The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
THE GREAT CAR DEBATE: NEW OR USED?
For many of us, a vehicle is more than just the thing that gets you from point A to point B. Your car can be a family transporter, a convenience maker, a friend carrier or a freedom-giver (yay, road trip!). That’s why trading in your ride, or buying a new one, is such a big decision.
One of the most important choices you’ll have to make is whether to buy new or used. According to Edmunds.com, a record number of 40.8 million used vehicles were sold in 2019 — over twice the number of new car sales that year! Estimates for 2020 have used car sales outpacing new ones even more. So, should you jump on the used car bandwagon and save some cash? Not so fast
Click on the cars to find out the monthly and yearly costs of each type.
A Brand New Ride
Enjoy updated tech, warranty coverage and more in a current vehicle.
Average New Car Purchase Price
$37,876 (Kelley Blue Book Feb 2020)
Repairs & Maintenance
8.94 cents per mile average x 15,000 miles = $1,341/year
(Keep in mind some or all of this cost may be covered under warranty)
- Depreciation basically means that your car loses value as you drive it.
- In 2019, depreciation accounted for 36% of a car’s total cost.
- Some experts estimate that owners lose an average of $15,000 in the first five years of owning a car due to depreciation.
11.6 cents per mile average x 15,000 miles = $1,740/year
Registration, Taxes & Fees
Total Average Cost of a New Car: $773.50 per month
This number includes loan interest and insurance, as well as the other expenses we outlined. It does NOT include the principal costs of a car loan.
SOME OTHER PROS OF A NEW CAR:
- Maintenance and repairs are fully or partially covered by warranty
- Latest technology and gadgets
- Lower interest rates
- No reports or receipts needed
A Pre-Owned Vehicle
Average Used Car Purchase Price
$11,339 (KAR Global Analytics Services Feb 2020)
Other average costs for used vehicles vary widely by vehicle, so we’re going to use a specific example here. Let’s imagine you buy a pre-owned 2014 Toyota Camry and look at what you might expect to pay this year, assuming you drive 15,000 miles.
Carfax (or other vehicle history report)
Many dealerships offer a free vehicle report with pre-owned car sales; however, you can also purchase your own inexpensively if you are buying through a private seller. While there are reports available for as little as $10 (or even free depending on circumstances!) CARFAX reports are among the most detailed, with info on previous owners, accidents, repairs and maintenance included.
Repairs & Maintenance
Taxes & Fees
Total Cost of Ownership: $702.91 per month
This number includes financing and insurance costs, as well as the other expenses we outlined.
SOME OTHER PROS OF A USED CAR:
- Lower purchase price
- Lower Arizona registration fees
- Insurance costs *may* be lower
- Reduced depreciation
If you’re still wondering whether buying new or used is best, there’s no wrong answer. Whether you choose to buy straight from the auto factory or show a pre-loved vehicle some more love, there are pros and cons that go beyond just purchase price. There are subjective peace-of-mind costs, like worrying about haggling with a dealership or the potential safety issues of buying through a private party.
With a new vehicle, you typically pay more fees upfront but have significantly reduced maintenance and repair costs while the car is under warranty. Unfortunately, you’ll also have to kiss your big resale value goodbye as soon as your drive it off the lot. A used car or truck, on the other hand, may break down more often but will hold its value better. You may also have a better chance of paying for it in cash, thus avoiding any finance costs.
In the end, you should choose what works best with your current budget and lifestyle, and consider what’s most important to you. Having the latest gadgets? Getting more of your purchase costs back when you sell it later?
By looking at the basics we’ve covered here, you’ll be able to make a more informed decision. Now go and enjoy the best part of buying a vehicle – driving off into the sunset in your sweet ride!
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