New vs Used Car: Which One Should I Buy?
Purchasing a vehicle is one of the most important financial decisions that you can make. Therefore, you have to carefully consider what type of vehicle is right for you.
However, before you start looking at specific models you have to decide whether to buy used or buy new.
The answer lies in a number of factors, including your budget and how long you intend to drive the vehicle.
Let’s take a look at the pros and cons of new and used vehicles.
Table of Contents
- New Car Benefits
- New Car Drawbacks
- Used Car Benefits
- Used Car Drawbacks
- Depreciation for New & Used Cars
- Other Vehicle Purchasing Options
- Should You Buy a New or Used Car?
- Best Car Deals by Category
- Frequently Asked Questions
New Car Benefits
Low Interest Rates
Currently, it has never been a better time to finance a new vehicle. Interest rates are at their lowest average level in decades. This factor alone will allow you to drive a new vehicle model that was previously out of your price range. It's good to shop around and see if you can get a better rate from the dealership or bank.
Latest Safety and Tech Features
With a new vehicle, you are driving with the latest tech features that a car company offers. That includes leading-edge touchscreens, digital cockpits, and audio/climate control systems. New vehicles also include the latest safety innovations to give you better peace of mind on the road.
All new vehicles come with a full warranty. Typically, you can get a warranty that covers just about everything on the vehicle for a period of anywhere between four to 10 years. This can help reduce your overall repair costs as you own the vehicle for a longer period of time. Check out our detailed guide on extended warranty programs.
New Car Drawbacks
High Average Cost
In 2021, the average price of a new vehicle is $40,000. If you have a limited budget, purchasing a new vehicle may not be the best choice.
New vehicles will lose about 33% of their value in the first year alone. By the fourth year of ownership, a new vehicle will have lost about half of its value.
Requires Full Insurance Coverage
When you purchase a brand new vehicle, insurance companies will require that you have full coverage. You may be able to reduce coverage as you build equity on the vehicle. However, during the first year of ownership, you can expect to pay more in insurance premiums.
Used Car Benefits
Lower Average Cost
The average price of a used vehicle is about $20,000, or half the price of a new vehicle. If you have a lower vehicle purchase budget, then shopping for a used vehicle is the way to go.
More Choice With Lower Budgets
When you are shopping for a used vehicle, you’ll find a lot more options at the lower price points. For instance, if you are shopping for a new vehicle with $25,000, you won’t find many choices. With a used vehicle budget of $25,000, you’ll find many more options, including luxury models.
Less Depreciation Hit
When you shop new, vehicle depreciation works in your favor. You can purchase four-year-old vehicles that have lost half of their value and get more vehicle for your money.
Check out Carvana's used car inventory
Used Car Drawbacks
When you are shopping for a used vehicle, you have to deal with the fact that these vehicles have thousands of miles on them and may have reliability issues. This is especially the case if you are shopping for a vehicle with more than 70,000 miles on the odometer.
Older Tech and Safety Features
Shopping for used vehicles also means that you are looking at cars, trucks, and SUVs with older safety and tech features. That doesn’t mean that the vehicle is unsafe. However, you will not be driving the ultimate in-vehicle technology and safety.
Less or Sometimes No Warranty Coverage
Some used vehicles will come with a limited warranty while other older models will be sold “as is”. Therefore, you have to be very careful when shopping for a used vehicle.
Depreciation for New & Used Cars
Whether you are shopping for a new or used vehicle, you have to consider how deprecation plays out when it comes to the vehicle's value. For new vehicles, depreciation works against you because the steep end of the depreciation curve is during the first four years of vehicle ownership.
When you shop used, depreciation works in your favor because the depreciation curve begins to smooth out after about four years. When shopping, you want to buy a vehicle at the “Sweet Spot” of the depreciation curve, which is about four years old.
Other Vehicle Purchasing Options
If you are looking for other options besides purchasing new and used, then you may want to consider the following two purchasing options available at many dealerships:
A Certified Pre-Owned (CPO) vehicle is a used vehicle that has to meet a high level of criteria set by the dealership or the vehicle manufacturer. For instance, a CPO vehicle may not be more than four years old nor have more than 50,000 miles.
Also, a CPO vehicle is usually inspected at a higher level than the typical used vehicle. If you are looking to purchase a previously owned vehicle, with low mileage, then you should consider a CPO vehicle.
Leasing allows you to drive a new vehicle more often. When you lease, you only pay for the time that you drive the vehicle. With leasing, you can drive a vehicle for anywhere from 24 to 72 months. When the lease is up, you simply return the vehicle to the dealership and you are done.
Should You Buy a New or Used Car?
Here’s a look at when you should be a new or a used vehicle:
You Should Buy a New Car...
- If you want to drive a vehicle with the latest tech and safety features
- You intend to own the vehicle for more than four years
- You want to take advantage of low-interest rate loans
You Should Buy a Used Car...
- You have a small vehicle budget
- You want to drive more vehicle for your money
- You don’t mind driving a vehicle with old tech and safety features
Frequently Asked Questions
Is it better to buy a car used or new?
You should consider purchasing a new vehicle if you want to drive the car, truck, or SUV with the latest tech and safety features. Also, consider purchasing a new vehicle if you intend to drive it for more than four years. If you have a lower vehicle purchasing budget, then you will find more options purchasing used.
What used car brands should I avoid?
You should avoid purchasing used car brands with lower than average reliability ratings. According to the Consumer Reports, the five car brands with the lowest ratings are Ford, MINI, Volkswagen, Tesla, and Lincoln.
Which car brands last the longest?
According to the research group iseecars.com, the car brands with the highest reliability ratings include Toyota, Lexus, Honda, and Acura. The ranks are based on reliability studies of vehicles lasting more than 100,000 miles.
How many miles is too many for a used car?
When shopping for a used vehicle, you will want to avoid used vehicles with more than 70,000 miles. At this point, certain major vehicle components such as the transmission, exhaust, and engine will require major service or replacement.
What is the best age for a used car?
The best age for a used car is the “Sweet Spot” of the depreciation curve, which is about four years old. This is the point where the rate of depreciation begins to smooth out.
How much value does a new car lose?
The average new car will lose about 33% of its value after the first year and about 50% of its value after four years.
Is it worth buying a new car?
It is worth purchasing a new vehicle if you plan to drive the vehicle for more than four years. Also, the record low-interest rates make it more affordable than ever to borrow to purchase a new vehicle.