Knowledge Is Power Banner
Get Financially Fit
Use our library to help you learn about banking and credit.
Print Section

Car Buying 101: Should I Buy A New or Used Car?

Buying a new car is an exciting experience. Yet for it to be a successful one, it's important to do your due diligence. One of the first questions you should answer when beginning your car buying journey is whether to opt for a new or used vehicle.

To help you make the best choice for your needs, let's take a closer look at the various pros and cons of buying used and new.

The benefits and drawbacks of choosing a new vehicle

No one can deny the thrill of driving a brand new, sparkling vehicle right off the lot. Getting a car in pristine condition isn't the only advantage of this approach, however. Some of the other key benefits of opting for a new vehicle include:

  • Manufacturer's warranties and service plans. Most new cars come with a minimum three-year, 36,000-mile comprehensive warranty and you can opt for extended warranties that last 100,000 miles or more. Used car warranties are typically much shorter and often cost extra.
  • New car loan rates are more competitive than refinance rates. Lenders will usually give you a better interest rate if you buy new.
  • New cars break down less often. Older cars often need significant and costly repairs that can arise at inopportune times.

While these advantages are substantial, buying a new car doesn't come without a few strings attached. Some of the less positive things to consider when looking at new vehicles include:

  • Higher cost. The average new vehicle costs well over $30,000, making it a serious financial commitment.
  • Monthly payments and insurance will be higher. Not everyone is in the best position to assume these added costs.
  • Immediate depreciation. You've heard the old saying that your new car will lose value as soon as you leave the lot? It's accurate, and an important consideration for new buyers.

The benefits and drawbacks of buying used

If the added financial expense and higher insurance costs of buying a new car doesn't fit into your budget, it might be time to consider opting for a pre-owned vehicle. Some of the key benefits of a used car include:

  • Costs are lower. The average used car costs less than $20,000, and there are used cars to fit almost any budget. Monthly payments and insurance are also lower.
  • You can buy a certified pre-owned vehicle. These cars are well-inspected and certified to be in excellent shape.
  • You can buy from a private party rather than a dealer, something that may get you a better deal.
  • Depreciation isn't as rapid.

While these benefits are certainly attractive, there are also some negatives of which to be aware. These include:

  • There may be little to no time left on the original warranty, though you may have the opportunity to buy a separate protection plan.
  • Older cars have wear and tear, which means that more repairs and maintenance are likely.
  • The interest rate for a used auto loan is likely to be higher.

In conclusion

Evaluating these benefits and drawbacks -- and seeing which option best fits your needs and circumstances -- is the smartest way to choose between a new or used car. Please contact KeyPoint today for all of your credit union car loan needs