Choose Between Buying Used Car and a New Car: Questions to Ask

Should You Buy a Used Car or a New Car? Used Car Buying Tips

Should you buy a used car or a new car? This might be a question if you are considering purchasing a new vehicle. This is the first question that strikes your mind before picking the new model of the vehicle or for which brand you must go. Indeed, a brand-new car gives you a better warranty and the latest technology, but that comes with a higher price than a used car. 

Key Highlights

  • Buying a used car can be a good decision as the depreciation process happens more slowly than that of a new car.

  • Before buying a used car, it is good to have it checked by a verified mechanic to avoid further repairs or maintenance.

  • Used cars are pretty cheap in price and insurance.

Should You Buy a Used Car?

If you are considering buying a used car, you can save a lot of money in many ways. The initial price of a used car is lower, but your savings don't end there. You spend less money on various things like freeze insurance and the car's depreciated value than a brand-new car. 

Let's understand it more simply. According to a study conducted by Experian, the average monthly payment in the third quarter of 2023 for a used car or vehicle is $533, while for a new car, a driver spends around $726; in a month, used car drivers save and even thousands if we convert it in a year. Getting the same car model from a different year at a lower price is why people choose a used car over a new one. However, there are more obvious reasons to consider when buying a used car. There are several other advantages, too.

Used cars can help you save a ton of money on your initial purchase. However, you must also consider other costs like maintenance and repair over the life of its ownership.

Pros and Cons of Buying a Used Car

While a new car may have lower repair costs initially, a used car can save money on loan interest if purchased in cash. Though new cars require fewer repairs for the first few years, once major maintenance is needed, you may want to trade it in. In contrast, used cars often have higher repair costs but avoid interest payments if bought outright rather than financed. Considering a used car can give you numerous advantages and disadvantages.

Pros of Buying a Used Car

1- Less Depreciation

Depreciation is a part of any vehicle you purchase. But a used car costs much less than a new one. New car depreciates about 20% if they are driven a lot, and most car lose their 10% value after the first year. It means a new car depreciates about 30% in the first year of its ownership. In the case of used vehicles, the depreciation process happens at a slower rate. This is because it has already undergone significant depreciation. Lower depreciation means you have a stable loan-to-value ratio.

2- Low-Cost Insurance

The cost of insurance may vary on your age, driving history, credit score, mileage, and location. In the case of used vehicles, insurance is lower than that of new cars. When calculating the insurance rate, the insurance company often looks at the car's value. And as a used car has less value than a brand-new car, the insurance cost is usually lower.

3- Fewer Dealership Fees

Insurance is the force from location to location; the fees also change according to the area. However, when buying a used car, the dealership fees are often lower than for a new car. This difference is due to a sales tax you may have to pay.

Cons of Buying a Used Car

Cons of buying a used car

1- Settle on Less

When you want to buy a used car, finding one that fits your preferences is challenging. You might have a specific style, color, or additional feature in your mind before buying a car. However, due to high demand and a limited number of used models, you might need to be flexible on your expectations and make compromises on your ideal car.

2- Car History

You must research the maintenance history of a used car to ensure its reliability and good performance. You must check records of regular maintenance repairs and any incident a car may have been involved in. Taking the vehicle to a trusted mechanic for a specific inspection is good, and this process costs around $100.

3- Increased Maintenance Cost

If you think a car was in good condition at the time of purchase, it is also essential to understand its age, which typically requires more maintenance and repairs. Used cars frequently go through wear, and components age and depreciate. You ultimately are putting more money on used cars in the long run.

Is It Financially Better to Buy a New or Used Car?

When you buy a used car, you save more money on monthly payment insurance and other fees, and another benefit is it depreciates at a slower rate. If you look at the primary benefit of buying a used car, it is less expensive than a new one. You get the exact model you want, which is just a few years old and can help you save a lot of money. Another benefit of buying a used car is that many pre-owned cars carry lower insurance rates, title fees, and sales tax; therefore, you save a lot. On the other hand, used car depreciation is much slower, to be precise. Rather than losing 20% of its value in the first year of ownership, a 3-year-old car could lose only 10%. So if you think you are buying a used car, you must because it is financially better.

Final words

When buying a car, the obvious question that strikes our mind is whether to buy a used car or a brand-new one. Various factors influence the decision, like depreciation, budget, and other features that may not be available in a used car. If you find a good used car at a great value that fully adheres to your expectations, you go and hit the road. 

FAQs

Q1. How much mileage is good on a used car? 

A used car should have around 12000 miles per year on it and no more than 15000 miles per year. However, you must also understand that mileage can be misleading. You must consider a different vehicle if a car has more than 12000 miles per year.

Q2. Is a 10-year-old car too old?

A decade-old car may not be reliable; however, the average car on the US road is now 12.5 years old, and if you look at its depreciating value, a car doesn't stop depreciating until it hits its 10-year mark. So, if you are considering buying a 10-year-old car, you must not pay more than the fair market value of it.

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22 Dec, 2023

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