Almost every car buyer considers buying a used car one time or another. It can save you a lot of money. But buying a used car isn’t always the best way to do that. We can think of six good reasons why you should buy new despite the greater expense.
If you’ve visited local car forums, you may have come across the term “pre-worshipped,” an adjective designed to make a used car seem like a much safer bet. But most cars aren’t pre-worshipped.
But the risk of buying a lemon isn’t the only consideration. Many factors can wipe out the savings that are the reason you buy a used car in the first place. In this guide, we look at six reasons to buy a new car—starting with interest rates.
Better Financing Deals and Interest Rates
Interest rates are powerful financial tools that you can use to save money. New cars generally come with options for low-interest financing from the dealership itself. But this may not be the best deal you can get. Even if you’re getting a loan from your own bank, you can probably get better interest rates if you undertake a little research.
The difference of even a single percentage point in the interest rate you pay can matter a lot over the long run. For example, the difference between a 3 percent interest rate and 4 percent interest rate on a four-year loan of $30,000 is about $640.
Many free tools, like this one at bankrate.com, can help you compare rates on auto loans.
Another benefit: financing a car is an effective way to build your credit history. Car loans are one type of loan that has a positive impact on your credit score when the loan is approved.
Warranties and Reliability
Most dealerships offer warranties of three to five years on a brand-new car. You probably won’t get a warranty for a used car unless you’re purchasing a relatively new used car, and any warranty you do get won’t last as long.
This can be a problem. Maintenance and repair of your vehicle tends to get more expensive after the warranty has expired. If you plant to use a five-year-old car for another three years, you’re probably going to have to deal with expensive repairs.
Depreciation Isn’t as Steep as It Used to Be
Many people assume that a brand-new car loses half its value as soon as it rolls off the lot. That kind of assumption was always an exaggeration and is even more of an exaggeration today.
It is true that brand-new cars are start to depreciate as soon as they are sold. It is true that the newer a car is, the more rapidly it depreciates. But in recent years, modern cars have depreciated more slowly than cars used to. Not counting Teslas and some sports cars, today’s new cars retain their value very well.
Lower Cost of Maintenance
Buying a new car has up-front costs and maintenance costs. When people by a used car, they save on up-front costs. They’re less likely to save on maintenance costs.
When you buy a new car, most of the problems that may come up are covered by your warranty, and you pay only for labour—at least for the first year or so. In the case of used cars, regular maintenance typically requires out-of-pocket payments. Moreover, an older used car may require more expensive replacement parts than a new car would. Or it may require a part that has become rare and hard to get. Your used car may spend a lot more time in the shop than a new car; and, once it gets there, may cost more to repair.
Breakthroughs in Fuel Efficiency
We Canadians spend more money on fuel than almost anyone else, so fuel efficiency is important. Fortunately, recent advances have made new cars much more fuel-efficient than their older counterparts.
The difference is night and day when you look at hybrid electric vehicles that have become mainstream only during the last few years. In addition to the fuel savings, the Canadian federal government and certain provincial governments are offering financial incentives, like tax credits up to $5,000, if you purchase or lease an “eligible battery electric, hydrogen fuel cell, or longer range plug-in hybrid” vehicle.
Customize and Make It Yours
Purchasing a new car gives you a lot of freedom to select different trims and specifications. Want all of the bells and whistles? None of them? You decide.
It’s possible to find a used car with just the specifications you want and in the trim you want, but the chances are slim. Unless you happen to be interested in a wildly popular trim level, you’re probably going to have to compromise.
There will always be reasons to purchase a new car and reasons to purchase a used car instead. Often, buying a new car is a better long-term decision. But look at the considerations we’ve talked about in light of your own situation and do what’s best for you.