Are you in the market for a new vehicle? It can be difficult to choose between a brand new car and an older used vehicle. While there is no single right answer for everyone, we are providing the financial risks and benefits of both options to help you make the smartest financial decision possible when you purchase your next car, truck, or other vehicle.
Buying a New Car
Purchasing a brand new car can be exciting. With so many new options coming out each year, you may begin to think you need all of the latest features – backup camera, heads up display, heated and cooled seats, or a panoramic sunroof.
Buying a new vehicle makes it easy to find the perfect car for you. If your local dealer doesn’t have what you are looking for on the lot, they can easily order one for you with everything you want.
Buying new also provides you with financing options you cannot find with used cars. Dealers may offer lower financing rates and cash-back incentives that can make it seem like you are getting a good deal. Plus, there is the peace of mind that comes with a comprehensive 3-year/36,000-mile warranty and the option of a prepaid maintenance plan.
However, for many, the sky-high monthly payments of having everything you want in a new car may not be worth it.
Automotive technology is constantly evolving and, while you may love your car today, how long do you plan to keep it? According to Edmunds, a new midsize sedan that costs $27,660 will lose $7,419 in value over the first year.[i]
For some, that loss in value may be worth the prestige and features a brand new car, truck, or SUV has to offer. Others may choose to go with the short-term option of leasing a new car. Leasing provides access to the latest models but limits the miles you can drive annually, and you may have to pay additional fees if you end the lease early. Think about your daily commute and whether you would be able to stay within those limitations.
Buying A Used Vehicle
The most obvious benefit of buying used is the lower price tag. However, with many people utilizing leases and returning cars to the dealership after two or three years, the benefits can go far beyond price.
If you don’t need a car right way, you can find your next car by searching leading websites such as Cars.com and AutoTrader.com to discover used cars in your area. Simply type in your must-have features or color and access hundreds of used car inventories in or near your community.
Buying a recent-model-year car through a dealership may also provide you with a sense of security with a thorough multipoint inspection and potential extended warranty options.
For many car buyers, the biggest decision point comes down to the price tag. However, car expenses go beyond the sticker price of the vehicle. Make sure you factor in the cost of insurance, the price of gas, and the general cost of maintenance for your next car. High-end cars require expensive high-end parts when something goes wrong. Other cars may come with fewer miles per gallon or require high octane gasoline that will add up throughout the year.
Running a test budget can help you fully appreciate the cost of a new or used car, truck, van, SUV, motorcycle, or other vehicle.
Financing Your New Car
Start by deciding how much you have to use as a down payment for your car. From there you can use the Bank of Internet USA Auto Loan Calculator to see how much you can afford each month. By knowing your budget, you can work backward by factoring in your maximum monthly payment, the duration of your auto loan, and the interest rate.
Many times car dealers offer different interest rates based on the length of the loan. Talk to your lender to find the ideal combination of interest and loan term to meet your monthly payment needs.