So your mechanic called and delivered the bad news. The car that got you through high school and college is toast. It had a good run, and the stories it could tell would set your parents’ hair on fire.
The good news is that you have a job, and after assessing your finances, you realize that you can buy either a new or used car to get you to that job on time. And let’s be honest, there’s nothing like buying your 1st ride
! Since this will probably be one of the biggest purchases you’ve ever made, don’t jump the gun and run off to the dealership just yet. As with all of life’s major decisions, you need to do your research beforehand to fully understand all the options. We sat down with Steve Benise, president of Car Solutions
, our auto buying service with access to multiple dealer inventories. Here are the top takeaways from that conversation on NEW vs. USED car-buying.
Should You Buy A New or Used Car?
First, fully assess your financial situation and be realistic when deciding how much you can spend on your car each month and through the year. Realistic doesn’t mean deluding yourself into thinking that you can cut necessary monthly expenses down just to afford that convertible you dream of on a daily basis. Driving around in your dream car will not make living off of a $30 grocery budget a breeze, or even a realistic possibility. Take time to honestly examine your unique financial and life situation.
Once you’re fully aware of your financial situation, you’re armed with the knowledge to make smarter car buying decisions. Be sure to consider the additional costs of a car, such as the interest rate on a loan, insurance premiums and maintenance fees. Typically, if you buy a new car, your loan and insurance will be higher while the cost of maintenance and upkeep will be lower. On the other hand, if you decide to buy a used car, the loan and insurance will be lower but the maintenance (i.e. tune-up, tires, etc.) will be a lot higher.
If you’re like most of us who cannot get enough of the smell of a brand new car, you might be thinking: why on earth would anyone ever buy a used car if they could afford a new one? Turns out, that new car smell you love so much comes at quite a high price because of the new-car depreciation rule. On average, a new car depreciates between 20-30% in value the moment it rolls off the dealer’s lot, and can depreciate up to 50% in the first three years. All of this means that if you tried to sell the new car the next day, you would lose a lot of money.
If you don’t want to take the rapid depreciation hit, consider buying a used car. However, if you plan to keep the car for a long time, say 8 – 10 years, then the depreciation hit of buying a new car really won’t be an issue for you.
For both new and used cars, do extensive research online before stepping onto the lot. Check out websites like NADA, AutoTrader, Edmunds, Kelley Blue Book and Car Solutions to get an idea of appropriate price points for specific cars.
Regardless of whether you are buying a car from a dealer or an individual, you should ask for a record of the car history report. Firms like Carfax and Autocheck will track down the history of your prospective vehicle by its Vehicle Identification Number (VIN), usually listed on a metal plate just inside the windshield.
Once you’ve honed in on a car, remember to never accept what you don’t inspect yourself! Take your car to either your own mechanic or one recommended by a trusted source. While the mechanic check will probably cost around $100, it will be well worth the expense to ensure that you're buying a healthy, used car.
Initially, buying a car, new or used, may sound like a lot of fun. However, to successfully buy one, you need to think long and hard about your true needs, in addition to spending an extensive amount of time on researching car options. Other than buying a house, purchasing a car will be one of the largest expenses that you will encounter during your life. Do your due diligence to ensure you purchase a car that is right for you. Steve and the team at Car Solutions are a great resource regarding car buying and Delta Community is here to help with financing options that will get you in the car you want.