Should I buy a new or used car?

It is the choice millions of car buyers make every year: buy a new car or opt for an older one to save money? Choosing between the scent of a new car and a used vehicle is not just a matter of price; it is an important factor.

Driving a new car costs an average of $725 per month, while a used car costs an average of $516, according to Experian's State of Automotive Finance Market study for the first quarter of 2023.

If you want to save on the initial purchase, a used car is a good choice. But you will need to consider the cost over the life of the vehicle, including service and repairs. It is possible that buying a new car will be better suited to your financial situation.

Buying a new car may be a good choice if you want to benefit from the latest features and lower initial maintenance costs. Buying a used car may make more sense if you are willing to compromise on certain features to save on the initial purchase and insurance.

Cost comparison: new and used cars

There are several options for tracking your purchase, whether it is a new car or a used car. You can find new cars at a local dealer or on sites such as Autotrader or Edmunds. Used cars are available at dealerships, but you can also find them-potentially cheaper-at independent dealers, private sellers or superstores such as CarMax, Vroom or Carvana.

In general, used cars are cheaper than new ones. However, prices for both types of vehicles have risen sharply in recent years. Payments for new cars have gone from an average monthly payment of $554 in 2019 to $667 in 2022, a difference of 18.5 percent. Used cars also increased significantly, from an average of $391 to $515, a difference of 27.4 percent.

To better prepare for the cost of owning a vehicle, new or used, Kelley Blue Book and Edmunds can give you an idea of the cost of purchase and maintenance over five years. Here is a breakdown of Edmunds' prices for a new and used Honda Accord.

Monthly payments are based on average interest rates for new and used vehicles in the first quarter of 2022 and on a 60-month term. Maintenance and repair costs for the first year of ownership are provided by Edmunds.

Price should not be the only factor to consider when choosing a car. You must also consider vehicle depreciation, safety features, reliability, and your own preferences.

Things to consider when buying a new car

Buying a new car allows you to invest in the latest technology and reduce maintenance.

Benefits of buying a new car

A new car comes with a wide range of features, many of which can be chosen if you find the right dealer.

• Customization: the main advantage of buying a new car is that it can be equipped according to your preferences: you can choose the color and style that suits you best and request the accessories that interest you.
• Cutting-edge technology: The advantages are also practical: you can drive with the latest technology and safety features.
• Better interest rates: when you buy a new car, you are more likely to get a better interest rate on your car loan than when you buy a used car, often by a few percentage points.
• Reliability: by buying a new car, you do not run the risk of hidden mechanical problems. In addition, the vehicle warranty should limit repair and maintenance costs in the first few years.

The disadvantages of buying a new car

Unfortunately, buying a new car is more expensive and has some disadvantages that can put a strain on your wallet.

• More expensive: New cars are often several thousand more expensive than used ones, which can make it more difficult to make a down payment or pay off monthly loan installments.
• Depreciation: You will also have to deal with vehicle depreciation, or the rate at which the car loses value. As they say, new cars lose value as soon as they leave the factory. Experian estimates that new cars lose 20 percent of their value in the first year and that the depreciation continues for the first ten years of ownership.
• Higher insurance costs: new cars are often more expensive to insure because of the higher risk of theft, higher value, and other related factors.

If you decide that buying a new car is the right choice for you, plan ahead and look for seasonal offers. By carefully planning your car purchase and looking for car loans, you can reduce some of the upfront costs.

Things to consider when buying a used car

Second-hand cars are generally cheaper and depreciate less quickly, but they also have other disadvantages.

Advantages of buying a used car

A used car saves on monthly payments, insurance and other costs. In addition, depreciation is longer. Below we look at the main advantages:

• Cheaper: The main advantage of used cars is that they are generally cheaper than new cars. By buying the same model you wanted a few years ago, you can save several thousand.
• Lower insurance costs and taxes: many used cars have lower insurance premiums, registration fees and sales taxes. Savings can be made on both the purchase price and the life of the vehicle.
• Slower depreciation: Used vehicles depreciate much more slowly. Instead of losing 20 percent of value in the first year, a three-year-old car will probably lose only 10 percent.

The disadvantages of buying second-hand

Buying a used car may mean changing your wish list for your next car, researching the car's history, and spending extra money on maintenance.

• Compromises: you will have to do some research to find the style, color and accessories you want. And even then, you may have to compromise. The car market is extremely competitive these days, and you may not be able to meet all needs.
• Vehicle history: you will also need to check the vehicle's history to make sure that the previous owner has taken good care of it. Before closing the deal, it is a good idea to take the car to a trusted mechanic for a check-up, including a brake and engine check. The cost of the mechanic's work is about $100, but it is well worth it.
• Increased maintenance costs: even if the car is in relatively good condition, a used car will inevitably require more maintenance and repairs over time. So when choosing a new or used car, you need to consider your long-term budget.

If you are trying to save money on the initial purchase, a used car is a good choice. But you will need to consider the costs over the life of the vehicle, including maintenance and repair costs.

Certified pre-owned options

If you prefer to buy a used car but hesitate to trust the vehicle's history, a certified pre-owned vehicle is an excellent choice. A certified used vehicle is one that has been fully inspected by the dealer or manufacturer.

In terms of initial price, these vehicles fall somewhere between used and new because you pay extra for the inspection. This extra certification is ideal for drivers who want the security of a car in perfect condition without having to pay the price of a new vehicle.

How to choose between a new and a used car?

Choosing between a new and a used car depends on a number of factors, including financial considerations, tastes and needs. Take these factors into account to determine which type of purchase is best for you.

Your budget

Buying a used car is often less expensive than buying a new car. From the price of car insurance to dealer fees, everything is cheaper when you buy a used car. Depending on the vehicle you choose, the purchase price will also be lower for a used car.

When calculating how much you can afford to spend on a car, do not limit yourself to the monthly payment and insurance. Don't forget to include annual registration fees, fuel costs, maintenance and repairs.

Bells and whistles

One of the advantages of buying a new car is that it is equipped with the latest technology and safety features. Likewise, if you want to be able to choose a specific vehicle color or interior finish, buying a new car will make it easier for you. When buying a used car, you may have to spend a lot of time researching to get exactly what you want.

However, the luxury of choosing the best set of tires, the best sound system, or the best seats may not outweigh the savings from buying a used car. If you have concerns about the safety of the vehicle you are considering, use the tools available on the National Highway Traffic Safety Administration website to check the safety rating.

Maintenance needs

A somewhat older vehicle may have higher maintenance costs, which is an important consideration if your household budget is tight. Much of the maintenance on a new car will probably be covered by the warranty.

But if you opt for a second-hand car that is no longer under warranty, this may not be the case. You can purchase an extended warranty to get the extra protection you need. The average cost of an extended warranty is about $1,480, but you can spend much more or less, depending on the vehicle and the level of coverage you choose.

How to find the best deal for your car?

Whether you decide to buy a new or used car, remember that vehicle research is the most important part of getting a good deal. Research should look at model safety, insurance costs and five-year ownership cost. Try calculators to help you decide.

Also take the time to try different vehicles and get quotes from different lenders. Make sure you get the lowest monthly payment and the most competitive financial terms so you can keep more of your hard-earned money in your pocket.

The choice between a new and a used car depends on a number of factors, including depreciation issues, your budget, your desires for certain features, and the length of time you plan to keep the car.