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New or Used: Which Car is Right for Me?

last updated November 14, 2013 by

There is nothing quite like the feeling of stepping into a new car.  The smell of the leather, the squeaking of the plastic, the visceral thrill of tearing the protective film off of the dashboard instruments; it is no wonder that millions of Americans purchase new automobiles every year.  Unfortunately, not everyone can afford to pay thousands of dollars for a new automobile, especially when the used car market in the United States is so active and vibrant.  When shopping for an auto loan, you should consider whether or not you really need a new car, or whether a used car might better suit your financial condition and driving habits.

Maintenance Issues

The main tangible reason that it might make sense to purchase a new car is for the increased reliability.  When you purchase a new car, you are in charge of every aspect of that car’s maintenance, and you can be sure that the car is treated within the manufacturer’s specified operating guidelines.  New cars also typically come with warranties, both from the dealer and the manufacturer, covering all service and repair for several years after purchase.  The higher cost of new cars is thus offset somewhat by the reduced expenses in maintenance and emergency repair.

Used cars, on the other hand, vary wildly in their reliability.  High mileage cars might be reaching the end of their lifespans, requiring costly investment in new drivetrains or engine rebuilds to keep them on the road.  Older cars, especially luxury models and imports, also suffer from electronics failures as older wiring begins to corrode and break.  Some used cars are fantastically reliable though, such as Toyota pickup trucks and Honda sedans, so be sure to shop around and read consumer guides before making a purchasing decision.


New cars go through an immediate depreciation period when they drive off the lot, as they become “used” despite their low mileage and good condition.  When you buy a new car, expect to immediately lose about fifteen percent of your car’s value the second you start driving, although subsequent depreciation is slower. Used cars have already depreciated a great deal from their original purchase price, allowing you to afford car models that would have otherwise been prohibitively expensive.

Auto Loans for New and Used Cars

While new cars might seem vastly more expensive than their used counterparts, most Americans choose to finance their car purchases in order to make them more affordable.  By financing a new car, payment can be spread over several years, reducing the overall financial burden.  It is somewhat harder to get a loan for a used car, as the bank has difficulty assessing the used car’s value, and many sellers of used cars want cash-in-hand rather than deal with financing.  On average, buyers of used cars actually pay more initially for their cars, whether buying the cars outright or paying large down payments to provide security for the lenders.