To buy a new car or to buy an older one. A consumer stumping conundrum thats been around for years now. In this post we’ll go over the positives and negatives that go along with buying used cars versus new ones.
Your car is on its last legs. Engine light is on. It’s making strange noises. The gas doesn’t work like it used to. One of the door handles is broken. The back left window won’t go down. Sound familiar? It’s trying its best to get you from point A to point B, but sometimes all good things come to an end. Now comes the age old question… Should you buy a new car or a used car?
While considering this question, you should weigh the potential costs of each, and how much you could save buy buying a used car. The average person owns 13 cars in a lifetime. Each one costing on average $30,000. If you can find ways to lower that cost, you can save a substantial amount of money in your lifetime. Buying new or used each come with their own advantages and disadvantages. Unfortunately, there’s no easy answer to this, and it’s quite dynamic depending on the consumer. We’ll look over some aspects to consider when choosing either new or used.
Disadvantages of Buying a New Car:
There’s one almost sneaky part that comes with buying a new vehicle: Depreciation. On average a new car loses 10% of its value when driven off the lot. This rises to over 20% in the first year of driving. So in no time, that shiny new $30,000 vehicle you bought is only worth $24,000. If you apply this to every car bought in a lifetime, you could save up to $130,000 by buying used. It takes a new car approximately 4 years to lose half of its value.
Advantages of Buying a New Car
The main advantage of buying a new car tends to be the peace of mind. Reassurance that the car is ready to go and at peak performance. There’s a sense of confidence in knowing you’ve purchased an asset that will be useful and last you a long time. With technology advancing at exponential rates, new cars are becoming more useful. A decade ago, a new vehicle would have a useful life of 12 years. Today, the average car lasts 23 years. This means you can expect to get more out of a new car now than you would have years ago.
Buying a car fresh off the lot gives you a sense of absolute reassurance. You have a high degree of confidence that the car in fact hasn’t been used, damaged, repaired etc. Furthermore, most new vehicles will come with a warranty. For example, Audi gives a four year, 80,000km warranty on all new cars.
Disadvantages of Buying Used Cars
The biggest disadvantage of buying a used car is really the unknown. Despite service reports, CARFAX and other mandatory reporting, a vehicle’s history can be unknown. Even to a used dealership, repairs and history can go undetected.
After the initial warranty is up, and drivetrain warranty is expired (6 year estimate), used cars will need repairs at some point. Ride Time Canada estimates you should budget $1,200 to $1,300 a year for repairs and maintenance. Of course, this varies with each model, make, previous owners care among other factors.
Advantages of Buying Used Cars
Of course, price point is a major factor that makes buying used cars more appealing. Avoiding the initial depreciation that is associated with a new car can save lots of money in the long run. For example, take this 2018 Audi Q5. It retailed last year with an MSRP of over $45,500. Now in 2019, it goes for just around $40,000 with very low KM’s. The original buyers essentially paid the depreciation for you. Since it has such a low odometer, it’s still covered by Audi’s bumper to bumper warranty.
Next, the stigma around used cars has changed a lot. Just like newer cars lasting much longer, this means used cars are also much more reliable. For instance, 98.3% of Subaru’s sold in Canada over the past 10 years are still on the road. They made to run over 500,000 km’s, meaning a used Subaru can go through several owners while still remaining reliable, and holding much of its residual value. Buying used cars have become more and more popular because of this.
The process of buying a vehicle in general has changed dramatically with technology. All dealerships, sellers are forced to be much more transparent due to the digitization and ease of access to information. Whether it’s a price comparison like the one offered on CarGuru’s, or Google Business Reviews, you can get a good sense of the value and integrity of a used car dealership with a few clicks of a mouse. For more information on navigating through the used car market, you can click here.
Whether you’re looking for a new or used vehicle – make sure to weigh out the costs and benefits of each. Remember that vehicles are only getting more efficient, and their useful lives are getting longer. As a rule of thumb, make sure you purchase within your means. For some people, a new car is no problem and paying that extra depreciation could be seen as purchasing peace of mind. On the other hand, the immediate lost value of purchasing a new car can add up, making quality used cars a better option.