Saturday, March 24, 2018

New Car vs Used Car

"The value of a new car drops like a rock the minute you drive it off the lot!"

"Buying a used car is one scary thing to do!"

The age-old debate carries on.  But the times they are a changing.

Cars are no longer loosely screwed together buckets of bolts, and car dealers no longer wear plaid suits. Fact is, cars last longer than they used to; there's better materials, safer designs. And the "information age" has led to a more transparent car buying experience too.

If you spend enough time looking, you can find great deals on both new and used cars. But what really differentiates the two?
  • Is it the price?
  • That 'new car smell' perhaps?
In truth, there are many differences. The most obvious place to start is the mileage and condition of a used car vs. the never-used-plus-warranty condition of a new ride. Granted, you can save some coin by getting a slightly used version of the new car that you want. But you're not going to be able to pick the options, and you might not qualify for the complimentary maintenance programs that many car companies are now offering.

We could go back and forth on this all day, so let's just examine a few of the key arguments, and see if we can find a winner.


Depreciation, put very simply, is money that you lose. When you buy a brand new car, 3-12% of the initial price is markup for the distributors and dealers. That money gets subtracted from the car's value as soon as you sign the paperwork. By the end of the first year, your new car will lose 20-30% of its value. And it's going to keep on losing value to the tune of 15-20% per year after that.

By contrast, a used car is going to be initially cheaper to buy because the original owner took the depreciation hit for you. You're also going to pay less sales tax on a used car, lower tag fees, lower insurance premiums. And if it's a big, expensive exotic, you won't have to pay thousands in gas guzzler/luxury taxes either.

So on the issue of price, buying a used car makes the most financial sense.


Today, many factory warranties are transferable. So, you'll still be covered by the remainder of the original factory warranty if you decide to buy used.

But keep in mind, that 5-year / 100k mile warranty will only cover the vehicle for 100,000 miles or 5 years. Which ever comes first. And there's usually a separate (much shorter) Bumper-to-Bumper warranty to cover things like broken window switches, and glitchy infotainment units.

With the increased complexity of new cars, you can bet that repairs will be expensive. So if you plan to buy used, you may want to consider protecting yourself with an extended warranty.

By contrast, a new car buyer is usually insulated from raising repair costs, thanks to their full-term factory warranty. Not to mention, many car-makers are now offering complimentary maintenance, satellite radio, and concierge services, which will make the first few years of ownership quite convenient.

So on the issue of warranty & repairs, buying a new car makes more financial sense.

Getting what you want

One of the most attractive things about getting a brand new car is the ability to get exactly what you want. Would you like Almond Leather seats, or Oatmeal? How about the stereo, do you want your ears to bleed, or would you rather have navigation with restaurant reviews?

By ticking the right boxes, you can customize your Runabout LE any way you want. You can even have it painted Notice-Me Yellow, with the body-kit and chrome wheels. However if you buy used, you're going to have to settle for whatever you can find.

Obviously, buying new wins here too.

Who won?

Well, we're still waiting for a recount in Florida from past presidential elections, but we can tell you that buying a new car makes perfect sense if you value convenience. All your repairs are handled for you, and you can get exactly the car you want, in any color that you want.

If you value saving money, and you've already got a good mechanic, then buying a used car might suit you best. You can save a boatload of cash when you buy it, and you can usually get an extended warranty on it too (depending on where you buy of course).

In the end, you have to decide what matters to you most; convenience or value.

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