Next to purchasing a home, a vehicle purchase is the biggest financial purchase that most people will make. Like all major decisions, buying a car comes with a host of potential challenges and questions that you must consider. At the top of that list, you must decide whether to purchase a new or used vehicle.
Since we know a thing or two about car buying, our recommendation is that you buy a used car. However, since this is a nuanced process, this guide is designed to detail the pros and cons regarding the purchase of a new car versus an old car.
Don’t get scared off by that purchase price!
There are some noteworthy advantages to purchasing a new car. If you’re buying a brand new car from a dealership, the vehicle will likely have a warranty. New cars usually only need general routine maintenance since they are unlikely to need repairs for the first five years.
New cars are usually eligible for lower interest rates when financing with the dealer, meaning that you’ll get a reduction in the interest paid over the life of the new car loan. New cars are also equipped with the latest technology. This means that navigation, smartphone interactivity, increased fuel efficiency, improved emissions, and any other new safety features will be available to you.
Depreciation: new car costs
The number one disadvantage of purchasing a new car is depreciation. New cars depreciate in value the moment they leave the car lot. Over the first three years, an average new car sees its most significant depreciation.
With new vehicles, you are also at risk of purchasing a car during the first year when there have been design alterations that affect the performance or safety features of that particular model. Even just changing the engine in a new model can cause performance issues that are not seen right away.