Should I Buy a New Car or Used Car?
Example of new, flashy car
Ever since I was younger I was aware that cars depreciate in value rather than appreciate. This is why I bought a used economical 4-cylinder car and continue to drive it without trading it in every couple of years. Especially with new cars, the moment you drive off the dealership lot the car depreciates in value. There is not a one size fits all answer to the question: Should I buy a new car or used car? But, I wanted to give everyone something to think about before making this decision for themselves.
The higher the lifestyle, the more expensive it can be. Brand new, flashy cars come with higher expenses than used, economical cars. Of course, the initial price tag is much higher, but it doesn’t stop there.
Now, let’s take a deeper look into this. To conduct our analysis comparing basic expenses such as the initial cost, insurance, and maintenance & repair, and fuel , the new car I will reference is a flashy, luxury car and the used car is economy class (generally 4-cylinders).
Initial Cost: This is an easy one. Brand new, more flashy cars can sometimes cost twice as much as used cars or more. In addition, if you need to take out a car loan to buy the flashy car, the interest expense can severally inflate the price. (Note: please do your homework regarding this analysis if this is the direction you are thinking about making.)
Winner – Used Car
Insurance: There are many factors that affect and make up your insurance premium such as where you live, but also, typically speaking, the newer car you drive (and more flashy), the more you will pay for insurance to cover the car.
Winner – Used Car
Maintenance & Repair: As with a large house, more expensive products have a higher price tag on maintenance and repair. As a simple example, tires on some flashy cars (such as the Infiniti G35), brand new tires can cost around $1,500 for a set of four. On a economical car such as a Honda, a set of tires would cost in the neighborhood of $400. Although, the drawback to buying a used car is that it could need A LOT of repairs, but this is why it’s important to have a mechanic inspect the car before buying ANY car!
Winner – For Maintenance Used Car, but Repair could be a tie depending on condition of used car (this is why the inspection is important)…
Fuel: High-end, luxury cars require higher grade fuel, which adds up quickly. Economy cars can run on the lowest grade fuel.
Winner – Used Car
Besides making the decision to buy a new or used car, you should also consider how long you are planning on keeping it. Since this is an asset that depreciates in value, the longer you hold onto it, the more you will get your moneys worth. For example, I bought a used, 2-year old, economical car almost 12 years ago and paid around $8,000 for it. This equates to about $667 per year. To keep things simple, I did not include the maintenance and repair costs, but they are nominal considering it’s over such a long time period. Overall, I consider this an EXCELLENT value for my money! 
Now it’s up to you, do you buy new or used?
Readers: Does anyone have any buying new or used car tips or experiences they want to share?
Image: M – Pics / FreeDigitalPhotos.net
I was always told growing up, “A Car is the worst investment you can make.” And he was right… to a point. I’ve bought new (and they’ve run forever, with few maintenance issues other than regular – because I take care of them) and I’ve bought used (even off family, and had to put so much into it). I recently bought a used car off a family estate – old man, good maintenance, etc. – it’s running great and will last a while. But it’s a challenge… my experience has been the new car purchases (if not expensive cars) have done better for me in the long run. I once bought a Sprint for $10,000 and drove it 300,000 KM or 186,400 MI without doing anything other than oil, transmission fluid, tires, and one set of brakes. That was a great investment – even though it was new.
You’re right Doc, it can be a tough decision to buy new or used. I’ve heard stories both good and bad about both options…
I bought a used car that was one year off the model year and I plan to drive it until the wheels fall off! lol They tried to get me into a new car at the dealership but I said, no thank you, I do not want to be upside down in my car loan as soon as I put the car in drive. Now I am almost done paying off my car loan but even if I sold the car today I would get enough to cover the remainder of the loan.
If you do decide to get a new car, and borrow to pay for it, get GAP insurance! Look it up if you don’t know what that is but it’s great for peace of mind.
Great advice FSYA. I bought my car when it was only 2 years old, meaning I bought a relatively new economical car. I have held onto it for 10+ years. I think the second time around I will use the same strategy, buy used relatively new, economical car (of course, maintaining it to make sure it lasts) that I plan on keeping for 5-10 years. I think this is best way to get the most value out of a car.
I haven’t had a new car yet! The closest I got to was owning almost new cars were cars that were a year old. Let the original buyer eat the out-the-door depreciations!
Well put MC – “Let the original buyer eat the out-the-door depreciation.” Great comment.
I will always buy used. The cost of repairs doesn’t even compare to the money lost in depreciation. With that said, I will try to stay with 3-5 year old cars and drive them for a long time. It is always hard to judge when is the right time to sell and upgrade. Sometimes you get lucky and other times you don’t.
Great point 20′s Finance. Most people seem to agree that buying a used, relatively new car makes the most sense.
i would say used…you can get a great deal and they are for the most part in great condition!