Whether your car is just a couple years old, or it looks like a rusty block of artisanal cheese, it’s never too early to think about what you’ll do when your current ride calls it quits. To start, you’ll need to decide if you’ll be looking for a used or a new car. Your answer will set the foundation for every car buying decision that follows. In this article, we’ll explore the merits of both and try to help you decide which one is right for you. And, unlike that chemistry test you flunked, there’s no right or wrong answer.
Option One: The Used Car
Though we spend a lot of time talking about new cars, pre-owned cars sell at way higher volumes than those straight off the assembly line. And there’s one reason for that: they’re cheap. But, going used doesn’t mean settling for a rust bucket. In fact, you might realize that the car of your dreams is within reach if you’re willing to get a car with a few thousand kilometers on it. Though saving money is great, there are a few things you’ll need to consider when buying a used car.
Benefits of Buying a Used Car
- More Money in Your Wallet: According to Birchwood Credit, the average new car costs $16,700 more than the average used one. But the cost differences go beyond the sticker price. Though not always the case, new cars also tend to be more expensive to insure. If your main concern is upfront affordability, a used car is probably your best bet.
- Used Cars Give You a Chance At Luxury: When you shopped used, you might just discover that you can get a one-year-old model of the luxury vehicle you want for the same price of a new economy car. In the end, is a few thousand kilometers enough to make you go Ford over Mercedes?
- Most Cars Are Still Eligible For Warranty Coverage: Just because the comprehensive warranty on your 2015 Ford Focus ran out doesn’t mean you’re on your own. Most dealerships offer extended warranties on pre-owned vehicles. Whether or not these are worth it depends on your driving style and circumstances. If you’re lucky, your used car might still have a few thousand miles left on its bumper-to-bumper warranty.
Drawbacks of Going Used
- Financing Will Cost You: Because they’re more likely to break down, lenders often charge a premium to finance a used car. While this won’t completely erase the savings, you get from going pre-owned, it can shrink that gap.
- Your Trade-In Value Will Be Lower: If you have to trade your car in down the road, it won’t be worth as much. This is further reinforced by the fact that your vehicle will no longer have that sought after “one-owner”
- You Don’t Know the Car’s History: Even with Carfax, you might not know everything your car has been through. In Ontario, for example, dealerships are only required to report collisions costing over $3,000. Furthermore, as testimonies from Consumer Affairs show, vehicle history reports aren’t perfect.
- Used Cars Are Usually Less Reliable: As a car’s mileage increases, the likelihood of a breakdown does too.
Option Two: The New Car
From that new car smell to the newest gadgets, new cars have a lot going for them. And, for most Canadians, they’re a symbol of wealth and adulthood. But, like used cars, they come with their fair share of drawbacks.
Why You’re Right to Crave That New Car Smell
- New Cars are More Reliable: If you’ve ever been stuck on the side of the road because your new-to-you car’s timing belt broke, you might be reluctant to buy another used car. In fact, 46-percent of new-car buyers said avoiding maintenance and mechanical issues was a key reason they chose a new car over a used one.
- You Want a Warranty: Most new cars come with bumper-to-bumper warranties. These practically guarantee the first few years of a vehicle’s life will be worry-free.
- You’ll Get the Newest Technology: From Bluetooth speakers to backup cameras and parking assist, new cars come with all kinds of bells and whistles. Though you can add a lot of this stuff aftermarket, it’s nice to avoid the upgrade costs.
- Better Financing Options: Automakers don’t make any money off used car sales. That’s why they’re so quick to slap things like 0% APR and cash rebates on the newest models. It’s not just the dealers sweetening the pot, however. Because new cars pose less of a risk, lenders are more willing to offer longer loan terms and lower interest rates.
Reasons You Might Want to Reconsider Buying a New Car
- They’re More Expensive: Unless you’re getting it from a Febreeze vent clip, that new car smell doesn’t come cheap. Your average new car will cost you about $11,000 more than a used car when financed with the same terms. If you’re looking to keep the same monthly payment, you’ll have to stretch that cost out over a longer period. So, if money is your main concern, a new car might not be for you.
- Depreciation: Thanks to depreciation, a new car will lose about 20-percent of its value within the first 12 months of ownership. This is a loss of over $8,000 on a $40,000 car. And, unfortunately, there’s not much you can do about it.
What If You Don’t Want to Compromise?
Just because you’re going pre-owned doesn’t mean you need to buy a vehicle from the 1990s. By buying a car that’s just two or three years old, you’ll end up with a vehicle that perfectly balances affordability and dependability. Furthermore, since the average Canadian only drives 12,500 kilometers a year, there’ll be a good chance the factory warranty is still intact.
Deciding whether to buy used or new is a huge decision. Carefully weigh the costs, your lifestyle, and the risks before you sign that dotted line. When you’re ready to take the next step, we’ll be here.