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Buying a Car: New or Used?

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New car or used carI hate shopping for cars. As a result, I try really hard to ensure that I get a good value for a car so that I don’t have to shop for one anytime soon. My husband and I still have the first car we bought as a married couple. We bought it nine years ago, shortly after our son was born and we got sick of trying to throw a bulky carrier in the back of a two-door vehicle (which we traded in, just so we wouldn’t have to deal with it). Since then, we have added another vehicle to our establishment.

However, as the 2001 Saturn ages, we are again turning our thoughts to car shopping. We’ll probably hold off for a little while longer, since the car has remained reliable and is decent condition, thanks to the magic of proper car maintenance. As we think more about what’s next, though, it seems apparent that we will soon have to decide between a new car and a used car.

Buying a New Car

Of course, when you buy a new car everyone points out that it depreciates as soon as you drive it off the lot. Plus, you have to pay more up front for a new car. However, the advantage of a new car is that it is new and under manufacturer’s warranty. You don’t have to worry about it breaking down as much, and you can have many things fixed under warranty. If you have a sizable down payment, you can reduce your borrowing costs. However, your auto insurance costs might be higher on a new car. However, the resale value is likely to be higher (even with the immediate depreciation), since you will have a new car, and be the only owner.

While many people recommend that you avoid getting a new car, for some people, it works well. If you are worried about breakdowns, and gas mileage, a new car can be useful in that area. And you are likely to go longer without needing to do more than have regular maintenance performed with a new car. If time is an issue, and you don’t want the car in a repair shop, it might be worth it to get a new car — especially if you have a good down payment saved up.

Buying a Used Car

On the other hand, many find that a used car is the way to go. You will pay less up front, and you may not even have to borrow. Many people can save up enough for some kind of a used car over the course of a few months. As long as the car gets you from point A to point B, a used car can be a great choice — especially if you strapped for cash. You can get a 0 down car loan on a used loan, and still have a shorter term and pay less than interest than you would with a down payment on some new cars.

If you want a used car, one way to get the best value for your money is to consider a lease return. These cars aren’t as expensive as new cars, and they cost more than many used cars, but they make a nice compromise. Lease returns have often been cared for to certain specifications, and they are new enough to be reliable. Both of our cars are lease returns, and they have worked well. We are likely to get a year-old lease return next time we decide to buy.

If you are interested in deciding what’s best for you, Bankrate.com offers a great auto calculator that can help you weigh your options.

What about you? Do you prefer to buy new or used cars? Why?

(Photo: Eleventh Earl of Mark)

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10 Responses to “Buying a Car: New or Used?”

  1. Sun says:

    I’ve had my Honda Accord for over ten years now. I’ve done the regular maintenance and also abused it driving wise. Except for maintenance costs, I’ve yet to have a major issue of any kind. I think if you buy a reputable used car, they will outlast any unreliable new car.

    I think with new cars, people look at whether they can afford the monthly payments without really thinking about their total out of the door cost when it is all said and done. With a used car, you make your one big payment and you’re done.

    I bought my Honda Accord new for $18k. After ten years, it is worth $4k today. I’d buy a $4k used one over a new one that may break down more than used this reliable one.

    • Courtney says:

      This makes no sense. Also, the odds of buying an unreliable used car are far higher than buying an unreliable new car. In the latter situation, you are protected by the warranty and lemon laws. In the former, you are plain out of luck.

  2. cubiclegeoff says:

    There has been some articles talking about the depreciation of a new car once it is driven off the lot, and they tie it to the fact that a car that is sold or returned soon after purchase will be less desirable to car buyers because it would seem that it was returned because of a defect and it isn’t “new” even if it has low miles. If you plan on keeping your car for a long time, it doesn’t matter.

    When I was looking at cars last year, I found that most decent used cars were about the same price, or only slightly less expensive than a new car that would then have the warranty. I went with a new car since it was a better deal overall. I also drive around 300+ miles a week and wanted to be sure I could depend on my car. You can find a dependable used car, but it takes a lot more time and effort (opportunity cost), and wasn’t worth it.

    • Courtney says:

      Yep – I bought a 2011 Ford Focus last year and for a little while the KBB value was slightly *higher* than our purchase price. It’s depreciated about 15% over the course of the first year, but we plan on driving it for 8-10 years.

  3. Husker Avid says:

    We drive a 1997 Mercury Villager, 273,000 miles and a 2001 Lexus 300, 131,000 miles. It would take winning a car in a lottery to get us in a new car. Part of the fun is shopping and finding the right car for us. As they say, different strokes for different folks!

  4. Steve says:

    I bought a used car in college. Since I got a “real” job I have bought new cars. I hate the effort it takes to buy a car. If I can do that even 10% less often by buying new, that is a luxury I can afford. And by buying cars that hold their value, the cost isn’t all that high.

  5. Dave says:

    I am torn on this issue. I am all for buying a used car with low milage, to avoid that initial depreciation. However, in searching for a used car, I’m finding the initial depreciation may not be as much as it once was, and the cost of used cars has gone up, relative to the original price. I wonder if it is due to the fact that the economy is in the tank and people are more reluctant to buy new and are looking to buy used, which in turn drives down new car prices and drives up used car prices (damn supply and demand!)

    • Jim says:

      A bit of that does have to do with the bad economy, people are driving their used cars longer (less supply) and more people are looking to used rather than new (more demand).

  6. Shirley says:

    We have bought a 3 year old low-mileage Blazer and a new Silverado from the same dealership and not had any problems with either one. However, our son picked them out and went over each of them with care before we bought them and they are intended for long term use.

  7. Shannon says:

    The ‘facts’ in this article seem to be just ‘what people say/think’. I agree that the first year depreciation can be a moot point if you plan on having the car more long term. Additionally, I’ve found insurance costs often are less on a new car than a used one (maybe attributable to new cars having more safety features).


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