A Car Shopper’s Guide: The Pros and Cons of Buying New or Used

New and Used cars
Photo: Vector Source: iStock
We went under the hood to investigate your options.

Buying a car involves a lot of decision-making: What type of vehicle do you want, which make, which model—not to mention the color. But the first decision you need to make may have the biggest impact of all on your wallet: Should you go new or used? If you're on the fence about which is right for you, read on.

New Cars: The Pros

  • The choice is yours. If you have something more custom in mind, it's a lot easier to find your perfect match when you're buying new vs. used.
  • No wear and tear. You can rest assured your new car hasn't spent much time on the road and hasn't been in any accidents, so it won't have any “hard-to-see" issues stemming from the previous owner's maintenance (or lack thereof).
  • Lower fuel costs. Of course, it depends on the type of vehicle you choose, but thanks to fuel efficiency improvements, new cars tend to get better mileage than similar older models.
  • Warranty coverage. New cars come with warranties, which means your investment is typically protected if something goes wrong with the engine, transmission or other powertrain components.
  • The latest tech. Hands-free liftgates, 360-degree cameras, smartphone integration and other fun new tech features that make driving safer and more enjoyable can all be yours.
  • That new car smell. Enough said.

New Cars: The Cons

  • Higher cost. New cars are great for a bevy of reasons (see above), but they're also more likely to cause a few extra zeros to go missing from your bank account.
  • Higher taxes. Unfortunately, the government doesn't overlook big (and shiny) new purchases, but in some states, sales tax is waived on new cars.
  • Depreciation. Not all cars are created (to resell) equally. Expect a new one to lose around 20 percent of its value in the first year you own it, and up to 60 percent over five years. That means your ride will likely be worth less than you think when it comes time to sell or trade it in.

Source: DMV.org

Used Cars: The Pros

  • Wallet-friendlier prices. It's obvious, but used cars typically cost less than their new counterparts. (Though if you're looking to buy a used luxury model, it will likely still cost more to maintain than a brand-new economy vehicle.)
  • Better insurance rates. Your monthly premiums could be lower if you consider eliminating certain extras like collision coverage.
  • No monthly payments. If you have enough cash saved (or get a good enough deal on your trade-in), you can skip the whole financing thing and keep more money in your wallet each month.
  • Lower registration fees. In some states, your vehicle's price affects the cost of registration.
  • Multiple ways to buy. When purchasing a used car, you can go through a dealership, an auction or a private seller, where you might have more room for negotiation.
  • Used doesn't = old. Going used doesn't have to mean driving something from the turn of the decade. (And if you buy a car from a recent model year, you could even score some of those newer tech features.)

Used Cars: The Cons

  • The risk factor. Even if you ask all the right questions and get the car inspected, there's always a greater chance more could be wrong with it than meets the eye.
  • No warranties. Older cars (meaning ones three to five years or older), often don't come with warranties, so unless you drop $ of your own on an extended warranty, be prepared to foot the bill when things need to be replaced or repaired.
  • Higher interest rates. Car dealerships and banks typically offer better rates on new cars compared to used ones (as long as you have good credit).