As you consider buying a car, you may be wondering if you should buy new. As with any significant financial decision, it is wise to consider your options, and determine of the pros and cons of each. But remember that although buying new can have some attractive qualities, buying used is typically the smarter financial move. With our list of pros and cons, we hope to help you answer the question of, “Should I buy a new car?”
Pros of buying new:
- Those of you with money to burn and great credit scores choosing to buy new are almost guaranteed a very low interest rate. And a lower interest rate means that more of your monthly payment will go to your car’s equity, and less to your lender in interest.
- A new car will usually carry a manufacturer’s warranty that will cover repairs for a certain amount of time or until you’ve reached a predetermined mileage cap. Sometimes, a dealer will even extend you a warranty past the manufacturer’s expiration date. And because new cars can be very expensive to repair, you could be saving until the warranty ends.
- New cars usually have impressive safety and convenience features including: blind spot warning systems, collision avoidance systems, auto lane keeping, self-parking, and even built in vacuum cleaners. Still, many of these features are usually reserved for pricier models.
- Certain safety features will reduce your insurance premiums, and if you report that your new car has them, you could see a drop in your monthly payments.
- With a new car, you wouldn’t need to worry about repair issues (caused by previous owners or typical wear and tear) that may be of concern when buying used.
Cons of buying new:
- Any car will depreciate in value as time passes, but new cars’ depreciation rates are severe. This is the biggest problem with buying new. You could spend big bucks on a new car, but when you decide to sell a few years later, you may not even sell it for half of what you paid. The money you spend on that new car will lose its value quickly, and once you decide to sell, you won’t see a lot of the money that you spent returned to you.
- The situation above works both ways. If you buy a used car—and the previous owner took much of the depreciation—during the time you own that same car, it will retain more of its value. Usually, a car that’s 7 years old has already lost most of the value it’s going to lose. If you want an estimate on the depreciation of the cars you are interested in, you can use this depreciation calculator. It’s important to remember that certain car brands and models depreciate less than others, and it may be in your best interest to choose one of those—whether you are buying new or used.
- With a less-than-perfect credit score, you still may receive a higher interest rate, even if you are buying new. And it is hard to get approved for a new car loan if you have bad credit—as new cars are pricier than used.
- A new car will cost more to insure. Because new vehicles have new parts, those parts would cost more to repair.
- Some new cars are designed to run on premium gasoline, and that will be an expensive necessity to keep your car running.
Everyone’s situation is different, but at FederalAutoLoan.com, we typically recommend buying used. A used car will nearly always save you money—and we want to stress savings. If you want to compare rates of lenders and dealers in your area, we would like to work with you. After you fill out our free, no obligation application, we will send it to our network of lenders and dealers who may compete for your business. The ultimate goal is to connect you to multiple lenders and dealers so you can find the best rate. But the choice is yours! You may choose a lender or dealer that we connect you with, or continue to shop around.
Even if you have bad credit, we may be able to connect you to one or more of our lenders and dealers, as many of them are specialists in the bad credit market. This means, they are well equipped to try to get you the loan you need—regardless of your credit situation.