New or Used? Tips on Buying a Car

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Congratulations! You’ve graduated to the next phase of Adulting 101: buying a car. This process isn’t wildly different from shopping for a home, but it does come with its own set of questions. Do you prefer used versus new? Style versus functionality? Speed versus comfort? Diesel versus gas? We’re not trying to be clever here (well, sometimes), but perhaps the easiest way to answer these questions is with additional puzzlers. For example…

Do you have a down payment or a trade-in with equity?
We’ve talked a lot about how important credit is, and here’s another case. Good credit invites fewer issues when buying a new car (with little to no down payment) than a used one. That’s because many manufacturers offer incentives for new cars that won’t be found in the used-car market. #Exclusive. These incentives include rebates and discounted financing. The bottom line is that financing a used car will almost always require money down.

Are you prepared to take the new-car depreciation hit?
Depreciation is a fancy way of saying your car will gradually lose value over time. It’s a sneaky process because many don’t realize they’re losing money until they want to sell.  If depreciation is a top concern, it makes more sense to buy used. Why? Because on average, a new car loses 20-30 percent of its value the moment you drive off with it and leave the lot. Some cars lose 50 percent within three years. But if you’re in it for the long haul and plan on driving the same car for at least 10 years, depreciation won’t really mattera decade-old ride won’t be worth much on the market anyway.

Can you afford the maintenance of a used car?
Let’s be real for a second. If someone is trying to sell their car, perhaps via Craigslist or another website, they may not be entirely honest about its condition. That means it’s up to you to handle all repairs and maintenance from the second you buy it. Meanwhile, some carmakers offer free maintenance for the initial years of new-car ownership, which is a big contrast. Buying a used car from a stranger is a bit like rolling the dice. If you’re not the gambling type, consider buying a nearly new car, as you may inherit some fraction of the new-car warranty.

Do you have alternative methods of transportation?
Imagine your used car needs a lot of repairs and winds up at the shop for weeks, if not months. How will you get to work? How will you pick up your kids from school? Make it to a job interview? Pick up groceries? Be prepared to cope with the time a used car spends at the repair shop. It’s helpful to have a spouse, domestic partner, or reliable friend with a caror at least a bicycle. Thank goodness for Lyft and Uber, right? This issue may not matter as much if you live and work in the city or downtown. But for you long commuters, have a backup ride in your pocket just in case.

Okay, now let’s break it down even more. Pros and cons.

The advantages of a used car include:

  • Lower car insurance rates. When a vehicle is worth less, it costs less to insure it.
  • Cheaper registry renewals. The cost of registering a used car goes down every year.
  • Less stress. Used cars often come with a few dings, so who cares if you scratch it a little?
  • Option to move up to a luxury car. Because you’re paying less everywhere else, you can shop in a higher car class.

The advantages of a new car include:

  • Easier shopping. If all new cars are assumed perfect, you’ll spend less time evaluating each one.
  • More financing options. Automakers are ready to offer cash incentives to lure shoppers, and new cars generally have better interest rates.
  • Bells and whistles included. GPS? Check. Cruise control? Yep. Backup cameras? For sure. Parking sensors? Duh. It may take years for these advanced technologies to appear in used cars.
  • Bragging rights. Okay, this one is a little materialistic, but prestige means a lot to some folks.
Words to live by when buying a car: don’t listen to the stereotypes, and see for yourself. There are always exceptions to the rule. Be patient, do the math, and define your goals. People shop for cars for many different reasons, so there’s no right or wrong between used and new. It all depends on personal preferences. And when you do find the car of your dreams, let’s chat about getting you a loan.
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