When you’re looking for a vehicle, should you get new or used? Both have strengths and weaknesses that should be considered before you make up your mind. We’ve gathered the pros and cons for buying both new cars and vehicles that are pre-owned or “new to you.”
For comparable models, a used vehicle will, of course, be cheaper than a new one, but that’s not necessarily the whole story. You may be tempted to bypass mainstream models to get a premium vehicle that you can’t afford new, but be sure your budget can handle its higher repair and insurance costs. At the other end of the scale, a brand-new, entry-level model might cost the same or even less than a higher-end used vehicle, and it’ll have a warranty.
If you’re shopping used, a certified pre-owned (CPO) vehicle from a dealer likely will cost more than a regular used car, but might be worth it to you for the extra peace of mind. These come with a factory-backed warranty, and because the automaker would prefer you didn’t have to collect on it, the vehicle will have low mileage, and will have undergone inspection and any necessary reconditioning to help prevent potential problems.
No question here: If you buy new, you’re the one eating that initial depreciation, and we all know the value drops as soon as you start the engine and drive off the lot to take it home. Even so, the big picture can be a bit more complicated. It’s common for a premium model to continue to depreciate at a faster rate than a mainstream model, and if it’s used but still relatively new, that loss is on your books. In the pre-owned market, a higher-end model from a mainstream automaker may ultimately be a better deal than a vehicle wearing a higher-class nameplate.
New or used, if you’re borrowing the money to buy it, you need to do your homework. You could save a bundle on interest if you make the right choice. With a new vehicle, you’ll be offered financing through the dealership. If incentives are available, they could include low interest on the loan. That’s likely better than what your bank will give you, and could bring the total cost of a new car much closer to that of a used one.
Check dealer financing over at the pre-owned lot, too, to see if you can get a better rate than through your banker. That might lessen or eliminate the gap between a newer model on the lot, versus an older one you’re looking at buying privately. No matter what you’re buying, we recommend talking to your bank about loan pre-approval before you do anything. That’ll give you your interest rate and payments, so you can compare it to what a dealer offers you and use it as a bargaining chip.
The Choice and Convenience
The nod obviously goes to a new vehicle here, because you can order precisely the trim and options you want; while on a used car, the first owner had that opportunity. If you’re buying a used vehicle privately, you’ll have to first find the one you want, work around the seller’s schedule to see and test drive it, and possibly set up an appointment with your mechanic to give it a once-over. If the price difference is close, you might decide your time is worth as much, or more, than the extra you’ll pay for the new model.
When you’re considering a vehicle, talk to your insurance company to get some idea of what it’s going to cost to cover it. An almost-new premium vehicle could potentially end up costing more than a brand-new mainstream model.
Ask about gap insurance, which covers the difference between what you owe and what the vehicle’s worth if it’s written off in a crash. That gap can be pretty wide if you’ve elected for a long financing period and are making minimal payments against the loan’s principal. It’s most commonly offered for new cars, but may be available on a used one if it’s new enough, or is a pricier premium model.
While much depends on the model you’re considering, new cars overall will have more up-to-date technology than used ones. If you must have the latest in connectivity or driver-assist functions, then you’ll have to go for new, or at least a used one from a recent model year. If that isn’t a must-have, or if you prefer a vehicle with simpler controls, you can save some money by opting for a vehicle made before the automaker ramped up the tech inside.
A new vehicle has the edge here, with repairs covered under warranty, some for several years. Depending on the vehicle and the manufacturer, some may also include a period of free scheduled oil changes. If a used vehicle is new enough, it might have some of that factory coverage still on it, but for the most part, you’re usually out-of-pocket for repairs on used vehicles.
Some people may feel it’s worth the extra money to get the warranty for a new or newer vehicle, and if so, go for it. You might be offered third-party warranty on a used vehicle, but we don’t recommend it, because these often come with tight restrictions and exacting maintenance schedules to keep them valid. You’re better off socking away the money you’d have paid for it, and using that for any repairs needed in future.