Should You Buy A New Or Used Car?
Cars have become a staple in society. However, many people don’t have them. Traversing the world without one can be quite difficult. However, people prefer it. Not having a car can save you a lot of money with the cost of time. Furthermore, there are many economic and societal advantages to not having a car. However, most people come to a crossroads and need to decide whether they should buy a car. a common question is whether they should buy new or used. Both are good options. However, it depends on your circumstance and perspective. Therefore, we will take the time to outline the benefits and disadvantages of purchasing both new or used cars.
New Car
Having a new car can be a status symbol. For most people, especially those who don’t have much wealth, look forward to the day that they have a new car. This can be true during retirement as well. How many older people do you see with nice cars driving around in the summertime? Chances are quite a few. However, if you’re like me, you’ll just want any car that’s reliable and can get you from point A to B. Therefore, do you really need a new car?
Well, that is dependent on a list of factors. Therefore, we will weigh out the pros and cons of purchasing a new car. However, before we do that it is important to note that you should have a holistic view of your finances. Regardless of whether you’re getting a new/used car, this is most likely a large purchase and should be treated as such. Therefore, let’s get into the pros and cons of purchasing a new car.
Pros
The biggest pro that you can have when purchasing a new car is because it is reliable. It doesn’t get more reliable than brand new. Of course, there are always chances that cars can come with defects. Cars get recalled all the time. Furthermore, parts are subject to recall. However, an extremely popular case of when a car gets recalled is the Ford Pinto. Why was this car recalled? There was a problem with the fuel tank design. There were many instances where the car would get rear-ended, the fuel tank would rupture and cause deadly fires. Fortunately, those risks are no longer apparent.
The reason why they’re not apparent is that as technology grows, so does the safety of cars. Cars are safer now than ever before. There are cars that stop on their own when you get too close to another vehicle. Therefore, if you’re someone who is frantic and scared of driving, a newer car has the safety features that you would need.
Newer cars come with all the bells and whistles. However, you do have the ability to put certain features within older cars, such as remote starters. However, features like lane departure warning, steering wheel warmers, and audio control when the steering wheel is all common within newer vehicles.
Lastly, newer cars can cause you to have lower insurance costs. However, it is important to note that this isn’t the biggest factor. There are many times where you can get a newer car and pay more on insurance. Without getting too deep into it, instance quotes are dependent on a few factors. These factors are location, how common the car is, age and past driving experience.
Honda Civics are some of the most expensive cars to insure because they’re the most common. This means that they have the most insurance claims. Therefore, when I was looking for a car. The cost for instance on a 2012 Honda Civic was $100 higher than a 2012 Hyundai Elantra.
Cons
The biggest concern most people face when buying a new car is the price. New cars are expensive, especially due to inflation. If the price wasn’t bad enough, cars are a depreciating asset. This means that the longer you have them, the less they’re worth. Therefore, once you purchase that car and drive it off the lot, you’ve already lost money. This contrasts real estate where it is common to make money when you purchase a property. However, it is completely possible to purchase a car and sell it for a profit. However, this isn’t a market where new cars are welcome. Most people don’t purchase new cars with the hops of flipping them.
There is something to be said about the environmental impact of purchasing a new car. However, most (70%-80%) emissions that a car emits during its lifetime are fuel consumption. Although cars have become more fuel-efficient, you have to decide whether it’s worth creating that initial impact on the environment. Those who’re for environmentally friendly should consider this. However, I did mention that newer cars are more fuel-efficient. Therefore, driving a less fuel-efficient car more often may have a greater impact in the long run.
Lastly, newer cars can be more expensive to fix and maintain. Many new cars used synthetic oil and specific car parts that are only available after certain years. This means that some parts are scare. Therefore, parts tend to be a bit more expensive.
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Used Car
Most of us spring for a used car when looking to purchase a new vehicle. Every single car I’ve bought has been used. This is because I personally feel that the pros outweigh the cons in my situation. Furthermore, my financial circumstances would benefit more from a used car as opposed to a new one. This can be different for everyone. However, the point of this article is for you to look at your financial situation and see how much a used car will benefit you versus a new one. Therefore, lets into the pros and cons of purchasing a used car.
Pros
The biggest pro for purchasing a used car would be its price. Used cars are significantly cheaper than new ones. This is due to depreciation. However, a skill that any person looking to purchase a car should develop if finding dependable cars. This can mean knowing what to look for in terms of red flags and which models are the most reliable. Let’s use my car for example. I purchased a 2012 Hyundai Elantra in 2017 for $6,000. The car had approximately 90,000 km on it. At that point in time, the car was 5/6 years old and had a relatively low amount of kilometers. To me, this was a good trade-off. This is due to the fact that if I got a newer Elantra, it would be more reliable but over $10,000 more in price.
Another pro is that buying a used car can have a lower environmental impact. This is due to the fact that the car has already been built and is living out the rest of its tenure with you. If you were purchasing a new car, they would need to build it, effectively emitting greenhouse gases during the process. Therefore, if you find a reliable used car with incredible fuel economy, you’ll be affecting the environment less.
Used cars can be cheaper to repair than new generations. Not only are there more parts that fit the older models, but they’re cheaper.
Another positive is when purchasing a new car, you can sometimes get a lower interest rate if you were to do monthly payments. A lot of people don’t know that you do not have to go through the dealership when financing a car, this is also true with used cars. Step into a bank and inquire about a car loan. Often times the interest rate will be lower and it may be easier to get approved. However, if you’re purchasing a car, you should always shop around for a better deal.
Lastly, having a lower monthly payment and a shorter commitment period to paying off a car can leave you with more room in your budget. You can find a nicer used car and won’t have to break the bank.
Cons
I’m sure by now that you could guess all the negatives for owning a used car. One of which is that they’re less reliable. There can be malfunctions or damages that the previous driver caused. Furthermore, if you purchase the car and are not aware of these things, you’ll be responsible for those repair costs.
Similar to how newer generations may need specific parts, there are older models who’re parts are discontinued. This can be due to a design shift. Therefore, if you have an older car and that was the last year a specific part was being manufactured, finding it may deem costly years later.
If you know what car you’re looking for, the choices may be limited. This is because if it’s before a certain year, only private dealerships and sellers will have them. Furthermore, each car can have its respective problems. Finding a perfectly fine 2010 Honda Civic will be much more difficult than you expect if you’re looking for lower km and in mint condition. Chances are a car like that (or a less popular car) will be quite pricey, regardless of it being used.
Lastly, interest rates can be quite high. When I purchased my first car, my interest rate was 4.99%. I thought this was high until I heard of people getting up to 7% in interest rates. Since a car is a large purchase and can take 5+ years to pay off, you can effectively pay thousands of dollars in interest over the years.
Final Thoughts
Whether you’re buying new or old, you should take a holistic view of your finances and see what you can afford. Before purchasing any used car, always have it looked at by someone of your choosing. Preferably a mechanic. However, someone who is really into cars may be able to spot out red flags as well. Do your due diligence and make the correct choice.
Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.
