When it comes to car buying the first decision you make is not what brand and model, but rather if you are willing to buy new or used. In the past, buying used came with the stigma that you were cheap or unable to afford a “real” car. Yet as the sales tactics and dirty deeds of the automobile industry have become more apparent, new cars are not quite as attractive as they once looked.
So is it better to buy new or used?
Buying a New Car
Aside from buying a house, purchasing a new vehicle is likely the biggest investment you ever make. But it shouldn’t be a stressful experience. Buying a new car is exciting, and It doesn’t get much more of the ‘American Dream’ than driving out of a car lot in a brand spanking new car.
Unfortunately, the allure of buying new has tumbled a bit due to the harsh reality of depreciation. It’s not a myth, the moment you drive a new car off the lot it just lost 20 percent of its value. How is that fair? It really isn’t yet automobile manufacturers have been getting away with it for decades.
Not only does a new car immediately depreciate, but the trend continues for its first year (30 percent reduction in value) and by year three you have lost almost half of its value (40 percent).
Is there still any incentive to buying new?
You bet. Along with having the shameless opportunity to brag to co-workers, friends and family about your new ride, buying new also provides more financing options, car reliability (backed by some type of warranty), the latest technology and security features and the peace of mind that you should be golden for at least the first 36,000 miles, or three years.
Buying a Used Car
Your average American owns 13 cars in a lifetime. It means that a male that lives to the average age of 79 years will only own the same car an average of five years before selling or trading it in for another.
If you do the math and factor in the rapid depreciation on new vehicles, it actually makes sense from a fiscal standpoint to buy used.
Instead of being the sucker that buys a new model only to desperately watch it lose nearly half its value in three years; you can be the genius that sweeps in and buys a relatively new car for half of its retail price, than turns around and sells it years later for a slight loss (because used cars depreciate at much slower rates).
It’s the smart play and makes complete sense, right?
Regardless, we live in a capitalistic society and whether its marketing and advertising, or just built into American genes our minds tell us that nothing is better than buying new, and it’s true going that route does provide some benefits.
Used vehicles are kind of like adopting a pet from an animal shelter. You want to believe it will play nice with your kids, but it was just doing time in doggy prison after all. It’s a bit of a wild card.
Yes, used automobiles result in lower insurance premiums and cheaper title and vehicle registration fees, but maintenance costs are a major gamble. You can do your best to eliminate uncertainty if you know cars, but there is never any real way to know exactly how the previous owner treated (or mistreated) the car. Then there is just the overall bad luck of having engine parts go out at unexpected times.
Buy Used or New?
When it comes down to brass tactics, the more logical conclusion is to buy used. The decision can vary depending on budget and how long you plan on owning the car, but the rapid depreciation of new cars indicates that financially it’s just not a wise move when you might trade the vehicle in 3 to 5 years anyways.