New vs. Used: A Cost Comparison

Deciding to buy a new or used car comes with a lot of pros and cons to consider. Figuring out which option is best for you likely comes down to your finances, lifestyle, and preference. Below are some of the main areas to compare when considering the advantages of buying a used car versus a brand new one.

Depreciation

Depreciation on a new car is much higher for the buyer than a new one. Most vehicles lose 20-30 percent of their value in the first year. However, some experts say the loss of value due to depreciation evens out the longer you own it, especially if it’s after five years. Of course, the rate and cost of depreciation depend on the make, model, and year of the vehicle. 

Savings on Insurance with Best Car Warranty Companies

When it comes to insurance costs, used cars have the advantage. Whenever a vehicle is worth less (as most used cars are when compared to their new counterparts), then insurance costs will correlate and be lower as well. 

Many of the best car warranty companies will also offer more affordable policies to drivers who aren’t getting financing on a used car. This is because many lenders require a set amount of coverage on vehicles that have a lien against them. When there’s isn’t a lien, the owners themselves can decide what level of coverage they want.

Car Registration Costs

Another lower cost for most used cars is lower vehicle registration. This again correlates with a lower average purchase price. Most states come up with vehicle registration rates based on the car’s value, age, and type. For example, a five-year-old sedan will likely cost less to register than a brand new SUV. While this may vary from state to state, lower annual registration is a perk a used car can bring to the table.

Cost of Repairs

Repair costs for vehicles really vary from car to car. In some cases, it is better to get a used vehicle, especially if that specific make and model has a common issue that the previous owners had to get fixed. For instance, if a manual vehicle usually gets its stick shift replaced at 60,000 miles and it was replaced before you purchased it, you are saving the costs of replacing the stick shift later on. 

However, older vehicles will likely need more repairs as they get older and age and mileage. Cars are becoming more and more reliable as time goes on due to new technology, but eventually, parts and pieces do wear out. Consider the cost of basic repairs for each car you’re looking at so you can calculate that in your cost of ownership.

Financing

New cars have the advantage when it comes to financing. Because used cars have an increased risk of repair and are less safe than newer cars, most lenders will charge a higher interest rate. Conversely, it’s common for dealers like Honda to offer 0 percent financing for a set number of months for new vehicles. Manufacturers and dealerships also run financing specials often on new vehicles so they can continue to move their inventory.

Get Higher End Cars for Less 

If you want a higher end car, but don’t want to pay full price for it, going used is much more economical. When you are looking at used cars, you are able to get more features and upgrades than you would with newer makes of the same car. This means you may be able to get things like a sunroof, leather seats, or a more powerful engine without breaking the bank.

Whenever you do decide to go with a used car, be sure to do a thorough visual and mechanical inspection to look for things you may eventually have to replace. Focus on a few areas, like body condition, radiator, and overall running condition.

In the End, It’s Up to You

The choice of buying a used car versus a new one comes down to your budget, needs, and the type of vehicle that you want. Many people prefer newer cars because they want a vehicle that is extremely reliable, has the latest features, and comes with better financing. 

However, a used car can offer nice features, the option for an extended warranty, and cheaper registration and purchase costs. No matter which you decide, make sure you choose a vehicle that you will enjoy driving for years to come.