Should Your Next Car Be New or Used? See What the Experts Think
If you’re in the market for a car but are unsure whether you should start shopping for new models or those that have already had someone in the driver’s seat, there are a few things you should consider. However, they might not be what you think.
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“Most of the advice you will get will tell you to consider your budget, personal preferences or specific circumstances before making a decision to buy a new or used car,” said Matt Edwards, senior finance advisor and managing director at Auto Finance Online. “But the decision goes deeper than this.”
To find out whether you should buy a new or used car right now, here’s advice straight from industry and financial experts.
About the Current Car Market
Before heading out to buy a new or used car, it’s important to take a reading on the current car market. Here’s what car industry experts had to say.
New Cars
“The car market is seeing some significant changes,” said Mike Trudeau, executive vice president of business development at Montway Auto Transport. “New car inventory continues to rebound, and dealers with a surplus are offering great purchasing incentives.”
Lauren Fix, founder of Car Coach Reports, said, “New car inventories are increasing, which means buyers are not paying over sticker unless it’s a special or rare vehicle. This is great news for buyers who have been waiting for the removal of additional dealer markups.”
New Car Market: Prices Are About To Plummet Due To Oversupply
Used Cars
Regarding used cars, Fix said, “Used car prices have softened and prices have come down, but not back to where they were, which means buyers have selection but at a higher price.”
Why You Should Think Twice About Buying a New Car
Although the new car market sounds promising, there are other things you should consider.
Brian Dechesare, CEO of the financial career platform Breaking Into Wall Street, said, “Due to things like manufacturer warranties, lower mileage and the newest amenities, buying a new car often entails higher upfront fees. However, as new cars depreciate significantly, their value might drop drastically in the first few years of ownership.”
Why You Should Consider Buying a Used Car
Buying used can be a better choice in many instances.
Price
Mark Holthoff, senior editor at Carvana, said price is the main reason to buy a used car instead of a new one.
“Most new cars depreciate at a rapid rate — as much as 20% in a year — so buying one that’s a few years old can save you thousands of dollars,” he said. “Used cars also tend to depreciate more slowly than new cars, so a used car will retain more of its value over time.”
Lack of Kinks To Work Out
“Additionally, a used car is more of a known quantity since it’s already been on the road for a few years,” Holthoff said. “That means that, with a little bit of research, you can avoid some of the teething issues that some owners face after purchasing a brand-new model. These can typically be found in owner reviews or by looking up manufacturer recalls on the model.”
Reliability and Resale
“While it is true that new cars have the latest features and, most importantly, warranty coverage,” Edwards said, “do not underestimate the power of technology these days. As technology has become more efficient, cars have also become more reliable. Many do not need repairs until they have been driven for more than 100,000 miles — an equivalent to almost 10 years.
“To put it into perspective, you could buy a car two years old and still sell it after five or six years without any major repairs and close to the price you bought it for.”
Potentially Lower Costs of Ownership
“I personally would recommend buying a used car right now,” Edwards said, “as it can cut your costs in terms of not only the purchase price but also lower insurance premiums and registration fees while also avoiding the initial depreciation of the car and potentially getting more value for your money.”
Dechesare said purchasing a secondhand car can yield cost savings because the first depreciation already has occurred. However, he cautioned not to blindly buy a used car: “It’s crucial to give the used car’s condition, maintenance history, potential repair costs and financing choices considerable consideration.”
New vs. Used: The Choice Is Yours
Now that you have insight into what various car-buying and financial experts think regarding buying a new versus a used car right now, here are some final thoughts to consider.
If You’re Ready To Start Shopping
“If you do need to purchase a new or used vehicle right now,” Trudeau said, “I recommend expanding your search outside of your local market as some states might have less demand and better prices for the type of vehicle you are looking for.
“Since the car market hasn’t fully returned to pre-pandemic conditions, be prepared to navigate a landscape that’s still more expensive than usual. No matter what, do your research and try to be patient as you weigh your options.”
If You’re Still Trying To Decide
“You may decide whether buying new or used is better for your financial circumstances by performing a detailed cost-benefit analysis based on your budget, long-term financial goals and preferences,” Dechesare said.
Edwards said the decision to buy a new or used car also can be made in terms of the 20/4/10 rule. “You should be able to pay 20% or more of the total purchase price, be able to pay off the balance in 48 months (4 years) or less, and your monthly auto expenses should comprise 10% or less of your monthly income.
“Assess the purchase price and loan terms for both buying a new or used car, keeping in view this rule to come up with the best choice.”
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This article originally appeared on GOBankingRates.com: Should Your Next Car Be New or Used? See What the Experts Think
