Guide For Buying A New Vs Used Car
Posted on August 12, 2020
Did you know that over 2 million vehicles were purchased in Canada last year? This marks a huge increase in vehicle sales when compared with previous years.
If you are interested in purchasing a vehicle you might be torn between new vs used car options.
Used seems so much cheaper! But is it really when you take into account it's reduced resale value? New seems so much safer! But is it worth the extra expense?
Put aside the unconfirmed rumors, we are here to give you reliable guidance. Check out our comprehensive guide to whether a new car or used car will work best for you.
Depreciation
Let's start with the most well-known factor. Everyone knows that as soon as you take ownership of your car and drive it home it will lose value. If you are thinking longterm of the resale value of the car, a new car will depreciate faster than a used car.
Of course, cars have different depreciation rates. This is affected by model and location. However, across the board, second-hand cars have already taken the initial drop in value and you will get a resale value that is closer to its purchase price.
Maintenance
While your new car will take a bigger depreciation hit, it will also bring certain guarantees. You will need to spend less on maintenance and repairs during the first years.
Of course, every car, new or old, requires some light maintenance-especially seasonal maintenance. However, receiving a car in perfect condition will give you guarantees regarding parts and the vehicle's performance. Further, if there is any work to perform on your new car, it is likely that it will be covered by your warranty.
Peace of Mind
Many people weigh the choice of a new or used car when their circumstances change. They find a significant other, get married, or children come along. At this time they need not just a car that provides greater capacity but one that can protect their loved ones.
A new car can provide more than just a guarantee regarding the quality of the parts of the cars and remove the need to do immediate maintenance. It also offers the latest in safety technology and the promise that the car has not been involved in a collision or accidents in the past.
The vehicle may need to travel long distances and endure harsh winter conditions. Under these circumstances, many view the peace of mind that a new car brings as priceless.
If a person does choose to go with the used car option, they should ensure that it has been thoroughly tested like these cars.
Initial Cost
It is undeniable that buying a new car requires a large initial payment than a used car. Especially if you are looking to pay a cash amount upfront for your vehicle, a used car will nearly always be cheaper than the new equivalent.
However, this is not the end of the story...
Financing
If you will use financing to purchase the car, the situation is different. Put simply you can often get a better deal on financing for a new car than for a used car. With dealer incentives, interest rates may be as low as 0%.
Since these interest rates are not available for used cars, this puts them at a disadvantage. If you finance the purchase of a used car with a loan that brings a 6% interest rate rather than a 2-3% interest rate for a new car you will end up paying significantly more interest.
On the other hand, many Canadians are choosing to benefit from low-interest rates on new cars and then spread the payments over a longer time - even more than 5 years.
It is very important to investigate your options well. Make use of online tools to calculate the true cost. You can ensure that you do not have to pay off the interest on a loan that could have been avoided.
Insurance Costs
Insurance costs also have a significant impact on your decision. A shiny new car will come with a higher insurance price tag than it's used equivalent.
A used car may only need a collision plan. However, your new car will likely need something more comprehensive. If your new car has a significantly higher purchase price - this will impact the insurance premium price.
Insurance is also impacted by theft. Some cars, even pre-used models, are statistically more likely to be stolen and will carry a higher insurance tag. While you might guess that these are high-performance cars, often the cars that make this list are more frequently seen or more popular cars.
Late-Model Used Cars
A final factor to keep in mind is the model of vehicle. A car may only be 1-2 years old but have been produced in the last year that the model was made. A new model was released and since the previous model has an older design and shape it loses some value. Its purchase price is lower but it is only 1-2 years old.
This is seen by many as the best of both worlds. The price of a used car, but likely still with many of the guarantees and perhaps even the warranty of a new car. It has also seen the greatest drop in depreciation, meaning that it will have a relatively generous resale value in the future.
New vs Used Car... And So Much More
Buying a new car is not a small investment. You want to purchase a vehicle that will support you for years without requiring expensive maintenance. Whilst the new versus used car debate may continue, we are here to help.
We are qualified experts in car sales and maintenance. Contact us at CarHub to talk to non-biased experts for making a better-informed decision when it comes to buying a specific car; used or new.