đđ€ Car Buying Basics: New vs. Used and the Current Auto Market
Having a car is extremely important in American society unless you live in a big city where everything you need is within walking distance. Many American households have more than one car, which can mean several car loans and hefty monthly payments. Buying a car is one of those things that nearly all of us have to do at least a couple of times in our lives. In this article, we will discuss buying a new or used car and general considerations for car buying in todayâs auto market.
General Pros and Cons of a New Car
Lots of people are excited at the thought of buying a brand-new car. Theyâve got a shiny, fresh coat of paint, theyâre up to date with all of the latest technology, and of course⊠theyâre new, so whatâs not to love? Aside from all of the cosmetic and superficial perks, here are some other general positives about buying new:
Reliability: With a brand-new car, you can usually rest assured that your ride will be reliable for quite some time. While cars do have recalls, and youâll always have to be on top of routine maintenance, there generally shouldnât be any major issues with a brand-new car for the first couple of years. Additionally, new cars usually come with free roadside assistance should you run into trouble. Newer cars are also usually protected under lemon laws, whereas older cars may not be. This means if you end up with a defective or poor-quality vehicle (i.e., a âlemonâ), you could be protected under the consumer lemon law and be able to get the defect fixed or get the car replaced.
Technology: A big appeal of brand new cars is that theyâre equipped with many fancy features, and nowadays they usually have eco-friendly options too. If this concerns you, buying new is a great option.
Financing: With a good credit score, you can usually score a low-interest rate if you have to finance your new car. One general rule is to always shop around for financing. A dealership might recommend their in-house lender, which benefits the dealership and makes it an easy process for you, but that doesnât necessarily mean itâs the best choice out there. Always do your due diligence!
On the flip side, here are some disadvantages of buying brand new:
Expensive: Itâs no secret that buying brand new is usually the more expensive route. You will likely have to finance your new car to some extent, which adds to your consumer debt. When you finance your new vehicle, interest will be part of that payment, which means that over time, youâll pay way more than you would if you went with a used car. Insurance rates are usually higher on new cars, too, especially if youâre financing it. More on that later on in the article.
Depreciation: Have you ever heard the phrase that your car depreciates (loses value) as soon as you drive it off the lot? Well, thatâs no exaggeration. Generally, cars depreciate rapidly, and new ones are no exception. On average, new cars depreciate roughly 10% instantly, meaning that itâs worth at least 10% less right out of the gate. This might not mean too much to you if you plan on running the car into the ground⊠but if you end up needing to resell it in the future, youâll likely be doing so at a massive loss.
Check out this graphic showing how quickly a new car loses value. Based on a purchase price of nearly $35,000, the car has depreciated in value by over 60% by the 5th year of having it, making the same car worth just under $13,000. Now, this is a rough estimate, and the depreciation rate varies greatly on the car, but it is definitely something to consider!
Source: Trusted Choice
General Pros and Cons of a Used (Pre-Owned) Car
While buying a used car doesnât sound as luxurious as a new car, there are some advantages that could make it worthwhile, depending on your situation. You can buy a used car at a lot, or you can buy directly from the owner.
Here are some pros of buying used over new:
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