Buying New vs. Buying Used

Deciding whether to buy a new car, or a pre-owned one, is not an easy decision. Your final decision of what kind of car to buy is going to be influenced by a few key variables outlined below. If you have any questions, please contact us. Apply now for a car loan!

Should I Buy a Used Car?
No matter if a car is one year old, or ten years old, you avoid the vehicle's initial depreciation hit when buying used. The typical deprecitation amount of a car is between $2500 - $7500 during the first year. For example, let's evaluate the price of new, manual four door sedan Honda Accord with a used, manual four door sedan 2005 Honda Accord based on KBB, otherwise known as the Kelley Blue Book value.

2006 Honda Accord - $17597
2005 Honda Accord - $14,000
Used Car Savings - $3,597

By buying the one year older model, you save over $3,500! Check out the KBB website to see the differences of different years of the car you are interested in. Obviously, your budget can be influenced as a result of the money you will save, which can also make you change your mind about the car you are going to buy.

Buying a used car is relatively safe. You can check any vehicle's history by visiting CarFax.com. Also, most newer model used cars come with a manufacturer's warranty. These warranties will protect you from having to pay for certain types of repairs.

Should I Buy a New Car?
Buying a new car is a cool experience. There is nothing like that 'new car' smell. The one major downside of buying used is depreciation new cars hit as soon as they leave the dealer's lot. In fact, the value of your new car will drop in value by as much as 75% after five years!

When you buy a new car with an auto loan, you will end up owing more for the car than it is worth. This means that you will be 'upside down' on your loan. You need to determine if you really want to pay $300/month for five more years for a car that is worth significantly less than what you paid for it.

**Please note that not all new cars depreciate at the same rate. For example, a Ford truck or a popular car like a Mini Cooper, will likely retain their value longer than a general vehicle like a Nissan Maxima. A good idea would be to check out KBB and compare the depreciation values of cars you are interested in.

***Interest rates associated with new car loans are 1-3% lower than used cars. However, the amount of money you will save as a result of these lower financing rates is much less than the money saved by buying used.
 

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