That new car smell, the latest gadgets at your fingertips and a shiny, scratch-free exterior are calling your name, but your wallet is pulling you in the opposite direction. How do you decide whether buying a new car or buying a used car is right for you?
Ultimately, it comes down to what you are looking for, says Alec Gutierrez, a senior market analyst for Kelley Blue Book. “What are your requirements in terms of style, features and amenities? Are you okay driving a 10-year-old car that is a little dated, or do you want something fresh—a touch screen that works seamlessly with your smartphone?”
Before giving into touch screen temptation, or assuming you have to buy used to stay in budget, consider these five important car-buying factors:
New: Shoppers plan to spend an average of $30,500 on new car purchases, and their expectations tend to align with reality, according to the 2013 Edmunds.com Car Shopping Trends Report. In both 2011 and 2012, the average transaction price for a new car hovered just above this amount. While buying a new car can come with a steep price tag, you’ll be able to choose exactly what you want, and you’ll know that you are getting the latest and greatest from a manufacturer.
Used: On average, used car shoppers expect to pay $17,900, but they actually spend about 11 percent less, according to the Edmunds.com report. For those looking to buy a luxury vehicle, prices are on your side. “If you really want a luxury car, but have an economy car budget, getting a used car is probably the only way to do that, short of striking oil in your backyard,” says Brian Moody, the site editor for AutoTrader.com. Keep in mind that a lower price is always a trade-off for more miles if you are considering any used car.
New: A warranty allows you to drive a new car relatively maintenance-free for about three years, says Phil Reed, senior consumer advice editor at Edmunds.com. After that, extended warranty plans are available for a fee. Warranties provide peace of mind because you know that potential expensive repairs will be covered.
Used: Warranties can be harder to find with used cars, but there are exceptions. Getting a certified pre-owned car (CPO) is a good way to get the benefits of a used car—the lower price—with a strong warranty backed by the automaker, Moody explains. However, CPO vehicles can cost you an additional $700 to $1,500.
New: New cars have higher insurance rates because they are worth more. Along with insurance, consider the price of registration. For example, registration for a new car in California will initially set you back about $400. If you were to register a similar 4-year-old used car, though, registration would only cost you about $25, Reed says.
Used: Since a used vehicle is worth less to begin with, insurance rates are typically lower. As with insurance for a new car, add-ons such as theft and collision insurance can raise monthly payments on the insurance policy of a used car, Reed says.
New: Safety features that were once premium add-ons now come standard with many new cars. However, driving the latest model is not without risk. A new model doesn’t have the miles of test use that an older model has, Gutierrez explains.
Used: The safety features found in used cars depend on model year. Cars that are 3 to 5 years old may have modern safety features—such as stability control, blind-spot monitoring and a rear-parking camera—while cars more than 10 years old are less likely to have features such as side airbags and anti-lock brakes, Moody says.
New: We’ve all heard it: The moment you drive a new car off the lot, it loses thousands of dollars in value. While vehicle depreciation is a fact, you’ll get what you pay for in terms of warranty, gas mileage and safety features.
Used: Since the first owner of a car has already shouldered the burden of depreciation, this isn’t a big concern. However, unless you’re looking at a CPO car, or a mechanic has inspected your car, you run the risk of discovering problems later on.
“The marketplace for both new and used has changed quite a bit—most of it is good news for shoppers,” Reed says.
Pricing calculators, editorial reviews and comparison websites, for example, are right at your fingertips—whether you are buying new or used. To make an informed buying decision, take into account your budget, personal needs and on what you are willing to compromise.