Purchasing a car is a big decision, especially if you're a first-time buyer. No matter what type of car you're looking for, you want to be informed about your choices and find a vehicle that meets your needs at a price you can afford. When you first start shopping for your next car, one of the first questions you'll face is whether you should buy a new or used vehicle. While pre-owned vehicles are generally less expensive than brand new ones, there are several reasons to buy a new car – and it's more than just that “new car smell!"
To help you determine whether to purchase a new or used car, consider the following questions:
What can you afford?
Before you can start shopping for your next car, you need to know your budget. What can you afford to pay each month for your car? Be sure to factor in the costs of gas, insurance, registration fees and taxes. If you finance your vehicle, as most people do, you'll need to consider how much you can afford for a down payment and how much you'll pay in interest on the auto loan. If you're replacing an older vehicle, you'll also need to decide whether to trade in your old car at the dealership or sell it privately. You can often get more money from selling your car to a private buyer, but this option typically takes more time and planning on your part.
How long do you plan on owning the car?
Before you pull the trigger on buying a brand new car, consider how long you plan to drive it. Keep in mind that as soon as you drive your new ride off the lot, it will start to depreciate. According to CarFax, on average, a new car will lose more than 10% of its value within the first month of ownership. Then, over the first 12 months of ownership, a new vehicle's value can drop by more than 20 percent. If you plan on selling your car (or turning it in) after just a few years, you can expect to get far less than the original sticker price. If you really want to buy new, the most cost-conscious thing to do is to drive your vehicle for many years, until it eventually wears down. Or, you can just buy a used car and let the original owner absorb the depreciation hit.
Is having the latest technology important to you?
One good reason to buy a brand new car is to take advantage of the latest technologies available. For example, older, used cars might not feature amenities like hands-free phone technology, touch-screen dashboards or heated seats. Newer cars may also have advanced safety features, such as back-up cameras or lane assist systems. If you can't live without the latest tech and modern amenities, you're better off looking for a brand new car, or at least one that's only a few years old.
Can you afford maintenance and repairs?
Every vehicle requires regular maintenance, but if you choose to purchase a used car, expect to pay for things like new tires and new brake pads sooner than you would if you had a brand new car. Some dealerships offer free maintenance (such as oil changes) for the first year that you own a new car purchased from their lot, which can be a money-saving perk of buying new. A new car is also likely under factory warranty for the first few years, meaning that if anything goes wrong mechanically, you could have it fixed for free. With a used car, there's much more unpredictability. If you choose to buy used, be prepared to budget the money and time for maintenance work, along with any unexpected repairs that might come up.
Still unsure whether to buy a new or used vehicle? Wright-Patt Credit Union is here to help you make educated and informed financial decisions about your next car. Use our handy auto calculators or check out this short interactive learning module covering the basics of auto loans.