As the new year gets closer, many people are thinking about buying a new car to start 2016 with. However, there are a few questions you may be asking yourself. Some may have to do with what amount of money you are willing to spend, what type of car you are going to buy, but one of the most common questions is, “Should I buy a new or used vehicle?”
More common questions people ask themselves when making a decision when buying a car are things like, “Will I look good behind the wheel?,” and “What’s the highest monthly payment I can afford?” However, these two questions won’t help you make the best car-buying decision.
The reasons for buying a car aren’t necessarily the same for everyone, and once they make the decision to buy it they have a few things to keep in mind like, depreciation is the number one expense when you buy a car. Oftentimes, cars also take some time and money to maintain.
New Car vs. Used Cars
The “New Car vs. Used Car” debate has been a long one, but the decision to buy one or the other really depends on your situation. It also depends on how long you intend to keep the car and how much money you are willing to put into it.
Do you have a trade-in?
There are a few things you need to ask yourself before you buy a brand new (or used) car. For example, do you have a trade-in or down payment? Buying a new car (if you have good credit) oftentimes does not require a down payment or trade-in. However, buying a used car always requires a trade-in and down payment. This is because manufacturers offer incentives for newer model cars.
How much depreciation will there be?
While the price of a new car may be good initially, newer cars depreciate in value heavily. On average, a new car depreciates 20 to 30 percent the moment it is driven off the car lot. Some new cars depreciate 50 percent in the first three years. For example, a newer Honda Accord is priced around $25,000. In the first year, the car depreciates $6,000, almost $2,000 the second year, and by the third year, the Accord is only worth $15,000. That is like throwing away $10,000 each year. However, if you bought the same car but used (two years old), you would pay roughly $20,000 ($5,000 less). The price drop after two years would take care of the depreciation.
Will you be able to maintain the car?
Used cars often require some repair and may require more maintenance than a newer car. You may need to take into effect the costs of keeping the vehicle running and in good shape if you plan on buying used. However, for newer vehicles, carmakers oftentimes offer free maintenance for the first few years of ownership (usually a number of years or miles, whichever comes first). After 30,000 miles, however, there are certain things that need to be done on any car. Because of this, a used car may be more expensive to upkeep.
Can you spend time on it?
A used car will likely spend more time in the shop than a new car. Sometimes this will require leaving work early, getting a ride or using public transit to get to work while your car is being worked on. You have to decide what kind of time you are willing to spend on the vehicle and if bringing it into the shop and waiting on it is something you have time to do.
With all these things in mind, you will be able to make the right decision when it comes to car buying’s most important question: Should I buy a new or used car?