So you’re in the market for a car. You might be wondering where do you start? And what are the pros and cons of each? Take a look at these four factors to see whether a buying brand new car or a used one is the right choice for you.
How much you can afford to spend is an important factor when making the decision to purchase a car, but this question isn’t as simple as it may seem. Sure, a new car will cost more than a used one, but there are lots of variables to consider when it comes to the real “cost” of buying a car.
A new car has a higher sticker price - that’s a fact. But if you come to the dealership with good credit and a sizable down payment, you can take advantage of incentives to get a better deal. 0% financing for a certain period is often available, as are cash rebates. Of course, your payment term will be longer and monthly payments will likely be higher than with a used car. Insuring a brand-new car may also be more costly than if you had a lower-valued used vehicle.
When you look at pre-owned vehicles, the initial cost will be lower, offering a better value for your money. But the sticker price isn’t the only thing you need to consider. If your credit isn’t impeccable or you don’t have much for a down payment, you may have trouble financing your purcahse through traditional banks and financial instituitions. In addition, you'll want to make sure you have money set aside for repairs and maintenance.
If your heart is set on a certain make, model, or colour, buying a new car may be the best way to ensure you get the exact vehicle you seek. Brand new models also offer a wide variety of bells, whistles, and the latest technology in multimedia, phone connectivity, navigation, and safety. However, if you’re willing to keep an open mind, take a look at what used cars are available in your price range. You may be surprised at what ends up being a good fit! If you’re into the vintage look, considering used vehicles also gives you the opportunity to purchase a cool, classic model.
On average, new cars need fewer repairs in the first few years, and are of course covered by a warranty. If that peace of mind is important to you, new may be the way to go. If you’re going for a used car, it’s important to have a trustworthy mechanic in your corner, as used cars are much more prone to needing occasional repairs (It’s a good rule of thumb to budget for $1,500 or more of maintenance and repairs in the first year alone). If you already have a good relationship with someone reliable, get them involved in the buying process, too: most will give a prospective used car a once-over to let you know whether it’s a good investment.
Are you ready to make a big commitment to the car you buy? One of the biggest drawbacks to purchasing a new car is the depreciation factor - new vehicles lose an average of 20 per cent of their value in the first year of ownership. If there’s a possibility that you’ll sell your new car in the next few years, you’ll be taking a significant financial hit. However, if you plan to drive your car until the wheels fall off, the depreciation won’t be as much of a factor after one or two decades of ownership.
Something else to consider before you buy new is any other major loans that may be in your near future. If you’re hoping to invest in a home, you may want to avoid taking on a $20,000 car loan, as this could impact the size of mortgage you will be approved for.
With used cars, you’ll have a bit more flexibility when it comes to your options for the future. Say you’re in the market for a sporty coupe at this point in your life. When the time comes to upgrade to the soccer-mom minivan, you’ll be able to resell without feeling that deep depreciation sting that would have come with a new car.
Making the choice to buy a new or used car isn’t a black and white issue - there’s lots to consider, and no “right” or “wrong” answer. But if you take the time to research a few options, and honestly examine your needs and wants, you’ll soon find the perfect vehicle to call your own.
Whether you are looking for a new or used car, our team at Birchwood Credit Solutions can help you find a vehicle that fits both your lifestyle and your budget. Applying with us is simple, easy, and and takes less than 2 minutes! Apply here or visit our contact us page for other ways to reach us with your questions!
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