Is It Better To Buy a New Car or a Used One?
If you’re in the market for a car, you may be torn between buying a new model or a used vehicle that’s in good condition. Either way, you’ll likely need to be flexible in your search. Inventory levels are down over 71% since last year, according to a CarGurus report. Meanwhile, demand is going up — right along with prices.
Whether you’re buying a vehicle in the near future or waiting until the market rebounds from the pandemic, there are pros and cons of buying a new car versus a used one. Here are some important things to consider before deciding which one is right for you.
Buying a new car
Getting a shiny new car certainly has its perks, though there are disadvantages as well.
You’re getting the latest technology and design features
New cars are outfitted with the most up-to-date offerings. These are often positioned as add-on features to the base model, and they can include everything from leather seats to a sunroof. Just bear in mind that these benefits come at a premium and can significantly increase your total spend.
You might find better deals and financing options
Car dealerships are known to offer 0 percent auto loans on certain new models, assuming the borrower meets their credit requirements. That could translate to significant long-term savings. Just be prepared to negotiate as competition may be fierce. A recent J.D. Power report found that new vehicles are expected to sit at dealerships for only 19 days before being sold. That number was 48 days one year ago.
New cars typically come with warranties
According to Kelley Blue Book, new car warranties are typically built into the sticker price. It isn’t uncommon to snag a comprehensive, bumper-to-bumper warranty on top of a powertrain warranty that covers important mechanical parts of the car. Free warranties are far less common among older vehicles. That means you could spend more on repairs with a used car.
Buying a used car
74% of drivers say their most recent car purchase was a used car, according to 2019 AA Cars research. Buying a used car has its advantages and drawbacks.
The sticker price is often lower on a used car
At the end of the day, new cars tend to be more expensive. Edmunds research found that in the fourth quarter of 2021, the average amount financed for a new car was $39,017. That number was over $9,000 cheaper for used vehicles. What’s more, the average down payment for a preowned vehicle was almost $2,300 less.
Depreciation is less of an issue
Older cars depreciate more slowly than new cars. In fact, new models lose 20% of their value after the first year and continue depreciating by roughly 10% every year after, according to Experian. But depreciation usually slows down after five years, which might make a used car an attractive option.
What it means for your car insurance rates
When it comes to auto insurance rates, the most important factor is where you live as each state has its own minimum requirements for drivers. Most states require auto liability coverage, which protects you if objects or other vehicles are damaged in an accident that’s your fault. It covers injuries sustained by other drivers and their passengers as well. This type of policy also limits your personal liability.
Your state may also require you to carry uninsured or underinsured motorist coverage. This offers protection if your car is damaged, or you or your passengers are injured by an uninsured or underinsured driver. Beyond your state requirements, you may choose to tack on additional insurance at your own discretion. Collision coverage, for example, covers you if your car is damaged by a run-in with an object or another vehicle. Then there’s comprehensive coverage, which protects against things like theft, vandalism and more.
Your auto insurance rates depend largely on your level of coverage, though other factors also come into play. If you have a new car that would be expensive to repair, paying for collision and comprehensive coverage may be worthwhile. It’s worth noting that those who lease a car or finance a purchase with an auto loan might be required to buy additional insurance.
The type of car you have can impact your auto insurance rates in other ways. Opting for a new car with the latest safety and security features might help you secure a lower premium. Insurance carriers may determine that these bells and whistles decrease the odds that you’ll file a claim in the future. On the flip side, a newer car that would be costly to repair may actually trigger higher rates. The same goes for cars that are at higher risk of being stolen.
Finding the right auto insurance policy can be an overwhelming task. Matic combines an easy-to-use digital marketplace with an expert team of licensed advisors. Compare quotes from 30+ A-rated carriers in seconds and find the right coverage at the best price.