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Should You Buy A
New Car Or A Used Car?
By
MySpendingPlan.com Editorial Staff
Once you have
decided that you want to be a car owner, you have to then decide whether
you want to buy a brand new car or a used car. It does not always make
financial sense to buy a used car even though used car prices are much
lower than new car prices. The decision is not a clear cut one and
neither is there a clear winner. However, let’s go through the pros and
cons of new cars and used cars, and you will be able to decide which is
the best choice for you.
Buying New
Car
Pros:
- You get to
drive a brand new car that is much more comfortable than a used car
- You can
enjoy the maximum benefit of the new car warranty
- Decent
equity in the car once the loan has been paid off
- The
expenses for maintenance and repair are very low on a new car
- You get to
enjoy the excitement that comes with owning a new car
- That “new
car smell”!
Cons:
- Higher
monthly payments and upfront costs.
- Higher car
insurance premiums.
- Greater
depreciation of the value of the car right off of the lot.
Buying Used
Car
Pros:
- Much lower
monthly payments (even though interest rate is higher for used car
loans, the monthly payment is lower since used car prices are much
lesser than new car prices).
- Lower auto
insurance premiums.
- Lower rate
of depreciation.
- Low
registration costs.
Cons:
- Much higher
repair and maintenance costs as opposed to new cars.
- Cannot
enjoy the auto warranty and will have to pay for all repairs
out-of-pocket (you can buy “preowned” certified cars from auto
dealers, but you will pay more for these than if you buy from a
private seller or auction – that’s the tradeoff).
- Lesser
equity in the car after loan is paid off.
- If you’re
sold a lemon, you may have to pay exorbitant costs to get the car in
working order or may have to live with the lemon.
- May not get
the satisfaction that comes with owning a new car.
- Used cars
can be tougher to drive than new cars, as you may not get as
comfortable a ride.
As you can see
above, buying new car or used car each has its own pros and cons. If
you look solely from a financial perspective, buying a used car may be
the better option as long as you know that the car is in good working
condition and has only undergone normal wear and tear. Used car is also
a good choice if you want to change your car every 2-3 years.
On the other
hand, buying a new car is a much better option if you are likely to use
a car until it literally dies on you. If having the satisfaction and
pride of owning a new car means a lot to you, and if you want the peace
of mind knowing that all major repairs and problems are covered by the
car warranty, then buying a new car is probably for you.
If you do decide
to buy a used car, here are some things that you should check:
- Check if
the car warranty is still in effect.
- Get the
used car inspected thoroughly by a qualified mechanic to ensure that
you’re not being sold a lemon.
- Check the
blue book value of the used car, which will give you an excellent
idea about the current market value of the car.
You can also
make use of the new car vs. used car calculator (usually available
online for free) to help in the decision making process.
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