Used Vs. New Car Expenses
This is a guest post from Joanne Kwan, who provides sound advice for those facing the used versus new car decision for the first time.
When it comes to buying a car, there are two options: new and used, and as a young professional, for whom this may be the first automobile purchase not funded by the Bank of Mom and Dad, there are valid reasons to consider each. Used cars are less expensive to buy, and are often less expensive to insure as well, while new cars often have a much broader array of safety and anti-theft devices. There are a number of excellent websites at your disposal to help you locate used car deals, new car rebates, and more information than you probably thought possible about mileage, performance, engine specs, and prices.
Questions to Ask Before you Purchase a Car
Even with the abundance of information at your disposal, there are three basic questions you need to answer, before you begin to shop:
1. What is the reason for the purchase? Are you buying a new car because you need to replace a vehicle that isn’t working correctly, or are you upgrading your car to reflect a recent promotion or other change in status?
2. How much can you afford? Even with rebates, new cars are significantly more expensive than used cars, and if you go to a dealer even previously-owned vehicles can be financed. Do you have a down payment? How much of a monthly payment can you make?
3. How will you use this car? If you’re the type who drives between home, work, and the grocery store, and maybe goes to dinner with friends, or on a date with your significant other from time to time, you might be fine in a vehicle that’s a little older. On the other hand, if you’re in a sales position, and have to travel for work, or like to take off on long weekend road trips, a new car may be the wisest choice for you.
Generally speaking, if you have enough money to make a decent down payment without dipping into your investments, and can make a monthly payment for three or four years without stretching your budget too badly, and have good-to-excellent credit, a new car is within your reach. If any of these things pose a problem, you may want to consider getting a used vehicle, off of Craigslist, for example.
Advantages of Buying New Cars:
The advantages of new cars include:
- Most up-to-date safety and anti-theft devices
- Less likely to require maintenance
- Better performance
- Vehicle will be under warranty
Before going to a dealer to shop for new cars, you should find a lender and set up financing. While you can use dealer-provided financing, you are not required to do so, and may get a better APR (annual percentage rate) by arranging your own. If you are a member of a credit union, you probably have access to excellent auto loan opportunities.
As well, you should hit the Internet and do some research on the specific makes and models you’re considering. Compare safety features and fuel economy, check suggested prices, and determine which optional accessories you need and which you merely want, or can live without. By doing this, you’ll be negotiating from a more equal position, and will be able to get the lowest price possible.
Advantages of Buying Used Cars
Used cars are not without their advantages, either. Among them are:
- Less expensive to buy
- Insurance tends to cost less.
- Unless the vehicle is rare or otherwise unique, they’re less likely to be stolen
Questions to Ask yourself when Purchasing a Used Car
Purchasing a used car takes a bit more education than buying a new car. Whether you’re going through a dealer for one of their “previously owned” vehicles, or buying direct from an individual, you should consider the following:
- What is the car’s condition? Are the parts original, or have they been replaced? How old are the parts? Has the vehicle been well-maintained?
- How old is the car? If it’s more than six years old, or the mileage seems either too high or too low relative to the age of the car, be very wary.
- How’s the paint job? Does the paint feel smooth and sleek, or does it seem to be hiding dents or rust. Does it feel patchy? Perhaps there was body damage.
- Is the original paperwork, including the owner’s manual, available?
If all of these questions have been answered to your satisfaction, you’ll want to obtain a vehicle history report from a service such as CarFax (most used-car dealers will provide this. Insist upon it if they don’t), to make sure the car was never reported stolen or involved in an accident that caused significant damage. It’s also a good idea to find out what similar cars are selling for, to make sure the price you pay is fair.
If your used car is coming from a dealer, be sure to ask about any warranties or guarantees. Most certified pre-owned vehicles come with some sort of protection plan.
Getting the Best Deal on Car Insurance
Whether you ultimately choose to purchase a new or used vehicle, be certain to arrange for your car insurance quote at the same time you arrange financing. Be prepared for the fact that a financed car will generally have to be covered with comprehensive and collision policies as well as your state’s required liability and uninsured motorist coverage.
If you own a house or are self employed, you’ll want to make sure your auto insurance coverage is more than the minimums, so that you can protect your home or business if you are sued because of involvement in an accident, and never, EVER, let your insurance lapse.
A new car, whether it’s fresh from the dealer’s lot, or merely new-to-you is always exciting. By using the tools available on the ‘net, and knowing what to ask about when you shop, your new car experience will be a pleasant one.