Is It Better to Buy a New Car or a Used Car?
you go new or used, buying and operating a car is a
huge cost. It's well worth your time to seriously balance
all the costs and benefits against each other.
a car lover. I grew up in Manhattan, a city where you
don't even need to own a car, and I've owned American
hot rods, German-engineered beauties and everything
in between. In terms of new versus used, I've been all
over the map there, too. But let me put my aficionado's
cap down and address the question of whether it's better
to buy your cars new or used.
to the Bureau of Labor Statistics, the average U.S.
household spent 18.1 percent of its income on vehicle
costs, second only to housing. Given that nearly one
out of every five bucks that you earn will go into your
car, you're right to think long and hard about whether
it's best to go with new or used.
are a myriad of issues to consider about your purchase.
My checklist provides the most important.
Armchair Millionaire's Checklist of New versus Used Cars
This is a big issue for many car buyers. It's simple:
The moment you drive a new car off the lot, it immediately
loses a chunk of its value because it is no longer "new."
Cars generally lose 25 percent or even more of their
value each year (although some models hold their value
better than others). When you buy used, you let someone
else take that depreciation hit.
Obviously, when you buy new, you pay more, and not just
for the initial purchase, but also in higher insurance
premiums, registration and licensing fees. On the other
hand, used car owners have to consider the higher costs
of keeping an older car running (such as replacing the
brakes, muffler and battery), as well as the possibility
of needing major repairs (ie. transmission replacement).
The advantage is clearly in the new car camp here. Basic
warranties are standard with new cars these days, and
you can buy extended warranties for an additional cost.
While some dealers may offer a limited warranty on used
cars, they are typically much weaker than what you would
get from a new car. And if you buy used from a private
individual, it's highly unlikely that you'd receive
any kind of warranty at all.
Many new car buyers tout not having to worry about a
major breakdown as a reason for going new, but the truth
is that some used models may actually be far more reliable
than some new models. One this if for certain, though,
and that's that the new car buyer knows exactly how
the car has been treated.
There are devotees of Consumer Reports out there who
would never dream of buying a car without knowing that
model's track record for repairs and defects. When you
buy a new model, however, you can only hope that it
will prove to be reliable.
The "shiny chrome" factor is a big one for
many new car buyers — nothing else can quite replace
the feeling of knowing you're the original owner of
a new car in mint condition. Used car buyers have to
settle for freshly detailed.
A car will always break your
heart. Whether it's the first scratch on your new sports
car or the day your old coupe won't start, there's trade-offs
on new and used. My advice is to content yourself with
knowing that some day you'll buy your dream car. In
the meantime, practice financial prudence by never spending
more than you can afford, and remember to save for a
rainy day and for your future.