Whether you live your life a quarter-mile at a time on the drag race strip, or you do a choreographed dance alongside your friends with the “Greased Lightning” soundtrack, getting your buns in the seat of a new car can be exciting. Do you buy that new car you’ve been dreaming about? Or do you get a used one to save some cash?
Conventional wisdom says when given the choice between buying a new or used car, buying used is more economical. But, depending on your situation, the decision isn’t so clear. The cost of maintenance, insurance and your eligibility to get a loan all make the decision a little harder. Here are the biggest factors you might want to consider when buying your next car.
The bottom line is that cars – new or used – will eventually require maintenance. However, when buying a new car, you will usually be able to get the repairs covered under the manufacturer’s warranty for a few years.
“One major benefit to buying a new car is the warranty it comes with,” says Teresa Walsh, a marketing executive with Cazana.com, an online database that helps people find out the background of used cars. “Most new cars come with a three- to seven-year warranty, depending on the manufacturer. This means you don’t have to worry about paying for unexpected repairs.”
So while you may pay more for a new car, it could end up being well worth it by saving money on repairs.
A used car often means repair costs are all up to you. This can become a financial nightmare if you’re not prepared.
“Used cars come with a history and sometimes this history can be hidden,” Walsh said. “It’s important to take your time and do your homework when buying a used car in order to avoid common car scams. It’s imperative that you take your time and get a full history check on the car before handing over your hard-earned cash.”
You can save yourself a lot of trouble by doing some research online at sites like CarFax.com.
Automobile dealers can do all sorts of things to make sure your monthly payment is where you want. They often will stretch the terms of your vehicle loan to get a lower payment. However, the longer your term, the more you’ll end up paying in interest. Try to avoid answering this common question from a car dealer – “What would you like your monthly payment to be?”
Instead, know how much of a monthly payment you can afford before you start shopping. That way you can negotiate the terms and rates to get the best deal possible for you.
The actual amount of your monthly payment for a new or used car will depend on many factors, including the amount of your down payment, loan length and the interest rate. You may also be able to trade in your old ride and apply the value of it to your next car. Your payment can be almost any amount you want it to be – make sure you have a budget set beforehand.
Technology moves at a fast pace (and greater than a quarter-mile at a time), and the technology in cars is no exception. Every year, car manufacturers add new features to their vehicles. It depends on what’s most important for you to have. Some used cars will have the technology you’re looking for, but other gadgets might only be available in the newest models.
Some of the features you should consider when looking for your next car:
- Style – You’re going to be driving your car everywhere; no one wants to be seen in something notoriously hideous.
- Technology – Bluetooth technology, GPS navigation, assisted parking and backup cameras are all technologies that may not be available in cars more than three years old.
- Fuel economy – If you have a long commute to work, a gas-guzzling SUV may not be the best idea. A hybrid might be what you need.
- Seating capacity – A two-seater sports car wouldn’t be a good idea for someone trying to soon start a family.
- Comfort – If you spend a long time in your car taking trips or driving to work, make sure your driving doesn’t leave you with aches and pains. But don’t be so comfortable you might fall asleep, either. Get the Goldilocks of car comfort – something just right.
The features most important to you will affect your next vehicle purchase. Make sure you research the car that fits all of your needs.
Eligibility for Car Loans
Buying a used car is more of a risk than a new one, so you’re taking a risk, and so is the bank you’re getting financing from. That means they will be charging a premium on the loan for a used car.
Natasha Rachel Smith is a personal finance expert with TopCashback.com, and from her experience, getting a loan for a new car is much easier.
“Aside from the obvious perks of having a new car with new technology, shiny exterior and interior, one of the biggest perks is the low finance rates,” she says. “Banks offer lower rates on new vehicles because the car is worth more. Once the car leaves the lot, it depreciates. Dealerships also offer plenty of incentives, such as cash rebates, new driver discounts and more.”
New cars are typically easier to finance, and you get the peace of mind knowing the manufacturer is going to cover any issues you encounter in the first few years with it. While a used car would be substantially less, it comes with much more risk.
Do you have a horror story about a new car or a great story about a used car? Tell us about it in the comments below.
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