When you’re thinking about buying a car, one of the most important decisions you will make is whether you should purchase one that’s brand new or used. There are several different factors to consider when you make this decision — the differences in prices, financing, performance, insurance costs, reliability, and even the overall buying experience can have a big impact on what you ultimately decide.
Everyone is in a different situation when they’re buying a car, and they also have different preferences for what they want. The truth is that there is no right or wrong answer in making your choice. Read on for the comprehensive guide to buying a new vs used vehicle, or scroll down to the bottom of this page for a synopsis of all the details.
Used Car vs New Car Prices
The most obvious difference between used and new cars is price. Used cars will always have a lower price tag than the same car that’s brand new, and there’s no getting around that. However, it’s important not to overstate that. The truth is that used vehicles can also be more expensive than new cars of a different brand, model, and age.
Used Car vs New Car Depreciation
The main reason why used cars usually have lower prices than new cars is because of depreciation. Depreciation refers to how much value a vehicle loses over time. For example, say over the course of a year your car’s value declines from $10,000 to $9,000 — that means it depreciated in value by 10%.
A new car will generally lose most of its value in the first few years of being sold. So if you buy a brand new car, it gets hit harder by depreciation in the first three years than it will over the following three years, and so on. There are some exceptions to this rule, as some car brands and models depreciate at a much slower rate over time than others.
If you want to keep an eye on the resale value of your car down the line, you should keep depreciation in mind.
Used Car vs New Car Interest Rates & Incentives
For people who do not have the cash to buy a vehicle outright, things get more complicated when you start talking about taking out a car loan. You might expect that the interest rates for used cars would be lower than they are for new automobiles because they’re also cheaper to buy. In fact, the opposite is true.
If you want lower finance rates, auto manufacturers will offer great incentives to attract buyers by offering low-interest rates — sometimes as low as 0% over a set period of time — as well as cash rebates. This means that the bigger starting price you see on a new car can wind up being less overall, plus you can split the cost into more manageable payments over time.
Leasing a Used Vehicle vs a New Car
With both new and used vehicles, you also have the option of leasing. With leasing, you will often have lower monthly payments than if you finance the same car with the same loan terms.
Leasing has the added benefit that you can start a new lease every few years on another new car. However, in the case of used vehicle leases, they are not so common as new vehicle leases. You may have to hunt around for a dealership willing to work with your needs. Used car leases can be a solid option for you since the vehicle will already have born the brunt of depreciation before you get it, meaning your monthly payments would be lower than a lease on a new vehicle of the same make and model.
Used Car vs New Car Warranties
Warranties can also have an impact on the cost of a new or used vehicle that you want to buy. If you buy a used vehicle, generally speaking it won’t come with any warranty coverage. That means if something goes wrong with it, you’re on the hook for the cost of repairs and replacement parts.
You do have the option with some used car dealers to purchase some warranty coverage, but they do not usually last long and the coverage is not as comprehensive. The only used cars that come with warranties are Certified Pre-Owned Vehicles, because they are relatively new and some manufacturers offer warranty coverage on them.
However, none of those options will match the new car warranties you get from manufacturers. They last longer, they cover a lot more in terms of the various parts and systems in the vehicle, and they come as standard when you buy a new vehicle.
Used Car vs New Car Insurance Rates
When it comes time to get an insurance policy for your vehicle, there is a difference in how much you will have to pay between new and used cars. Two of the major factors in determining your monthly insurance payments are the age of the vehicle and its value. This means that, generally speaking, used cars will cost less to insure because they are both older and usually less expensive.
There is some wiggle room with this, however. A used Ferrari, for example, will be more expensive to insure than a new economy sedan. If you want to get the most value out of your vehicle, make sure you do your research into insurance costs ahead of time.
Used Car vs New Car Performance & Fuel Efficiency
Manufacturers are always improving the performance and efficiency of new vehicles — whether it’s making engines with better fuel economy, making lighter vehicles using new materials, or continually getting more horsepower from smaller engines. That also means that used vehicles will not have the same level of performance or fuel efficiency as a new vehicle. The older the used car is, the greater the discrepancy will be.
Some new vehicles, for example, will come with features like “stop and go” technology to make your vehicles more efficiency during heavy traffic periods. Most uses vehicles will not have that type of feature.
Used Car vs New Car Technology & Features
Similar to performance, there is also a difference in the level of technology and features between what you will find in new vehicles and in used cars. Whether they come as standard or as optional extras, today vehicles come with fully integrated infotainment systems where you can connect your phone and all its music, apps and so on. Unfortunately, used cars will only be as advanced as cars were made at the time they were new.
Used Car vs New Car Safety
There has been a lot of advances in vehicle safety in recent years thanks to the evolution of things like artificial intelligence. Vehicles that are made now come with a lot of new safety features that will automatically react to certain conditions faster than you can as the driver — emergency braking, alerting you to something in your blind spots, warning you when you are straying out of your lane, and so on.
New advancements in engineering means that new cars are always made a bit stronger and a bit safer in the event you are in a crash.
Used Car vs New Car Reliability
The biggest stigma against buying a used vehicle is the reliability — people are afraid that they have no idea what condition the vehicle is really in, and they only find after the fact that it’s a decrepit piece of junk that needs a lot of costly repairs. While this fear is exaggerated, and the cars on the market are made more reliable than they were a decade or two ago, this does generally hold true: new cars are more reliable than used cars.
There are two reasons for this: first, engineering continues to evolve and improve so vehicles will not have nearly the same amount of breakdowns or shorter life spans. Second, the biggest issue for reliability is how old the vehicle is, and the older a car is the less reliable it will be.
Used Car vs New Car Selection & Choice
One of the big problems for used cars is the lack of choice and selection. It can be a lot of work to search online or visit different used car dealers until you find a vehicle that fits what you want in terms of the make, model, trim, colour, age, kilometres, condition, price, and so on. In the end, you will be at the mercy of what used cars are on the market in your area and in your budget.
Meanwhile, for new vehicles you can visit one dealer that has the make and model you want and they will have tons of options to choose from on their lot. You can choose the colour, whether it’s automatic or manual, whether it’s gas or diesel, and exactly what features, options or accessories it has. You simply have a far greater choice with new cars, and it’s a lot easier to find them.
Used Car vs New Car Overall Verdict
In the end, whether it is better to buy a new or a used car really depends on your situation. If you have the money, buying a new car offers you much greater value in terms of financing, fuel economy, performance, safety, reliability and the amount of selection and choice you have.
But if you want to get the best value overall, or if you are on a limited budget (or both), then there is a big benefit to buying a used vehicle that all of the benefits for new cars just can’t overcome.
- Lower initial prices
- Less depreciation over time owned
- No incentives & higher finance rates
- Little to no warranty coverage unless extra coverage is purchased
- Cheaper to insure
- Less fuel efficient and loses power and performance over time
- Won’t have as much technology or advanced features
- Has older safety engineering and features
- Reliability is unknown when you buy it and not as reliable as an older vehicle
- Not as much selection or choice if you are looking for a particular type of vehicle
- More expensive prices bought new
- Loses more in depreciation at a faster rate
- Lots of cash, finance and lease incentives from manufacturers
- Standard manufacturer warranty coverage
- More expensive to insure
- Better fuel economy and more efficient performance
- Latest technology and features available
- Latest safety technology and features as standard and options
- Brand new, no unknown history, better reliability & covered by warranty
- You can choose the trim, colour, optional extras, accessories, etc