Used Car or New Car? Which Should I Buy?

Is it better to buy a good used car, or buy a brand new car? New car versus used car. What are the pros and cons of each? Which is smarter?

This question comes up quite often from people who are looking to buy a car. Maybe you have the question too.

It might be that you have money, say $5000, that you could use to either make a $5000 down payment on a brand new car (and a new loan), or to pay cash for a $5000 used car — monthly payments or no monthly payments.

Or it might be that you have, say $15,000 cash, and you need to decide between a brand new car for around that price, or a used car that might be a better value.

There are advantages and disadvantages to either choice. Let's take a look at the pros and cons of buying new and buying pre-owned.

Pros of Buying New

You get a brand new car with new-car feel and smell
You get the latest style and technology
You get the latest safety equipment
You get a full manufacturer's warranty - 3 to 5 years
You get state Lemon Law protection
You get lowest loan interest rates, if you qualify
You get the option to lease
You can get free dealer invoice pricing information
You may get special manufacturer purchase incentives and financing, if offered

Cons of Buying New

Value of a new car depreciates more rapidly
Prices are higher (maybe) for same make and model used
Insurance rates may be higher than used
Taxes may be higher

Pros of Buying Used

You avoid high first-year value depreciation
If you buy almost-new, you may get same styling and technology as new car, at a lower price
You get price flexibility by choosing between different model years, mileage, and condition
You may buy "certified" vehicles with inspection and warranty - at a higher cost
You get lower insurance costs than same new model
You get lower sales tax and property tax

Cons of Buying Used

You buy "as-is" without warranty, unless some manufacturer's warranty remains
You risk greater problems if your car is older with high mileage
You risk greater problems is car has not been inspected
Lemon laws don't apply to used cars in most states
You may be buying someone else's problems
You risk buying a wrecked or salvage vehicle
Scams are common when buying online (see Car Seller Scam)
You don't have a lease option
You pay higher interest rates for used car loans than for new-car loans
You may get fewer safety/security features and fewer insurance discounts

Summary

To summarize, buying a used car can, but not always, be a better value for your money but it comes with higher risks. Without the protection of manufacturer warranties and lemon laws, you are on your own with used cars, since most such cars are sold "as-is."

You shouldn't assume that buying a relatively late model used car is always a better deal than buying a brand new car because new cars often come with heavy manufacturer rebates, discounts, and other incentives. Therefore you should always compare by getting free new-car price quotes from online pricing services such as Edmunds.com and InvoiceDealers. The prices you receive will include all Internet discounts and rebates. You might be surprised to find that a brand new car can cost less than a late model new car of the same make and model, since manufacturer incentives don't apply to used cars.

If you decide you want to buy a used car, there are many places online and offline to find good used cars for sale. Read our article Finding Cheap Cars and Best Used Car Web Sites for suggestions on how and where to find them.

Find already-discounted used cars at dealers in your area at UsedCars.com, the largest and oldest online used car source. They have thousands of cars of all makes and models in all price ranges. Most of their cars are priced below used-car guide book values. They provide free Carfax reports on all cars right online. If you find a car you like, you can make the arrangements while you are on the web site.