Should I buy a new car or used car?

Deciding if you should buy a new car or used car depends on your budget and the kind of vehicle you’re looking for. Used cars are substantially less expensive than new, including the title, taxes, license, and registration. You can also save money on car insurance with a used car. Enter your ZIP code below and get free auto insurance quotes based on the year, make, and model of the vehicle you want to buy. Knowing how much insurance will cost can help you decide whether to buy a new car or a used car.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 29, 2020

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Making a decision about car purchases can be difficult because it requires projecting life into the future to know what will make sense financially and in other ways, over the next several years. Buying a new car has its benefits, but a used model can be a very nice complement to a thrifty budget. Each has its merits and there are some things car buyers will want to consider before making a final decision.

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Buying a New Car

One of the big questions people have when making a new vs. used decision is whether they want the peace of mind of a new car, or rather, do they need a lower price tag, in which case they would buy a used car. Other factors come into play when deciding, such as maintenance, typical mileage driven and family needs. One of the great things about a brand new car is that it may be practically maintenance-free for several years, and comes with a warranty. It is probably a good idea to research the warranty on any new car as well as the maintenance record, to make sure the model you want does not have a reputation for being in the shop all the time, and that the manufacturer has a record of paying out on the warranty and not denying claims.

If you have very good credit, you may be able to get loan pricing for a new car that is very close to the price it would cost to buy a used model. Dealer incentives and special financing rates can provide good discounts. In addition, new cars have the most recent, energy efficient technology built in, which may end up saving a bundle at the gas station, as well as possibly keeping the air cleaner.

Consider your annual mileage. If your work commute involves long hours in traffic or you drive three kids around all day, it makes sense to buy a new car that is safe, comfortable and reliable. If the car is a utility vehicle, like a jeep that you would like to keep forever, then buying is the right choice. If you dream of the day when you will have no monthly car payments anymore, buy. Remember to factor in ongoing maintenance costs, though, since these are still essentially a car payment, just structured differently.

Buying a Used Car

Buying a used car is a good idea for many reasons. For starters, re-purposing used items as much as possible, including cars, is a great way to extend our resources on Mother Earth. Used cars are substantially less expensive than new, including the title, taxes, license and registration. One of the best things about buying a car that is one or two years old is the depreciation that someone else paid for instead of you. The minute a shiny new car leaves the dealer lot, it is “used” and the depreciation clock starts ticking.

If thinking of buying a used car, look at the depreciation for the car model you want – some cars depreciate faster than others, and possibly with good reason. The good news about depreciation, though, is that someone looking for a fully-loaded luxury car at a discount can save tens of thousands of dollars by choosing a model that is one or two years old. Some cars do not change their body style for 5 to 7 years, so a car a few years old will still look brand new. If you take clients in your car for work often and would like to have a car that presents well, buying a quality used car may be a wise investment.

Some Tips on Buying a Used Car

If thinking about buying used, educate yourself on the used car market. Buying a used car may be safer than you think, especially since many dealerships are offering certified pre-owned vehicles that have undergone rigorous inspections and have had all maintenance performed.

Regardless of whether you want to purchase a used car from a dealer or a private party, get a vehicle history report once you have a VIN# for a car you are interested in buying. This report will show how many owners the car has had, provide data for checking on any odometer rollback, and show whether the car has been in a flood, or was stolen or salvaged.

Do online comparisons for prices using eBay, classifieds and websites like to get a feel for the range of prices for the car you want, also checking them against new car prices for the same model and same options. Check the maintenance record for the car you want. A used car may not be a good idea if this model requires a lot of maintenance or is expensive to maintain. Used cars over 5 years old are generally not a good idea, since this is about the time when many of the parts start wearing out.

Car Leasing – A Happy Medium?

To loosely quote J. Paul Getty, if something appreciates in value, buy it; if it depreciates, lease. Before choosing to buy a new or used car, the decision-making process would not be complete without considering a lease for a new car. A lease cuts the monthly payment since it only covers the depreciation on the car for the few years you are driving it, instead of the whole value of the car, which may allow you to drive a brand new car for the same price as a used model that is a few years old. Determine what you can afford each month and do some online research to compare leases on a new car with the pricing for used models.

Leasing a new car rather than buying it allows most people to drive more car than they could afford if they had to buy. Leased cars, especially luxury cars such as BMW or Mercedes, come with a service contract for the life of the lease, that covers all regular maintenance, in addition to anything else that could go wrong. Driving to the dealer for scheduled maintenance, then driving away again with out even taking your wallet out is a great feeling.

Auto Leasing – Things to Consider

This is not a full analysis of the buy vs. lease debate, but a few points are worth noting if you want to consider leasing. Decide how long you want to keep your car. If you only want to keep it for a short time, leasing a new car allows you to give it back in 2 to 4 years. Also, consider the disposal aspect. Buying a car, new or used, requires you to sell it or trade it in for less money. Leasing a car, on the other hand, allows you to drive up to the dealership, hand the keys over and be done with the car.

If expecting family changes in a few years, such as children; or if you get tired of cars and like a new one every few years with a minimum of hassle, leasing is a good option. However, if you do a lot of driving for work, family or other reasons, leasing might not make sense because of mileage restrictions. Leases also have high penalties for exiting early. If circumstances might change while you are in the middle of a lease, for example you are searching for a job in a city with great public transportation like New York and will not need a car, or you want a two-seater convertible but your wife is pregnant with twins; then leasing is not a good option.

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