The Car Conundrum: New vs Used?

By on April 29, 2013

New vs. Used CarAs much as we love our cars, they don’t last forever. Whether you’re a 16 year old or 61 year old driver, you’re likely to face this dilemma sooner or later: should you buy a new car or a used car?

There are, of course, certain advantages and disadvantages to each option. Consumer Reports lists a multitude of reasons why buyers should prefer used over new cars, but not so fast, says a recent article on ‘gently-used’ cars by TIME Magazine. Primarily due to the economic recession, people are hanging onto their cars longer than they have in the past, and the demand for used cars has generally outpaced new car sales in the past few years.

Confounded by the car conundrum? The following guide can drive you in the right direction.

Initial Cost

When it comes to the initial cost of purchasing a car, newer cars tend to eat up a bigger chunk of your budget. But this is a given, since you’re purchasing a newer model that likely has more amenities (more on those below). In addition to purchase price, the DMV points out that there are also new car fees, titling, registration, and taxes to pay.

However, a May 2012 article from USA Today says used car prices will stay relatively high for a few more years, due to the recent spike in demand (CNW Marketing Research estimated that there were 3.0 used cars sold for every new car sold in the U.S. in 2011). Still, the fact remains that used cars are generally cheaper than similar cars that are brand new.

Winner: Used Cars

Amenities/Customizability

Looking to buy a car with all the bells and whistles, such as GPS, advanced safety features, seat warmers, sunroof, etc.? And what about specific colors (interior and exterior) or interior design choices such as leather or cloth seating? These may seem insignificant, but aesthetic appeal is yet another factor to consider when deciding between a used or new car purchase. Total customization is usually reserved for new car buyers, so unless you don’t have a preference for certain car amenities or you don’t care about loading up your car with the latest and greatest technology, a new car is your best bet here.

Winner: New Cars

Repairs/Maintenance

Used cars may get extended warranties (if you’re lucky or pay more), but most new cars come with great warranties and fewer maintenance problems within their first few years on the road. Meanwhile, used cars tend to accumulate more and more costly repairs as they rack up the miles and years, and you never know just how well the previous owner(s) maintained the car, so the risk is greater when you purchase a used car.

Winner: New Cars

Depreciation

One of the biggest drawbacks to buying a new car is the depreciation hit you’re going to take. The National Motorists Association estimates that your new car will lose 10-20% of its value within the first year of ownership. Worse yet, it loses approximately 50% of its value within the first five years. Used cars, on the other hand, have slower rates of depreciation because they’ve already been “broken in” and the original owner got hit with the depreciative factor instead.

Winner: Used Cars

Safety

Used cars are far more reliable than they once were, but does that make them as safe as new cars? Not quite, since they’re missing a few key components that vastly improve the overall safety of the vehicle. The United Services Automobile Association lists ten car safety features that could save your life. Few used cars have these features already installed, but they could be added on to many new cars available on today’s market.

Winner: New Cars

Car Insurance

The differences can be miniscule when comparing insurance for a new car to insurance for a used car, but it’s still worth noting that used cars tend to cost less to insure than new cars. Collision insurance is a predominant factor when determining cost of car insurance, as it’s mostly likely only needed with newer cars (for older cars, the cost to repair often exceeds the car’s total value). There are several factors in determining the cost of car insurance (make and model of the car, driver’s age and reliability, etc.), but when it’s all said and done, used cars have lower rates than new cars.

Winner: Used Cars

The final verdict: it’s up to you. For some people, the financial aspects of car buying will immediately prompt them to choose used over new. For others, knowing the car’s history and having a warranty in hand will outweigh the cost-related downsides to new car ownership. You need to take the wheel on this decision, but after examining the pros and cons listed above, you’ll be ready to greenlight your next car purchase.

Kelly Kehoe

About Kelly Kehoe

Kelly Kehoe is a full time college student and personal finance writer. In her free time she competes in speech and debate and writes fiction. Follow Kelly @kellypkehoe or on Google+.

4 Comments

  1. Skint in the City

    April 30, 2013 at 3:41 pm

    Used used used – all the way. Yes, they might cost a little more in maintenance but will still work out way cheaper than buying new in my experience. I’ve always gone for the classic frugal way of buying cars – buy a decent model with lowish mileage, for cash, then run it into the ground. This takes me 10 years usually and the car works hard for its money for that full decade. Annual cost therefore? Small beans!

  2. Greg@ClubThrifty

    May 2, 2013 at 11:55 am

    Absolutely, 100% used. I will never buy a new car again for a number of reasons – depreciation being the top one. Not only does the car depreciate the minute you drive it off the lot, it also depreciates over its lifespan. I’d rather invest that much money into something that is going to grow in value.

  3. Alex C

    May 2, 2013 at 12:54 pm

    Good post. I like the comparison that you did and explored whihc one was best if you value certain things more. For me, my major value is cost because I do not drive too much so I buy used cars. But safety might be important for families and such so it make sense to buy new cars.

  4. martin

    May 13, 2013 at 7:37 am

    I want to buy one more car and the above factors helped me in taking the decision. There is good comparison between new and old car. When it comes to cost of the car, you should also include repairing/ buying new parts. It is also a cost factor. Buying new parts is expensive and there are cases when your car needs repairing rather than buying a new part. Repairing is a good way to save money and keep your car like a new one.

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