Car Shopping: Is Buying New Really Worth It?
GY
Last updated 05/15/2024 by
Gina YoungLooking for a new car?
Car shopping can be fun, yet frustrating. There are so many makes and models, all with differing options. After you have decided what kind of car you want and what options you need, you then must decide if you are going to buy a new or used car, or lease one. So many decisions it can nearly make your head spin. Let’s take an in-depth look at the pros and cons that come along with each type of purchase.
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General Tips
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Steer clear of first year models.Whenever a company comes out with a new make or model, it is usually more expensive, especially if it has been highly anticipated. Car makers also refine and make changes to design after a car has been on the market for a year or so that could affect safety, performance, or usability in future models.
Dealer cars are nearly new, without the new price. Dealer-driven cars are basically new cars, except they will have a few miles on them. These cars may be driven by someone from the dealership or used as courtesy cars for a year and then sold. You can really get a good deal on these because they are considered “used” cars when it comes to pricing, but title has never actually been transferred to anyone.
Last year’s model will get a discount. Just like any other retailer that needs to clear out old inventory to make room for the new, car dealers are willing to discount last year’s models to move them off the car lot. These cars are brand new, except for a couple of test-drive miles on them. You may not have a lot of choice in color or options because you will be limited based on what is left in inventory, but you are sure to save thousands of dollars as compared to the new model year vehicle. This typically holds true for buying or leasing.
Fuel
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Maintenance
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Regular maintenance is important for any car, but especially if you plan on keeping the car, you will save yourself money in the future by taking your car in for regular oil changes, tire rotations, and fluid checks. These are relatively small expenses for maintenance that can save you, literally, hundreds of dollars in repairs due to lack of maintenance later on. Take advantage of coupons and specials to save a few bucks when going to a dealership service department or other auto shop.
Insurance Costs
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- Cars that are more expensive to repair are going to cost more to insure
- Newer cars have safety features that can actually lower the cost of insurance
- Older cars are more likely to be theft targets, due to the lack of anti-theft devices or GPS tracking ability, and that can essentially lead to higher premiums
- Higher deductibles can help to curb monthly costs
- Keep a good driving record; fewer accidents and claims means lower premiums
- Bundle insurance policies; having multiple policies with one company can qualify you for additional discounts
- Young drivers can lower insurance costs by earning good grades and not having a car in their name.
Depreciation
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- Drive your car longer— Most depreciation occurs when the car is new and decreases at a slower rate the older the car gets. Buying a car and trading it in after only two or three years can put you in a negative-equity situation, whereas, keeping the car and driving it for six or seven years allows you to pay off the auto loan and, typically, get past any negative equity.
- Lease a car—leasing a car will allow you to avoid worrying about depreciation at all. Once your lease is up, you turn your car in and you don’t have to worry about the value versus the residual value. You do have to think about mileage when leasing though, because this can be costly to you if you go over on miles.
- Buy used car— With lease programs still being popular options, many good vehicles are returned to the dealerships after a few years with less than 50,000 miles on them. Often, you are able to buy an extended warranty up to 100,000 miles, making these much less expensive choices, but still backed by the manufacturer.
- Take care of your car— Take your car for regular oil changes and tire rotations. Regularly wash your car, some environmental factors can actually be corrosive to your car’s paint over time.
Cost of Financing
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- new cars rather than used cars
- shorter lease/loan terms get better rates
- longer terms, get higher rates
- when buying, check the rates of your local bank or credit union
GY
Gina Young is an accomplished finance writer who has written for publications including Examiner.com, Lexington Law, Talk Markets, CreditRepair.com as well as her own blog (Money Savvy Living), giving budgeting and frugal living advice. With a bachelor’s degree in Accounting and Finance from Ashland University and a MBA from Indiana Wesleyan University, Young has impressive credentials in many aspects of investing, retirement planning, and personal finance.
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