New car vs. used car, pros and cons
Should you buy a new or used car? It seems like a difficult question, but it's not. In most cases, you will know the answer after looking at your income. The rule is that monthly car expenses should not exceed 10 percent of your gross income and you should be able to pay off your car within 4 years.
What does it mean? To afford a new compact car, like Toyota Corolla or Hyundai Elantra you have to have a stable job making around $4,000 a month before deductions. Don't worry if you are making less than that, the used car market is full of choices. Even with $5,000 to spend, you can find something that will work as basic transportation.
Should you even consider a used car if you can afford a new one? Why not? Would you rather spend $16,000 on a brand new basic Kia Rio subcompact or 6-year old top-of-the-line BMW 3-series? For the same $16,000 you can find a 3-year old low-mileage Honda Accord family sedan that not only known for its reliability, but offers 5-star overall safety rating.
This is an important point. There is a common misconception that any new car is safer than a used car. Most cars made after 2010-2011 come with standard antilock brakes, stability control and at least 6 airbags. Would you feel safer in a large well-equipped 4-year old Honda Accord family sedan or brand new basic Kia Rio subcompact? You can compare safety ratings of different cars at the NHTSA and IIHS websites.
We spoke to two people offering different opinions on this choice. Sheryl is a high school teacher and a busy mom of two teenagers. Between her son's hockey practices and special needs of her daughter she has very little time to spend.
Last year I bought my third Toyota from the same dealership. I know all the service advisors and shuttle drivers. Of course I will rather buy a new car knowing that my dealership will take care of the maintenance and provide me with a loaner vehicle if the part is not available.
Chris is a sports car enthusiast. He offers a different take:
My previous car was VW GTI that I bought used. My buddy is a mechanic. He helped me with my mods and oil changes. I just picked up this Subaru WRX from a downtown Subaru dealership. It has only 36K and is in mint shape. My next car I'll probably buy used, because cars that I like are too expensive new.
What are the advantages of a new car?
You can pick a color, options and accessories you want. A new car comes with factory warranty that usually include roadside assistance. Your dealership can perform all the maintenance. When you don't have time to wait for service, you dealership may provide shuttle service or a loner vehicle. You can drop off your old car and drive off in a new car on the same day.
What are the advantages of buying a pre-owned vehicle?
A used car is cheaper. You can buy a 3-4 year old vehicle for half of its original price. Any glitches and factory defects were most likely repaired while the car was under warranty. You won't be stressed out about every new scratch or ding on the door. You can learn about reliability, potential problems of any car by reading owner reviews, forums and sites like Consumer Reports. You can pick any car that you wouldn't be able to afford new. Insurance is often cheaper too. You don't have to service your car at a dealership which is known to be more expensive. Read next:
Step-by-step used car buying guide
What to look for in a used car - illustrated checklist.
Opt for a new car when:
- You can pay it off in 4 years
- You don't have time to shop for a used car or worry about unexpected repairs.
- You prefer to have warranty coverage for you car
- You have comfortable relations with your local dealer
- The dealership is close to work or offers shuttle service or loaner vehicle.
Consider a used car if:
- You have a good family mechanic who can take care of all service needs for the vehicle you chose.
- You have time to spend researching and shopping for a used car.
- You can have a used car properly inspected.
- You are comfortable handling unexpected repairs.
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