used car might be the best option.
Regardless of your decision, you should either pay for the car in cash or ensure you can afford the payments if you finance the purchase. A good rule is to be able to pay off the full value of the car within three years. If you can’t handle payments this quickly, you likely can’t afford the car.
Conclusion
Do your necessary research and ensure that the model you are considering has good reviews and is considered reliable. If you don’t know much or anything about cars, you should ask a trusted mechanic to inspect the car for you, especially if it is used.
Make sure you are looking for the best loan if you are borrowing money to buy your car, and don’t be afraid to negotiate the best possible price for your vehicle.
Frequently Asked Questions (FAQs)
Is a 10-year-old used car too old to buy?
It depends on the make and model of the car, along with other factors such as mileage. If you can afford it, try to find a car that is at least two years old. Cars depreciate by a third of what they cost new after just 18 months. Buying cars that are around five years old can be a cost-effective option as they are usually still in good condition, may have already experienced significant depreciation, and should have less than 100,000 miles.
What should the mileage be for a used car?
The mileage for a used car should be around 12,000 miles per year and should not exceed 15,000 miles per year.
How long does the warranty on a new car last?
Warranties for new cars are typically available for three years or 36,000 miles. The warranty on the engine is usually for five years or 60,000 miles.
Source: https://www.thebalancemoney.com/buying-a-new-car-or-used-car-2385961
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