Before you make any decision about AWD or two-wheel drive, manual versus automatic transmission, car or SUV (or truck), you probably want to determine if you’ll buy your vehicle new or used.
|Pros of buying new
||Pros of buying used
|You’re the first and only owner of the car, which can help you get a reliable vehicle and avoid potential maintenance issues.
||You can buy closer to true value (and avoid the huge drop in depreciation that happens when you buy new).
|You can choose exactly what you want, right down to the details of the car’s interior.
||You’ll face lower overall expenses, since taxes and insurance costs will be less.
|You can get the latest safety and other features, and enjoy top-notch gas mileage (even in vehicles like SUVs).
||You can get features and extras for less, because you aren’t paying dealer premiums and markups for more expensive packages.
As you can see, there are good reasons to consider either option. But the biggest drawback to buying new is the fact that cars depreciate in value the moment you take the keys and drive off the lot. That could mean you pay a steep premium for the luxury of being the first owner.
“When buying a car new, you purchase it at its absolute highest value point,” explains James Matthews, a financial planner based in Charlotte, North Carolina. “The manufacturer sold it to a dealer, who marked up the price for resale to you.”
Matthews says that used cars, on the other hand, already depreciated in value and more often reflect their actual retail value. Buying a car used can save you that markup, which often means keeping thousands of dollars in your pocket.
But if you’re set on getting behind the wheel of a brand-new ride, at least plan ahead and time when you buy. “On occasion, dealers get anxious to sell last year’s inventory at the end of a model year,” says Matthews. “You may be able to buy a new car for the same price as a used one that’s one to two years old.”
If you buy new, get the most for your money. Again, plan ahead and choose a vehicle you’re most likely to drive for 10 or more years. Today’s cars can easily run for well over 100,000 miles. Buying a car new makes a little more sense if you plan to drive your vehicle for its entire working life.