Should I Buy a New Or Used Car?


A few weeks back I was talking to my Dad about paying off my student loans. He suggested that when I am paid off I should use the money I was putting into my loans to save up for a new car. It got me thinking about whether a new car or a used car is a better option.

Cost

Cost is the first thing that comes to mind when deciding between a new car and a used car. A new car costs a lot more, and the biggest loss in value comes the moment you drive it off the lot. Cars are depreciating assets and lose value over time.

There are other important costs too. Taxes and registration on a new car is significantly more expensive than a used car, as the registration cost is based on the value of the car. Insurance will also cost more on a newer, more valuable car than a used car.

Where New Cars are Cheaper

If you have ever owned a new Toyota and an old Volvo, you know that maintenance makes a big difference in the cost of owning a car. I used to have brake work and all sorts of maintenance when I drove a 20 year old Volvo. It was in the shop frequently and the repairs were not cheap.

Since I owned a new Toyota, I have never had a repair that was not scheduled maintenance. I had to replace the tires at 50,000 miles, get my anti-freeze flushed after a few years, and get my oil change every 5,000 miles. That’s it. No other costs, no other repairs.

I also get much better fuel efficiency in the new car. My old 1990 Volvo 740 is rated at 18 MPG city and 20 MPG highway. My 2008 Corolla gets 26 MPG city and 35 MPG highway. Working 22 miles from home, the savings adds up quick.

Quality

This is a place where you have to decide the value yourself. I have really enjoyed owning a new car. I keep my car nice and clean and it is a pleasure to drive around. I often avoided driving and tried to get a ride with a friend when I had a 1987 Plymouth Horizon in high school and the Volvo in college. Now I don’t mind driving.

I am proud of my car. I am happy to drive it. I am comfortable while using it. And, with a 45 minute commute each way, being comfortable in the car is important.

What to Buy?

I am usually a big advocate of saving money where you can. Some people say that a car just gets you from point A to point B. That is true, but I like to get there comfortably. I am not saying that I am going to go buy a new sports car or luxury car, but I am not against the idea of buying a new car if it is practical.

Like everything else in life, only spend money where you get value. I get value from a new car, but only if it is going to be reliable, comfortable, easy to maintain, and fuel efficient. That is why I will probably get another Toyota (or maybe a Honda) for my next car. I don’t need anything flashy, I need something quality.

Your Thoughts and Experiences

Would you rather get a new car or a used car? Do you think it is worth the extra money? Please share your thoughts and experiences in the comments.

Image by .Larry Page

31 thoughts on “Should I Buy a New Or Used Car?”

  1. Love the updated look on the site!

    Not to turn this into a foreign vs. domestic debate at all… but do you think when you going shopping for you next car that you would consider any of the new Ford, GM, or Chrysler models?  Usually there are some cost savings available for buying domestic models (usually through great incentives from time to time, 0% loans etc.) They say the quality of these newer vehicles is competing with their foreign counterparts today too.  

    In full disclosure, I’ve only ever owned foreign brands myself.  I was just curious what your thoughts were on the topic as there is some potential savings to be had there.  

    -Bryce

    1. Glad you like it Bryce!

      I would still get a Japanese car over anything else. My family’s history with Toyota, Ford, and Volvo shaped my opinions. Our Toyotas have always been great, while the one Ford we had was in the shop constantly. It will take a while for the reputation of American cars to come back even if they are better.

      You have to look at long run costs in addition to up front costs. A Camry might cost more than a Taurus, but the maintenance costs could be a lot lower over time.

  2. I am usually an advocate for a used car, but I think your situation is different. You still have plenty of time to save up for a car, in which case I think you should save up for what you want, even if it is a new car. I agree that there are definite upsides to owning a new or newer car. I suppose I am an advocate for used cars because most people don’t save for them in the first place and can’t usually afford them anyhow. 

    1. I was considering upgrading from Corolla to Rav 4 next time. Not sure if I could live with myself if I got such a big car. It costs a bit more, but as you say, if I start saving now I could have it sooner rather than later.

  3. Jeff @ Sustainable Life Blog

    I was in this same position in 09, and I went with a new car.  Of course, I was driving 150+ miles per day at that time, and because I was focusing on paying off debt, I didnt really want to consistently heap money into a used car, mainly because of the variability.  I wouldnt really be able to predict what the cost would be month in and month out with a used car that may have needed some repairs, and with a new car, I knew it would cost me 315 + gas and insurance per month, no matter what.  

    as far as foreign and domestic, I went into the dealership like you – only wanting a toyota truck.  once I figured out the used ones cost more than a new ford,  I went over and gave them a chance.  If you do shop, look at everything you like, no matter the maker – then look into quality.  I know ford has taken huge leaps forward in quality, so they are at least worth a look.

  4. We got a new car (with the help of my parents) and an extended warranty for $600. It has been worth it to us, but it’s probably the last brand-new car I get. Our second vehicle, a van, was purchased used. It’s a reliable model and low miles and hopefully will last us a long time. 

    1. What is your reasoning for saying it is the last brand new car you would get? Did the van surpass expectations or did the new car not live up to the hype?

      1. It just depreciates so fast. The car bought new is probably worth $6k today, and new it was about $13k. Yuck. Our van was used and several years old but only had 28k miles on it. We paid $14k for it, and new it would have been oh man…$25k? Maybe more?

        1. The biggest depreciation happens right away, so getting a quality used car is often a good idea depending on your needs.

  5. Jenna from Adaptu

    I’ve got a used Volvo and Toyota.  I definitely would stick to buying used, unless I came into a bunch of money.  But for where I live (I hardly ever drive) and what I need a car to do (get me up to the mountain for skiing or pull a camper for camping) buying a brand new car doesn’t make sense.  It’s just going to get dirty and dinged up.

    1. It sounds like you drive a lot less than me. I used to live 2 blocks from the train downtown, but now I work over 20 miles from home and I appreciate the luxury of a nice car when I drive.

  6. Car Negotiation Coach

    Hey Eric, I’m a new car guy myself.  I love to buy and hold until I run it into the ground.  I like being the first person who owned the vehicle so I know it’s been taken care of.  If I didn’t keep ’em so long though I might consider used to avoid the immediate depreciation hit.

    If you do end up buying new, definitely check out my buying strategy and let me know if you need any help or have any questions.  I’m always looking for more case studies and feedback!

      1. Car Negotiation Coach

        Definitely do!  It’s good fodder for posts on either (or both) of our sites as well.

  7. I’ve never bought a new car, and I’ve been driving for 16+ years.  Part of the reason for that is that I’ve never really been in a position to afford a new car.  Would I buy a new car?  Maybe one day, I’ll splurge and do it, but considering how little I drive (<10,000 miles/yr), I don't see the need to spend all that money on something I spend little time in.  I'd rather spend the money on the house, or something that I will use more often.

    1. That makes sense BB. I drive quite a bit more than that with my long commute every day. If I drove a lot less, I probably wouldn’t care as much about my car.

  8. Don’t forgot that if you have time to plan, you can sometime qualify for 0% finance.  MY truck payment comes out of an interest earning account (which has enough money in it to pay for the truck)

    1. That takes a little extra work to setup, but I like the idea. I might share a plan to do that here on the blog. Thanks for sharing.

  9. I was religiously in the ‘never buy new’ camp. Then while shopping for a car several years ago, I found a brand new Hyundai Elantra wagon for $12,000, not a lot more than the used, comparable vehicles I’d been seeing. So I bought the Hyundai–a basic car, for sure, but it met my needs and I felt (wrongly!) that I was saving money every time I drove it! Ever since I’ve been in the “be open to all opportunities” camp.

    1. That makes sense Kurt. It really depends on your needs and situation at the time. What might be good for you today could be totally different six months from now.

  10. I personally wouldn’t buy either, since I have no need for a car in a big city.  That said, buy what you want regardless of new of used.  The car will be with you for multiple years, you should at least be happy when you drive it.  

    1. Good advice JP. Of all cities I have visited in the US, the only one I have been to where I don’t think I would need a car is New York. Everywhere else the public transportation has not been good enough. However, when I visited Europe I can’t think of a city where I would need a car.

  11. You can get a car from costco!!!!  I got a new Hyundai Sonata in May and I love it!!!  I have a 10 year 100,000 mile warranty, which since my last car was 9 years old and only had 49,000 miles  I think I will take full advantage.  You have to LOVE what you buy because you will be spending a lot of time in it, but do not buy something that is too expensive that it will effect your way of life either. 

    1. I have seen that they sell cars and Sam’s and Costco, but never really thought much about it. I went through a broker when I got my last car. You make a good point about impacting you way of life. Just like being house poor, you don’t want to be car poor.

  12. Your dad sounds smart 🙂

    And I would rather have a used car, ideally one that’s 1 year old.  The only new car I ever bought was a lemon.

  13. This is a very tough decision to make I believe that keeping a car that has relatively few problems is always a wise idea. The issue with buying a used car is their is is no warranty on anything that is defective assuming you buy the car from a person selling directly to you  Unlike a new car. This is a close call I would say its a draw assuming you buy a new car with cash or mostly with cash as far as saving money goes that is. I do not think owning a used car is at a advantage over buying a new car and keeping it for 10  12 or 15 years  If you take good care of a car from the time you buy it brand new it could last 15 years so the price of buying it brand new would only be a small part of your total cost over time. One fifthteeth of say fifthteen thousand is only one thousand dollars a year reallly not all that much money. If you go though two or even three used cars over a fifteen year period how much is that going to cost you.

    1. Good points Dennis, and those used cars probably don’t get as good fuel efficiency and have more expensive repairs while you own them.

  14. I am definitely going to buy used to try and get my money’s worth and hopefully have a car that lasts forever but it still very safe as I have 2 kids. I am looking at mid-size sedan’s, accord or camry but was wondering if you guys have any other suggestions? Also, is it better to buy from dealer a used car where get maybe warranty or possible lease buyout? (I have 3 months left on my mercedes C300 lease which I feel stupid for every leasing a car. . .). I am thinking about getting a 5 year old car or around there- a 10 year old car just seems to me to have more of a risk to need costly repairs to negate any purchase benefit. What do you guys think?

    1. I’m a huge fan of Toyota and Honda, which makes the Camry and Accord two of my favorites in the midsize sedan category. Great choice there with the Camry!

      I like getting newish used cards with lower milage when possible. Dealerships can be good, as can online search tools like Carvana or Shift.

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