Once you have decided that it is time to replace your current car, the next question that inevitably comes up is: Should I buy new or used?
Most people approach this question by determining how big of a monthly car payment they can afford, then going to the dealership to see what fits their budget. Unfortunately, if you base your car purchase on what you can afford per month it will almost always ensure that you buy too much car and pay too much for it.
When making the New vs Used decision there are four questions you should ask yourself, and let the answers guide you towards the right decision for you.
1. Do you have a down payment or trade-in equity?
If your credit is good, you may not have trouble buying new with little or no down payment, mainly because many dealerships offer incentives for new cars that they do not offer on the used lot.
When dealerships offer financing of their used cars, they almost always require money down, which means you need cash or trade-in equity to close the deal.
No down payment = less friction buying new.
Trade-in or cash available = better value buying used.
2. Is there a really good reason that you should be paying the depreciation on a new car instead of someone else?
A car loses value over time, we all know that, but it remains a sort of hidden cost since don’t we face it until trade-in time. A $5,000 depreciation on a car from the day you buy it to the day you sell it is a lot like throwing $5,000 away. You simply never get it back. But how do you figure for variables in depreciation?
Use the Kelley Blue Book cost of ownership calculator. It is in USD, but it remains the perfect tool for comparing the true cost of ownership of every car on the market. It takes into account everything from cost of purchase, repairs, insurance, fuel and financing.
I drive my car until it falls apart = depreciation isn’t a factor, buy new.
I like to get a new vehicle every few years = let someone else pay the depreciation, buy used.
3. Can you afford to maintain and repair a used car?
A new car is a dream when it comes to maintenance. Repairs are covered under warranty and many dealerships offer free oil changes for the first few years of a new car’s life. Buying used, however, often feels like you are assuming someone else’s maintenance problems.
How do you ensure you are not buying a money pit? Get it inspected. No matter how well maintained a car is on the outside, as the odometer creeps up, parts start to wear out and need to be replaced. If you bring your prospective used car in for a purchase inspection we can give you the inside scoop on the true value of that vehicle.
I have the discipline to budget for repairs = used car keep-up will be a breeze for you.
I want to have hassle free maintenance = new car with warranty is the way to go.
4. Can you survive without a car on no notice?
Used cars spend time in the shop, plain and simple. They may only go in once or twice a year, but a used car can leave you without a vehicle for days when large repairs come up. Can you deal with a used car’s downtime?
My schedule is tight and I have a long commute = less headaches with a new car.
My schedule is loose and I can borrow, walk, or take transit = save some cash, buy used.
There is not a cut and dry answer to buying used or new, but if you ask yourself these questions, you will start to steer yourself towards the right decision for you. Need a purchase inspection, contact us and we can sort you out. We will even give you advice on a new car as well, we have seen them all and we love talking shop!