When comparing a new vs used car it almost seems obvious that the new one would be a better option, but you would be surprised by the amount of money you can save by driving a used vehicle.
Buying a New Car
Now I know buying a new car can seem pretty glamorous, but the truth is it is very expensive! The vehicle literally depreciates in value the second you drive it off the lot after purchase.
A good rule of thumb to use would be 20% of the new cars purchase price is lost as soon as you buy it, so that $35,000 car is now only worth $28,000 which is $7000 in depreciation.
After only 1 Year of driving that number could go down to 30% making the vehicle only worth $24,500 which is $10,500 in depreciation.
The deprecation is definitely the worst aspect to buying a new car, but there are lots of other benefits to owning a new vehicle such as:
- More Financing Options
- Warranty Options
- Spending Less Money on Repairs and Maintenance
- Increased Reliability
- More Insurance Options
Buying a Used Car
Buying a used car obviously dominates in the price aspect, but let’s take a look at the depreciation you incur on a new vs used car.
If you were to purchase a used car that is only 4 years old for $12,000 you would be able to turn around 3 years later and sell the vehicle for around $8,000 which is only $4,000 in depreciation. You will also get to drive a fairly new car.
Now I know you’re probably sitting there thinking “a new car is so much better for my peace of mind” which is very true, but is it worth the extra money in depreciation? That’s up to you, but here are some other various benefits of buying used:
- Insurance Rates Are Lower on Most Older Vehicles
- Stress Free – Dents and Dings Aren’t as Big of a Deal
- Bargaining – Easier Time Bargaining for Vehicles
- More Variety of Options Due to Lower Price
Not all cars lose value at the same rate. Some brands are known to hold their value longer than other brands can. You can find numerous resources online to determine the average deprecation value for a specific brand or you can use Kelly Blue Books 5 year cost to own.
So What’s Better?
Like a lot of things there is no correct answer to this one, it just depends on the type of person and the amount of money their willing to spend. They’re both great choices, but one just costs more than the other, so make sure you chose carefully when comparing a new vs used car.