When it comes time to purchase a Vehicle for you and your family, there are many things to consider.  You have to think about gas mileage, practicality, maintenance costs, styling, and financing,  just to name a few.  You also must choose if you are going to buy or lease the vehicle, which with just a little bit of math– ends up being an easy question (you should buy!).  You find yourself with a much tougher question when you ask the question should I buy a new or used car?

New cars lose a significant chunk of their value (as much as 20%) as soon as you drive off of the lot, which is rather staggering.  However, even with that, there are certain factors that make purchasing a new Car the more desirable option.  This post will examine the main reasons why people opt for both new and used cars, and will present a third option that we here at See Debt Run have used for both of our family cars.

New Cars

What is it about that “New Car Smell” that makes it so appealing?  What does it mean?  It means that this car is fresh from the factory, and is basically a blank canvas.  If this new car has a future as a well maintained workhouse that will run for over 200,000 Miles, it is mostly up to you- the new owner.  Yes, the main appeal of purchasing a new car,  is that you have the full lifetime of the vehicle at your disposal.  Sure, that shiny new toy will surely be dotted with the  bumps and nicks of life over the next several years– but it is appealing to know that you will be the one who is doing the bumping and nicking.  In time, that new car smell will be replaced with the scents of your life.

From a financial perspective, there is a price to all of that comfort.  Because they depreciate so quickly, the price of new cars is considerably more than what you will pay for a used one.  In recent years, however, manufacturers and dealers have really stepped up their incentive programs to help bridge the dollar gap between new and used.  If you have decent credit and can swing a 36 month loan, zero percent interest loans are fairly commonplace.  Many dealerships will also inflate the value of your trade in, in an effort to get you to help clear new inventory off of their lot.  Virtually every automaker offers a warranty on their new vehicles (of varying lengths and qualities), which will give you both financial protection and peace of mind.  Several have even started offering “maintenance care plans” that actually cover the costs of routine maintenance on new cars, which is a trend that we fully approve of!

Used Cars

When you start to go car shopping, you should already have a dollar figure in mind for what you can afford.  The simple truth is, that your money is going to go a lot further if you purchase used instead of new.  For the same investment, you should be able to upgrade to a nicer model. For example, you can get a Toyota Camry instead of a Toyota Corolla, or a Nissan Maxima instead of an Nissan Altima.  The mark-up on options is also considerably lower on used cars.  If you prefer to have leather seats, a premium sound system, a sun roof, or navigation system,  these options can carry a hefty price tag on new vehicles.  When you purchase used, the original owner paid the bulk of the costs, and you get to reap the benefits.

While saving money is the obvious benefit to purchasing a used vehicle, a portion of the car’s life has already been used up.  Depending on how many miles the car has driven (easy to see), and how well it was maintained (much harder to see),  the car may not have as much life left in it as you would hope.  It wouldn’t be smart to take out a five year loan, for example, on a car with more than 50,000 miles.  If your car breaks down and you still find yourself having to make payments, you could find yourself in a very hairy situation.

The See Debt Run Option:  Purchase a Slightly Used Car

We define a slightly used car as having less than 25,000 miles on it, which puts it in its relative auto infancy.  Purchasing a car in this state has multiple benefits:

• You get all the benefits of a used car, in that the lot premium has already been paid– and thus you should be able to afford a nicer model with more options.
• Prior to 25,000 miles, the only scheduled maintenance items are oil changes (and tire rotations). Most people at least do this for their vehicles, so the amount of damage that can be done by previous owner’s neglect is limited.
• Since the car is fairly new, chances are high that a good portion of the manufacturer’s warranty is still in effect.  Many dealers will also offer a “certified” program that will extend this warranty even further.

As mentioned previously, we have two vehicles that we purchased slightly used in the past few years.  Our family car is an SUV, with leather seats and a flip-up third row.  We purchased it from the used lot of a luxury dealership with 25,000 miles on it.  We saved over $12,000 off of the price being asked for a similarly equipped new version of the same car.  Our second car is a larger four-door sedan, which I call my “work-sled”.  It was about 5 years old when we purchased it, but only had 18,000 miles on it!  The previous owners were elderly, and didn’t drive very much.  As such, we saved nearly $20,000 off of the cost of purchasing a newer version of same car.

If you find yourself car shopping in the months to come, you should consider the slightly used option!