New or Used: Weigh the Benefits Before Buying Your Next Car
Practical tips and links to help set your course on the car buying journey.
Car shopping can be exciting, yet overwhelming. Make, model, body type, color, safety features, price – you get the picture. The list seems neverending. With so many choices to make on the road to car ownership, you could stall out before you’ve taken your first test drive. But, there’s a way to regain control of the car buying process.
Your first decision should be whether a new or used vehicle is the better choice for your finances. Before visiting the next car dealership showroom or contacting a private seller, weigh the benefits of purchasing a new versus used car.
Benefits of Buying a Brand New Car
You Have Access to Lower Interest Rate Loans
Car dealerships are motivated to make room for next year’s models and offer pricing discounts and financing specials to increase sales. Along with manufacturer rebates and dealer incentives such as cash discounts, new cars are attractive due to the potential for low interest rate financing.
You Can Remain Maintenance Focused, Not Repair Focused
A new car can mean less worry for you and your wallet if you follow the vehicle maintenance schedule. Generally, buying new means fewer repairs. You can review new car reliability ratings from independent sources such as J.D. Power and Consumer Reports.
If an issue does arise, as a new car owner you can reach for the vehicle’s warranty paperwork before reaching for your wallet to pay for the repairs. New cars come with a limited manufacturer’s warranty, at no added cost. Warranties are sometimes available for used cars, but they often must be purchased for an additional fee.
You Have Trade-In Allowance Options
If you have a vehicle to sell and want to avoid the hassle of selling it yourself, consider trading it in to reduce the sales price of the new car. Dealerships may offer special trade-in promotions, e.g., “$4,500 guaranteed trade-in”, to help spur the sales of their new vehicles.
Don’t worry if you can’t find these kinds of offers. Trusted industry websites provide online calculators to help figure your vehicle’s trade-in value. For example, Kelly Blue Book® Trade-In Value or Edmunds® Used Car Values – What’s My Car Worth might help save time and money by providing data to negotiate a higher offer for your trade-in.
Benefits of Buying a Used Car
Someone Else Takes the Initial Depreciation Hit
Used car buyers can escape the immediate drop in the car’s value, known as depreciation, which occurs soon after a new vehicle is driven off the dealer’s lot. CarFax®, a company that compiles vehicle histories for buyers and sellers, claims that car depreciation rates of 20 percent or more are standard in the first year of ownership. After five years, the new car’s value may have sunk to 40 percent of its original purchase price, making it an affordable used option.
Lots of Options
There are numerous used vehicles available, both from car dealerships and through private parties. You can choose from a variety of models, colors, features, and prices.
Private Party – Used
If you decide to purchase from a private party, you might avoid the dealership markup. The markup is the difference between the amount the dealer paid for the used car and the dealer’s expected profit.
Follow these used car shopping tips when dealing with private parties:
While it’s easy to rush the purchase after weeks or months of searching, always take time to test drive the vehicle to evaluate its condition. The seats may be comfortable and there may be plenty of passenger and trunk space, but there are other things to examine. In addition to stop-and-go performance, you might also want to make sure these items are in working order:
Heater/air conditioning
Manual or electric windows and car locks
Lights (signal, brake, reverse, and headlights)
Convenience technology features (touch-screen displays, remote start, etc.)
Safety technology features (blind spot monitoring, back-up cams, etc.)
Try to inspect the car early in the day in full sunlight. As evening approaches, it’s easy to overlook or miss issues in your rush to close the deal.
Ask for copies of all repair and maintenance documentation. Compare records with the manufacturer’s suggested maintenance schedule.
Hire a licensed mechanic to perform an inspection before you complete the purchase. A recently detailed car can look perfect, but you won’t know about mechanical issues until an experienced professional looks under the hood.
Dealership – Used and Certified Pre-Owned
For less risk, consider shopping for a used or certified pre-owned vehicle from a dealership. They may have used cars in their inventory that are still under initial warranty. If the warranty has expired, dealers may offer an auto service contract, for a fee. This optional protection can help reduce the cost of future repairs.
Certified pre-owned vehicles must pass a rigorous inspection and undergo necessary repairs to receive the certification. Many certified vehicles include a limited bumper-to-bumper warranty, an extended warranty, and roadside assistance.
Some used and certified pre-owned dealerships, such as CarMax®, allow you to search their inventory online without the need to visit their physical location. Once you’ve identified a car you like, you can complete the test drive by requesting vehicle delivery to your home or work.
Online – Used
Online information and technology companies, like TRUECar®, partner with dealers to help you locate your ideal vehicle. They collect pricing data on car listings nationwide to help determine whether the price you’re considering is a “Great Price”, “Good Price”, or “Above Market Price”, based on other similar cars listed for sale in your area.
In addition to helping narrow down your search using a variety of filters, TRUECar® allows you to confirm the car’s availability through their website. There’s no fee to buyers for using their service. Edmunds® and Kelley Blue Book® offer a similar service at no cost.
Should I Buy A New or Used Car?
Only you can decide whether a new or used vehicle is right for your lifestyle, budget, and financial goals. As you consider your options, remember that interest rates will greatly affect the total vehicle cost and your monthly payment. Use a loan calculator to estimate how interest rates and repayment terms affect auto loan payments.
Let Sea West help you save money on your next vehicle purchase. Eligible borrowers receive lower interest rates and longer repayment terms when compared to most banks and in-house dealership financing programs. Our New Auto, Pre-Owned Auto, and Contemporary Auto Loans can quickly get you on the road and off to your next adventure. Apply now or contact us at 1-800-732-9378. A friendly member representative is waiting to speak with you.
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