One of the first things to decide when you're going to buy a car is whether to buy a brand new car or a used car. Some people will inevitably assume it's just a case of whether you can afford a new car, and if you can’t, you then have to settle for a used model instead. In fact, there's a lot more to it than that and I'm going to gives you the pros and cons of buying a new car vs buying a used car.
Everyone prefers new cars, don’t they?
It would be perfectly understandable if you were to assume that everyone would prefer to buy a new car if they could afford it, but you'd be wrong. There are some very good arguments for and against buying a new car or a used car that I'm going to cover here, but some people are set in their ways and will only ever consider one or the other.
In fact, in my experience, it’s the committed used vehicle buyers who are the most evangelical about their preferred choice and are almost impossible to convert to buying new. That's fine, and as a dealer, I always preferred selling used vehicles as they tend to be more profitable and every single one is unique – unlike brand new models.
On the whole, though, most buyers would prefer a brand new vehicle if they are given a choice, but a lot will just assume their budget puts them into one category or the other.
Pros of buying brand new
- A full manufacturer warranty
- You are the first owner/driver
- Latest technology
- No hidden history
- Finance options
- Smells great
Full manufacturer warranty – One of the best reasons for buying a brand new car is the fact you get a full manufacturer warranty with one and that gives you a lot of peace of mind. You know that for the duration of that warranty if anything goes wrong and it isn’t a matter of wear and tear, the parts and labor for getting it fixed won’t cost you a thing. In some cases, you might even be provided with a replacement vehicle while yours is being fixed.
A lot of new car warranties also come with some level of roadside assistance, which can cover you for your vehicle being fixed at the roadside, transportation to a service center, onward travel for you and your passengers, and even for the cost of accommodation and a rental car if necessary. Most manufacturer warranties are for three years or 36,000 miles, whichever comes first, but some are for considerably longer. Kia currently offers a five-year/60,000-mile limited warranty and an industry-leading 10-year/100,000-mile powertrain warranty.
You are the first owner/driver – There's just something great about being the first owner or driver of a brand new car. It's never been smoked in, it's never had anyone's dogs or other pets in it, and nothing has been worn or damaged. That's obviously going to change as you use it the way you want to use it, but at least it will be you choosing how the vehicle is used and what is or isn’t done inside.
You also know you’re not inheriting any care or maintenance deficiencies of a previous owner. You know there haven’t been any missed services or corner cut when it comes to routine maintenance. You also know that every single part of the car is a genuine part and not some cheap replacement parts that have been used for their cheapness instead of their quality.
Latest technology – Whether it's the latest passive or active safety equipment, the most advanced infotainment and connectivity features, or the newest and most efficient powertrain; buying a new car means you've got the latest technology on board and not features and equipment that have now been superseded and improved upon.
Let's be honest, we all love to have the latest thing, don’t we? It could even just be the exterior styling. If the model you’re interested in has just launched an entirely new generation after a complete redesign, wouldn’t you rather have the new one than the old model that's now going to look severely dated?
No hidden history – I could bang on about how used vehicle buyers should spend the money on getting a professional to look over a vehicle before they commit to buying to make sure there's nothing wrong, but not many are actually going to do it. At least if you buy a brand new car you know there's no hidden history to worry about.
A brand new car hasn't been thrashed by a boy-racer before you bought it, and it hasn’t been driven around at below 20 mph by a little old later who never goes out of town for all its life either. You know it's never been stolen, never been in a major accident, doesn’t have outstanding finance on it, and it's never been in a minor crunch either.
You know the brakes, suspension, tires, exhaust, transmission and everything else is brand new, so there's no unknown wear and tear and tear items that might fail on you at any moment.
More finance options – You will have more options when it comes to financing a brand new vehicle than you will with a used vehicle. There will be some finance options that won’t be available to you if you’re buying used that you can take advantage of if you’re buying new. New cars are also more likely to have special finance offers such as low-rate finance and even deposit contributions that can make buying a brand new car more affordable than you might have imagined.
Smells great – It's a small thing, I know, but there really is nothing like the smell of a brand new car, is there? Actually, in all my years in the auto business I've only come across one person who absolutely cannot stand the smell of a brand new car interior. Unfortunately, it wasn't a customer or a workmate; it's actually my wife! Despite this, we're still very happily married, although it probably helps that she doesn’t drive so she doesn’t get too much of a say about the car we have.
Kudos – We can all make laudable pronouncements about how we don’t care what others think of us or what they think about what we are driving, but most of us really do. Taking delivery of a brand new vehicle is a great feeling, and you know you’re going to be keeping it gleamingly clean for at least the first couple of weeks until the novelty wears off.
Regardless of what we might say, a brand new car is always going to be something of a status symbol in a way most used cars can never be. What the car is inevitably matters when it comes to the impression it makes, but a brand new car is a brand new car and it's always going to give the impression you’re doing pretty well for yourself, even if you’re not really.
Cons of buying a new car
- The impression it can give
- Value for money?
Cost – A brand new car is always going to cost more than the same vehicle would if it was used. That just stands to reason and it’s a fact of life. Even if you go for one of the most affordable new cars available, such as a brand new Nissan Versa, it's still a substantial amount of money. If you just want a cheap ride to get you from a to b on a regular basis you can probably find something to do the job for less than a thousand bucks.
Brand new cars can be a lot more affordable than you’d imagine sometimes, but you’re still going to be starting at a minimum of $12k or more. Monthly payments can be a different matter, but we'll look at that later.
Depreciation – Depreciation is the biggest cost associated with buying and owning a vehicle of any type, other than an old junker, but it's a serious cost when it comes to buying a brand new car.
Depreciation is the amount of money a vehicle's value drops by from when it's bought to the day it's sold. Some vehicles depreciate a lot less than others, but you’re still going to lose a substantial amount of money on a new car as soon as you drive it away from the lot. For a start, you’re going to lose the sales tax, the dealer margin and the destination charge. In some cases, you could even be looking at losing as much as 60% or more in as little as three years.
If there's one reason to not buy a brand new car it has got to be the depreciation. If you buy something like a Toyota Tundra or Tacoma your depreciation will be less than it will be with some other models, but new vehicle depreciation is still a hard pill to swallow.
Value for money – One person's idea of what represents value for money and another person's idea can be very different, but it can be questionable just how much value for money there is to be had with a brand new vehicle.
Some brand new vehicles have better levels of standard equipment than others, but a brand new vehicle probably isn’t going to give you as much for your money as something like a demo or a pre-registered example of the same model.
Pros of buying a used car
- More affordable
- Insurance costs
- You could get a better model
Depreciation – Just as depreciation is the biggest reason not to buy a brand new vehicle, it's probably the best reason to consider buying a used car instead. When you buy a used car you know that someone else has had to take the pain of suffering the biggest level of depreciation that vehicle will ever experience.
Although you are still going to have depreciation to deal with, it's not going to be anywhere near as much as it is with a brand new model. If you look at how much some expensive luxury cars depreciate by in their first few years the amount of money really can be pretty eye-watering. Why wouldn't you want someone else to take the pain so you can come in when the worst of it is over?
More affordable – It stands to reason that a used car is more affordable to buy than its new equivalent, so used cars are cheaper than new. You might not be able to afford a new car, but if you absolutely need a car the used option can be an affordable lifeline. With some of the models that depreciate the worst, you can buy one three years old with reasonably few miles on the odometer for less than half of what it would have cost brand new.
Insurance costs – Although not always the case, a lot of the time a used vehicle will be cheaper to insure than a brand new model. There are lot of factors insurance companies take into account when issuing a quote for car insurance, but the cost of providing a replacement is a big one.
If your car is worth $15,000 instead of $30,000 for its brand new equivalent, the risk to the insurance company is less because if it was stolen and unrecovered or written-off in an accident it would only cost the company half as much to replace the used model. It, therefore, stands to reason that the insurance premium is going to be lower.
You could get a better model – Let's say you have a budget for your next car of $20,000. You’re going to be looking at mostly entry-level or low trim levels of most brand new cars in that kind of price range. However, if you go for something a few years old you could get a top-of-the-range version of a model your budget would only stretch to an entry model if you bought new.
This means you could get a used vehicle with features like leather upholstery, navigation, heated seats and parking sensors, instead of a brand new version with just the basics. It could also mean a bigger, more powerful model for your money if you buy used, and that could be an important factor if you’re looking at something like a full-size pickup truck or a family SUV.
Cons of buying a used car
- Maintenance costs
- More expensive finance
Reliability – One of the first things you are going to find different with a used vehicle over a brand new one is likely to be a difference in reliability. It's not that used cars are bad, it's just the natural way of things that as something is used more and more, things start to wear and fail.
There are always going to be things like tires and brakes that wear as time goes by, but it's the same thing with more intrinsic items such as the engine and drivetrain. Now, if a vehicle is looked after properly, serviced when required, and issues sorted as soon as they appear, a used vehicle can be perfectly reliable.
The problem is when you buy a used car you’re never a hundred percent sure how that vehicle has been looked after and driven before you bought it. It could have a spotless service history, but you still never know if corners have been cut with parts or if some problems have had temporary fixes.
Warranties – If you buy a used vehicle from a private seller you’re not going to get any sort of warranty at all. Although you will get a warranty of some sort if you buy from a dealer, a used vehicle warranty is never going to be as comprehensive as a new car warranty.
Any manufacturer warranty remaining will carry over, so if you buy a vehicle that's two years old from a private seller you'll still have a year or so left. It's the same when you’re buying from a dealer, but even if there are just a few months of the warranty left, the dealer will probably top it up to a full year. Even so, the top-up warranty isn’t going to be as comprehensive as the manufacturer warranty.
You can go and buy a warranty for almost any used car you buy, but it's not going to cover as much as the original manufacturer warranty did. It's simply because as time goes by things wear and are more likely to fail, so whoever is issuing a warranty for a used vehicle isn't going to cover as much as a new car warranty.
Maintenance costs – As sure as night follows day, the older a vehicle gets the more it costs to maintain. You’re not going to have to worry about brake shoes, rotors, tires, exhaust or any other wear and tear item for a while when you buy new. With a used car there's any number of things that you might end up having to pay to fix sooner rather than later.
Servicing also tends to cost more as a vehicle gets older. If you only keep your vehicle for two or three years you'll only have to pay for a couple of relatively affordable services. However, with a lot of vehicles, the 48-month service is often a big one and it can be pretty expensive. If you've just bought a used car from a private seller that's a few months away from a 48-month service you'd better be prepared for a sizeable charge in the not-too-distant future.
More expensive finance – I've already mentioned this as a positive for buying a new car. Finance tends to be more expensive for used vehicles. The rates are often higher, the length of available finance agreements are often shorter so payments are higher, and you don’t get some of the deals and offers like deposit contributions you get with new cars.
Yes, you might well see a 0% finance deal on some used car lots, but that deal will have been put together by subsidizing the rate down with money that would otherwise have been available for the dealer to discount from the asking price.
Low-rate and 0% deals on new cars are often subsidized by the manufacturer, but a 0% deal on used cars is going to be subsidized by the dealer. They're not going to give you a big discount and 0% finance unless the vehicle is overpriced in the first place.
Compromises – If you decide you want a brand new Camaro with the 335 horsepower V-6 engine in Riverside Blue Metallic with Ceramic White Leather seats, you can go to your local Chevy dealer and order one. If you are buying new you’re going to have to make compromises. You might be able to get the trim level and engine you want, but the color you want might not be easily available.
If you’re prepared to travel the length of the country or take a massive risk buying a used vehicle entirely online, you might be able to get more or less exactly what you want. But if you're shopping within your local area, you might have to settle for something that's not necessarily your first choice.
You might find the color and engine you want be the condition might not be as good as you'd like or it might have too many miles on the odometer. And if you want a particular vehicle with no more than average miles at a certain age, you could be severely limited on color, interior and trim levels.
What would I recommend?
I make no bones about the fact I much preferred selling used vehicles to new vehicles when I was in the retail auto business, and I've bought and sold more than my fair share of used cars for myself over the years too. However, I'm not sure I can actually bring myself to recommend used cars over used cars these days, but only with certain caveats.
If you do above average miles per year I'd probably recommend buying an ex-demonstrator, and if you don’t want finance and you're on a very limited budget a used car is probably your only option.
But if you do average miles or less and you don’t have an issue with finance, I'd go for a brand new car every time. You can lease some sensational cars for less than $200 per month with very reasonable down payments, and you can get something like a brand new Nissan Versa for under $180 per month with no down payment whatsoever.
You can even get some quite prestigious luxury models for very modest monthly payments because the lease is based on the expected depreciation as much as the MSRP. To find out more about leasing if it's right for you by checking out another article I've written here.