When it comes to buying a new vehicle versus a pre-owned vehicle, there’s no one-size-fits-all answer. Everyone’s situation is different.
Whenever you get rid of your old vehicle, this question always pops into our minds.
Should I buy new, or should I buy used?
And the answer varies. But here’s two questions that should NOT be determining factors:
- Will I look good behind the wheel?
- How much of a monthly payment can I afford?
Why? Well… it’s simple. If you buy a car based on these two questions, you will almost ALWAYS overpay for your vehicle.
… but here are several questions that you can ask yourself… which… will determine the right answer for you, no matter what situation you’re in.
Buying a Used Car Vs Buying a New Car
1. Do you have enough money for a down payment… or a car that you can trade-in for equity?
If you have a good credit, then you won’t find it difficult buying a new car with little or no money for a down payment. How? Well, that’s because many manufacturers offer incentives for new cars that aren’t usually available at used car dealerships.
These are usually rebates, cash incentives and discounted financing… but there’s one exception.
At Direct Auto Mall, we offer discounted financing… and… we give financing to ANY credit score.
Plus… we give low monthly financing, too. Financing a used car usually requires money down though, with cash or with a vehicle trade-in.
Click here to fill out a trade-in evaluation form to see how much equity you can get right now.
2. Are you prepared to lose money on your investment?
It’s a simple fact that your car will lose value over time. It’s a “hidden fee” that most people don’t take into account when they buy a new vehicle…
… until it’s time to trade it in.
So if you spent $8,000 from the time you buy it, to the day you sell it, you’re essentially throwing away $8,000. That’s money you won’t get back, so you need to be prepared for it.
Buying a car is usually an emotional buy. But it’s not your friend and it’s definitely not a wise investment.
It can convey status and provide some pleasure, but it won’t make you smarter, better looking, more interesting or wealthier.
Sorry to break it to you, folks.
Because of this fact, it makes more sense to buy used, and this is why: a new car loses between 20-30% of its value the moment it rolls off a dealer’s lot.
Some can even depreciate up to 50% in the first 3 years alone!
The Kelley Blue Book has a cost of ownership calculator that you can use to determine the average five-year costs of any vehicle to see for yourself.
Let’s say you purchase a 2016 Ford F150 with a retail price of around $25,387. It would automatically lose over $6,000 in your first year of ownership and close to $2,000 in the second.
After three years, it will only be worth 60% of its original value. You’re basically throwing away $10,000 every three years.
If you’re planning on driving the car straight into the ground, or until it’s ready for the wreckers, then depreciation really won’t have an affect on you.
After more than a decade, an old beater won’t be worth much in terms of a trade-in or resale value. But when you buy a 2-year old model, you will save more than $5,000 on the purchase price just due to the depreciation.
So why wouldn’t you buy used? It’s also going to cost you way less on insurance… and way less on taxes. That’s twice the savings already.
Just some food for thought.
… but here’s a big question you still need to consider:
3. Can you afford to repair a used car?
Most manufacturers offer free maintenance for a few years after you buy a vehicle. The average cost of maintaining a used car is much higher.
… but not if you purchase one from a reliable dealership with high quality vehicles. You may inherit somebody else’s problems if you buy privately.
You can take some steps to lower your chance of buying a “problem” used car. How?
Just get it inspected by having it inspected by a qualified mechanic and obtaining a detailed vehicle history report from an agency like Carfax before buying.
At Direct Auto Mall, we provide CarFax history reports with every single purchase… and… we’ll even let you take a vehicle for a pre-purchase inspection.
… but unlike depreciation, repairs and maintenance are costs that need to be taken care of as they rise. You will most likely need a budget just in case there are any problems that need to be fixed.
If you buy a new used car, you may be able to grab a piece of the vehicles warranty, too. Make sure you check the manufacturers rules on transferring the warranty before you buy.
At Direct Auto Mall, we give a FREE warranty with every single purchase. If you buy from us, you won’t worry about any hidden problems rising.
4. Can you handle your car being in the shop?
A used car generally costs more to keep operating, but also needs service work done, too. New cars spend less time in the shop… but it will also cost way less than losing money on the depreciation fees.
It’s questions like these that you need to think about carefully. You will save thousands of dollars in depreciation, but you will still lose time whenever your car is in for repairs.
Once you answer these questions, you will find out whether it makes more sense for you to buy a new or used vehicle.