Should You Buy a New or Used Car?

Factors to consider in your decision.

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That new-car smell and the warranty that comes with it are enticing, but would you save money over time buying a used car instead? And is cost the only factor to consider, or are safety and technology just as important to you?

Reasons to buy a new set of wheels or a well-seasoned ride aren’t the same for everyone. Here are some things to think about as you assess the pros and cons of buying a new or used car.

Cost

New cars are clearly more expensive, including the sticker price, tax bill and insurance premium. Depreciation is a hidden cost—it’s the amount a car loses in value over time. A new car depreciates immediately after you buy it, with a steep drop in value during the first few years. That significantly lowers its resale value. A used car has already lost its early depreciation value—which may make it a better long-term investment.

Depreciation isn’t the only cost. Financing costs are typically less on a new car than on a used one. Dealers offer lower interest rates on new-car loans, and vehicle manufacturers provide additional incentives. And it should cost much less to repair and maintain a new vehicle (see below for warranty considerations).

Bottom line: Used car cost savings can be compelling, but watch for repair bills. If you try to save big on an older used vehicle, you might soon be spending thousands of dollars to keep it roadworthy.

Reliability

New wins here: You’ll generally have fewer repair bills and greater peace of mind with a new car. If you buy used, you don’t know how the previous owner treated the car, so it’s wise to protect yourself. Have a mechanical inspection done and get a report showing the car’s history of accidents and damage.

New vehicles typically come with longer warranties, but you can buy a warranty for your used vehicle as well. Or consider a third approach: A certified preowned vehicle is a used vehicle that meets a set of requirements, often determined by the manufacturer. These vehicles generally include an extended limited warranty.

Bottom line: A new car should have the edge for reliability, and it comes with the peace of mind of the best warranty. But with research, you can reduce the risks of a used vehicle.

Technology

New cars come with the latest tech. That means better safety features, better gas mileage and perhaps fewer emissions. However, technology on some used cars that are only a few years old is fairly comparable with what can be found on a new-car lot. And some used cars can be updated to add newer tech capabilities, such as Bluetooth.

Bottom line: Consider how important the latest technology is to you. If safety is your top priority, for example, a new car may be worth the extra cost.

Speak with a local insurance agent through AAA about the vehicles you’re considering.

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Intangibles

When considering a new or used car, don’t forget the intangibles that may not be at the top of your must-have list. Buying new means you can order your preferred color and options. For many, a new car’s pristine condition (and that scent!) is worth the cost. Buying used may be the only way, though, to get what you want—say, if you yearn for a car type or feature that isn’t available in the latest model (perhaps a certain sports car with manual transmission that has been phased out). Shopping for a teen with a new license? A used car might be the most economical choice.

Bottom line: Consider your priorities carefully. Make a list of all your intangibles and how they compare when you shop for a new or used car.

In the end, you’ll want to consider the trade-offs between a new or used car. Assess your own financial situation, priorities and the many intangibles. Do your homework and sleep on the decision before signing and driving away.

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