Trying to decide if it’s better to buy a new car or a preowned car can be a tough decision – there are advantages and disadvantages for both options. To make your decision a little easier, we’ve outlined the pros and cons of each below.
Fewer repairs. You can assume you won’t be dealing with major repairs or maintenance issues for a while.
Easier shopping. There’s no need to drag your prospective new car to the mechanic to check it out.
More financing options. You’ll be offered attractive incentives, like cash rebates from the carmaker and better interest rates from the lender.
Improved technology. Recent models have incredible technology, such as programmable settings, autonomous emergency braking and adaptive cruise control.
Automaker’s guarantee. Most new cars come with warranty coverage for their first three years or 36,000 miles, whichever comes first. Some brands, like Hyundai and Volkswagen offer even more generous warranties.
Price. Of course a new car will cost more. But, what makes it more painful is the fact that you can get a comparable vehicle for much less.
Depreciation. New cars go down in value as soon as they leave the lot, by 15-20%. And at the end of the first year of ownership, your new car can drop another 10%.
Higher premiums. Insurance companies charge more for newer vehicles.
Registration. Newer and more expensive vehicles can be pricy to register depending on how your state calculates your license registration fees.
Price tag. It’s not unusual to find a used car in decent condition with a price tag that’s 30% lower than a similar brand-new model. And many dealerships offer dealer-certified preowned programs that come with inspection and extended warranties.
Less depreciation. With the previous owner absorbing the initial depreciation on the car, your vehicle will only experience a minimal drop in price.
Lower insurance. With your car weighing in at a lower value, your monthly insurance premiums will be lower.
Lower interest. If you finance a used vehicle, you’ll likely have a higher interest rate. However, since the loan amount is lower, you’ll save in total interest payments over the life of the loan.
Complicated purchase. With a used vehicle, you’ll want to get a vehicle history report, get the VIN so you can do a title search for liens or other issues, and bring it to a mechanic for an inspection.
Fewer choices. When buying pre-owned, you don’t get to be picky about things like colors and features.
Risk. Even if you do your homework well, you run the risk of buying a car that has issues.
To help minimize risks when purchasing a used car, buy from a reputable dealership and request a report of the car’s history (e.g., Car Fax).
Whatever option you choose, let Arizona Federal’s car-buying experts do all the legwork for you. Get started at CarBuying.ArizonaFederal.org.