Buyer's Dilemma: a New or Used Car?

New cars are fun, stylish, and covered by warranty. But a used car can deliver better bang for the buck. Which is right for you?

This page:

  • Assesses the risks and rewards of buying a used car

  • Outlines reasons for and against opting for a new car

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Buying a used car

If you're considering making your next new car a not-so-new one, you're not alone. More and more Americans are choosing to buy a used auto. Though the steady stream of car commercials on TV would have you believe otherwise, used auto sales outnumber new by about three to one.

Why? Because, on average, used cars cost less than half of what new cars do, and most of a vehicle's depreciation (loss of value) takes place during its first three years of life. Which means that used cars don't lose value as quickly (or as much) as new ones.

On the other hand, buying a used car is a financial risk. A low price tag is not a guarantee of quality.

So while you may be able to find a very low price from an independent seller, buying a used car from a dealership may give you a little more in the way of security. Most used cars for sale at dealerships are certified, and they may even have re-issued warranties.

Off lease vehicles sold by dealerships can be especially good deals. These are generally used cars with low mileage and good service records. And the leasing boom of the past few years has made these near-perfect used cars easier to find.

Read more used car buying tips.

New cars for sale

Everyone loves a brand new car. And, excitement aside, there are some very real advantages new cars have over used cars.

A big one is security. New cars are under the manufacturer's warranty, so there won't be any unpleasant (and expensive) surprises. And new cars are generally manufactured to meet higher safety standards with each passing year.

Shopping new cars is an easier (and more enjoyable!) job too. There's no real difference between the same model new car from lot to lot, so you won't have to guess which vehicle is in better shape.

The benefits don't stop once you've found your dream car, either. New cars earn lower financing rates than used cars.

And then there's the prestige factor. Even though it might not make financial sense, we love new cars because they are new.

But new cars have their drawbacks, too. New car prices are always high, and that price isn't reflected in the vehicle's actual "value". New cars lose up to 20% of their value as soon as they're driven off the lot, and continue to depreciate fairly quickly for the next few years.

The single most compelling argument against buying a new car is that you'll be absorbing this loss even as you're making payments on the original price.

Read more about buying new cars.

The big decision

In the end, buying new or used comes down to your priorities. If the security and prestige a new car are worth a bigger price tag, buy new. If lower cost and better "return on investment" appeal to you, a used car might fit the bill.

And don't forget the financing. No matter what car you choose, securing independent financing before you shop can be the key to savings. Read our guide to online auto lenders and apply for fast and easy approval.


Next: tips and advice in our used cars buying guide

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