Should you Purchase a New Vehicle or a Used one?
There is a lot to think about when the time comes to purchase a vehicle. You have to consider make, model, color and other factors before you make your final decision. Once you have a good idea of the kind of car that is right for you, though, you also have to decide whether you should buy new or used. This is not a factor to take lightly, as choosing the right option may wind up saving you quite a bit of money.
To help you make up your mind, we have put together a bit of information to help you out. Let’s take a look at an example that should make it easier to make the right car purchasing decision…
In this example we will look at two different cars – one brand new car and a used version of the same model. We’ll compare the different expenses that might pop up with each one over the course of the next five years. Before we get to those costs, though, let’s begin with the initial purchase price.
Let’s assume that the new card has a sticker price of about $19,000. The used car – one that is the same make and model, but about five years older – is for sale by the owner for $10,000. Remember, that a new car comes with a warranty to cover some of your initial maintenance/repair costs. Older cars depreciate a bit over the years. In other words, once the warranty is up and the brand new car is about five years old, it too will probably be worth only about $10,000 – give or take – and that is if you took good care of it over those years. If another five years were to go by, the same vehicle might only be worth $5,000 or even less. Automobile depreciation just keeps on keeping on, and cars all lose some of their value over time.
If you are one of those people who plan on driving their next car until it is almost literally falling apart, you probably won’t be as concerned with depreciation as someone who plans on trading it in after a few years or selling it down the road. A new car is likely to experience a faster depreciation rate than a used vehicle, so you can count on the new car losing more value than any used vehicle that you might purchase.
Financing costs are important to consider too. There are some people who say that you cannot finance a car that you purchase from an individual. This is not true. You can get a loan from your bank or other lending institution to pay for a more modestly priced used vehicle. The interest rates for loans on used cars are typically a little bit higher than they are for new cars. You might get lucky enough to find a used car loan with an APR that is 4 percent or more, while a new car loan might only have an APR of about 3.5 percent, if you have decent credit. It’s best to use one of the many online loan calculators to figure out exactly how much interest you will pay over the life of your car loan.
New vehicles are typically more fuel efficient than cars that were made even just a few years ago. With gasoline being pretty expensive these days, this is an important consideration. If you don’t plan on putting a ton of miles on your car, you may be able to get by on an older vehicle. But if you are trying to save as much money as you can on fuel costs, a newer car is a better bet. Maintenance and repairs on older cars are likely to be a bit more for older vehicles as well. Remember, when you buy a brand new car, you get that warrantee that helps to offset some of the most common maintenance fees.
So, should you get a new car or a previously owned car? You have to take the information that we just shared with you, along with your own financial situation into mind and choose the type of car that is best for you. Don’t forget to shop around, though, both for your car and for your loan. You can save a lot of money by doing your research and comparing the various deals available to you when the time comes to buy that new car.