For most frugal-minded people, the thought of buying a new car is inconceivable.
Why finance a brand new car that will depreciate thousands of dollars in value the very moment you sign the dotted line?
Surely there’s never a good reason to pay the full price of a new car, right?
While it’s true that used cars are a more economical choice for a lot of people, sometimes buying a new car can actually save you more money in the long run.
If you’re in the market to buy a new (or new to you) car, don’t feel guilty for looking at all of your options.
There are some fantastic, money-saving reasons to buy a new car. Assess the pros and cons before eliminating the possibility of buying a new car from your list. Let’s take a look at a few.
Pros of buying a new car
You know the complete history
There are no shady or questionable gaps in your vehicle’s ownership and performance history when you buy a new car. You get to rest easy knowing that your vehicle was never under water or repaired after a significant car crash.
New cars are more reliable, hands down, simply due to the fact that all of the engine components are new and functioning as they should be. This reliability gives new car owners peace of mind on the road. You also have the protection of lemon laws if you’re a new car owner.
If an engine component does malfunction for some reason, your new car will still be under warranty, meaning you won’t have to pay for the maintenance. Most manufacturers cover new vehicles under their warranty plans for at least three years, or 36,000 miles, whichever comes first. You can sometimes even elect to pay for longer and more comprehensive coverage (10 years to 100,000 miles).
Three to ten years of warranty coverage will save you a great deal of money on car repairs and expenses down the road.
Lower maintenance expenses
New vehicles don’t need any maintenance for at least the first two to five thousand miles. After that, you’ll only need to get an oil change or a tune-up, which is usually covered under the warranty. New car owners also have a long time before they need to worry about replacing their tires or brake pads, changing the spark plugs, or buying a new battery.
Roadside assistance coverage
Most new vehicles come standard with roadside assistance coverage included in the vehicle’s warranty package. There’s definite peace of mind knowing assistance is just a phone call away if your new car were to have a sudden mechanical problem on the side of the road.
Newest safety features
Peace of mind in a new car extends beyond the reliability. New cars are equipped with the most up-to-date safety technology and advanced safety features including stability control, blind spot monitoring, back-up cameras, impact warning sensors, and adaptive cruise control.
Insurance isn’t necessarily more expensive
If someone makes a blanket statement that all new cars are more expensive to insure, don’t believe them. Insurance rates are based on more than just the year. Companies base rates on the make, model, the driver behind the wheel, and theft history of that particular car.
So if you’re a sensible driver with a good driving history, then you could very well save money by buying a new car.
Customization is fun
Let’s be real. Buying a new car is fun. You get to pick the paint color, the upholstery, and the special features. Something about that new car smell, mixed with the fact that you were able to customize your vehicle, makes new-car buying a bit exhilarating.
Cons of buying a new car
New car buying isn’t all rainbows and butterflies. There are a few cons that any potential car buyer needs to address before making the decision to buy new or used.
Higher up-front costs
New cars cost more. Unless you’re willing to pay interest for several years, you can’t benefit from the perks of a new car unless you have the cash in hand. If you don’t have most of the cost of the car in cash, or at least a serious deposit, you’re probably better off buying a used car.
Depreciation in value
It might be cliché, but it’s still true. Cars do depreciate in value as soon as they drive off the lot. The depreciation isn’t always terrible, especially when considering the make, model, and fuel-efficiency of the vehicle.
As an exception to this rule, there are always vintage vehicles that do not depreciate in value.
Look at your personal finances before buying a new car
It would be ridiculous to assert that new car-buying is the better option for everyone, just as it would be ridiculous to claim that you should never buy anything other than a used car.
The question of “should I buy a new or used car?” depends entirely on your personal preferences, which type of vehicle you’re looking at buying, and the state of your personal finances.
For example, let’s say Joe has $12,000 saved to buy a car, but he isn’t sure if he wants to buy new or used. He has an excellent credit score, and he isn’t worried about getting a great interest rate should he decide to finance a more expensive vehicle.
He could certainly pay for a decent used car completely out of pocket and call it a day. He looks at the numbers and decides to buy a reliable, fuel-efficient, four-door sedan for $14,000, financing that extra $2,000 cost of the car.
With the warranty coverage, roadside assistance, and fantastic rates on insurance for his sensible (not to mention eco-friendly) new car purchase, there was no real question that buying new would save Joe more money in the long run.
Now let’s say Joe has a friend named Mike, who is also looking to buy a new car. He only has $5,000 saved for his new purchase. He’s also worried about interest rates with financing because his credit score isn’t so great.
He realizes that he would be much better off buying a used car for $4,500 and using that extra $500 to pay for insurance and roadside coverage for the year. With his credit score being so low, he would have ended up paying much higher interest rates had he decided to finance any portion of the car.
The bottom line
At the end of the day, the decision to buy a new or used car boils down to what you can realistically afford (without paying high-interest rates) and which car will give you the best peace of mind. You need to consider all of your options before deciding whether a new or used car is the better option for you.
Look at how much cash you have on hand, your credit score, and any necessary financing options. See if financing a little bit more for an eco-friendly car will actually save you more money in the long run than buying a less fuel-efficient car with zero financing.
Many times, a used car is the lower-cost, higher-value option, but don’t be surprised if through researching your options you realize that a new car is actually the better option.
Do you prefer to buy new or used cars? How did you come to that decision? Any tips for those in the market to buy a car?