What to Consider When Buying a New Vs. Used Car
Point of Interest
To properly evaluate the costs of buying new vs. used cars, consider warranties, maintenance costs, resale value and other factors in addition to the actual purchase price.
If you’re in the market for a vehicle, you may be considering your options for a new vs used car. Statistically, more than twice as many Americans buy a car used vs. new; over 40.8 million used cars were purchased in 2019 as compared to 17 million new car sales the same year. But used cars require more research to avoid overpaying, and reliability is not guaranteed with older vehicles. For some, the perks of owning a new car outweigh the cost savings of purchasing a used vehicle.
Buying new vs. buying used
When deciding whether to buy a new or used vehicle, you should consider several factors that will affect the overall costs associated with owning your car over the long term.
These reports will give you a complete history of everything associated with your vehicle’s VIN. This includes odometer readings, maintenance records, accident reports and title issues. When shopping for a used vehicle, it will be especially important to get a copy of this report and make sure you know the car’s history before committing to a purchase. Some used car dealerships provide a free CarFax report, but others do not. Be sure to ask your dealership when starting the buying process or plan to pay for your copy out of pocket.
New vehicles will have a higher initial purchase price than used vehicles of the same make and model. For some vehicles, the value depreciates significantly within the first few years, so you can sometimes get considerable savings when purchasing a slightly used vehicle that is two or three years old. If you are financing your auto purchase, the purchase price will also affect the amount of your monthly payment, so it is important to have a budget in mind before beginning your shopping. Financing your auto purchase will also be heavily dependent on auto loan rates, and you can compare how different rates affect your monthly payment using our auto loan calculator.
While both new and used vehicles will require some routine maintenance such as oil changes and tire rotations, used vehicles tend to have higher maintenance costs in the form of repairs and parts replacements. Many new vehicles will also include at least a partial warranty, helping to further offset the out-of-pocket maintenance costs associated with your new car.
Both new and used vehicles can include a warranty, and consumers can often purchase a separate extended warranty from a private company if one isn’t offered on the vehicle from the dealership. However, as the vehicle ages, the warranty cost generally increases. Since the warranty cost is often rolled into the purchase price at a dealership, it is often an overlooked cost. Be sure to ask your sales associate for an itemized report before signing any paperwork so you are fully aware of the price and coverage provided by your warranty.
Once you purchase a vehicle, you will need to insure it. Most insurance companies require full coverage on any vehicle that is financed, which is especially common with new vehicle purchases. The replacement value will also increase your monthly insurance costs, so new vehicles tend to be more expensive to insure than used vehicles.
Some car manufacturers are known for producing vehicles that hold value and stay in good running condition for many years. Other manufacturers are known for making cars that are stylish or safe in an accident, but they may not last as long. If you are partial to a specific brand, this can affect the purchase price, warranty costs, project maintenance and resale value. Doing your research on brands before beginning your shopping can greatly affect the cost of ownership over the life of your car.
Best brands to buy used
If you plan to shop for a used vehicle, it’s important to look for cars that are dependable after many years on the road. Fortunately, JD Power and Associates take the guesswork out of used car comparisons by giving yearly awards to manufacturers that consistently meet certain qualifications. The well-known JD Power Dependability award is given to brands that have the fewest problems reported per 100 owners on a 3-year-old vehicle. Over the past 20 years, three brands have won this award repeatedly: Toyota (17 out of the past 20 years), Chevrolet (16 out of the past 20 years), and Honda (14 out of the past 20 years).
Toyota takes confidence in its used vehicles one step further by offering a 12-month, 12,000-mile warranty on all certified pre-owned vehicles. Chevrolet consistently has one of the largest lines of passenger vehicles, so whether you’re looking for a small economy car or a robust work truck, you can likely find a Chevy vehicle to meet your needs. In addition to its Dependability awards, Honda also boasts two of the top-selling models — Civic and Accord — making it easy for used car shoppers to find plenty of Hondas on used car lots across the U.S.
The most economical cars to buy new
If you’re planning to shop for new cars, Edmunds provides some detailed statistics on a variety of financial and reliability measures on thousands of new car models. Since price is often a major consideration, Edmunds — an online publication based on reviewing and pricing cars — lists the most affordable cars each year. For 2020, the top 3 models include the Chevrolet Spark, the Mitsubishi Mirage and the Nissan Versa.
Edmunds bases its picks on a variety of factors, including baseline and average sticker price, fuel economy and overall quality. After all, an inexpensive vehicle won’t help your wallet much if it’s breaking down every other month. In addition to the factors Edmunds explores, these vehicles are a top pick for most economical based on several other factors:
- Chevrolet Spark: Safety features are important to most car buyers, and the Chevy Spark includes many safety features standard, including a 10-point airbag system, traction control, a driver’s information center and OnStar® capability (requires additional OnStar® subscription). Chevy also included some great tech features in the standard base model. All of these standard features save you money on vehicle upgrades, making the Spark an economical buy.
- Mitsubishi Mirage: With a combined fuel economy of 36 mpg and over 40 mpg on the highway, the Mirage will save you money every time you’re on the road. It also comes with an impressive 10-year/100,000-mile warranty, which is sure to save you on repairs during the first 10 years of ownership.
- Nissan Versa: The standard features on a Versa make it an especially economical choice for younger families. This model includes a myriad of safety features, such as driver alertness for tired or distracted parents and the LATCH system for proper child safety restraints. Combine those features with technology features such as Apple Carplay®, Android Auto™, Bluetooth® compatibility and Remote Start, and you’ll have an economical vehicle that parents and kids can enjoy for years to come.
The final word
When it comes to buying a new vs. used car, there are plenty of factors to consider. Buying used doesn’t necessarily save you money in the long run, but buying new may not be the best choice for your specific needs. Weigh the factors against your budget and commuting needs to find a new or used car that will