New vs Pre-Owned: Which One Is Right For You?

Making the decision between a new or pre-owned car can be difficult. There are pros and cons to both, so you need to make sure that you’re making the right choice for your lifestyle. While the prices between the two can be an obvious difference, there are more factors at play that can be just as important.

Price

On average, Experian’s State of Automotive Finance Market reports that a new car costs on average $700/month while a pre-owned car averages at $525/month for the third quarter of 2022.

This could help you save on the initial price of the vehicle, but you’ll also want to consider the cost of maintenance and repairs over the life of the vehicle.

Kelly Blue Book®️ (KBB) reported that the average monthly payment for a new car buyer in November 2022 was $762. This means that new dealerships are going to have to target wealthy buyers and won’t be able to build many affordable vehicles.

If you’re looking for a pre-owned vehicle, then you’re in luck. Pre-owned vehicle prices are on a steady decline. This means that, while there may have been 1 or two owners ahead of you, you can get a lightly used vehicle for a much more affordable price than buying the newest model. Another benefit to this is that, if you buy a vehicle that’s a model year or two older, you could get a higher trim level with more bells and whistles than if you were to get a brand-new vehicle.

With price out of the way, here are some pros and cons of buying a new or pre-owned vehicle.

Pros Of Buying New

Wide Range Of Features

It’s easier to get the features you want on a new vehicle vs a pre-owned vehicle (if you can afford the upcharge). With new vehicles, you’re able to order the vehicle with the accessories and features that you want.

Better Interest Rates

You’re more likely to get a better interest rate with a new vehicle. This rate can sometimes even beat the rate on a pre-owned vehicle by a few percentage points.

Reliability

New vehicles come with the assurance of reliability, for a couple of years at least, but that reliability comes with the higher cost of the vehicle.

Cons Of Buying New

More Expensive

As we’ve said previously, new cars are typically going to be more expensive than a pre-owned vehicle. You’re paying for the added reliability and, more often than not, non-existent wear and tear. These added benefits do out a hefty increase on the price though.

Depreciation

According to CARFAX®️, the value of a new vehicle drops by about 20% in the first year of ownership. Over the course of the next 4 years, buyers can expect that value to drop even more; about 15% of its value every year.

Higher Insurance Costs

Insurance costs are usually higher for new vehicles because of the collision and comprehensive coverage required by lenders. Insurance for new cars is so expensive because of the potential cost of repairs or replacements on the vehicle.

Pros Of Buying Pre-Owned

Less Expensive

Again, pre-owned vehicles are going to win out when it comes to initial price. With depreciation being so high for a new vehicle in the first 4 years, it’s likely you can score a pretty good deal going with a model that’s just a couple of years old.

Slower Depreciation

After the first few years of ownership, the depreciation rate doesn’t decline as drastically, which can get you a better value if you trade in later down the road.

Lower Insurance Costs

Many pre-owned vehicles will have lower insurance rates, titling fees, and registration costs. You won’t be battling with the requirements of lenders here, so you can save a few bucks.

Cons Of Buying Pre-Owned

Making Compromises

It’s not as easy to get the features that you want in a pre-owned vehicle, and you may need to make compromises on some things that you had in mind. Although, if you’re on a budget, you may be able to get more features at your price point than you originally thought by getting a car that’s a few years older.

Car History

You’re definitely going to have to look closely at the vehicle’s history. Unlike with new vehicles, a pre-owned car has had an owner (or a few) and a life before getting to you. It’s not unusual to see service records for various maintenance items, but the big thing to look for are larger repairs and replacements that the vehicle had to undergo.

Increased Maintenance Costs

A pre-owned car will inevitably need more repairs and maintenance over time, but with the right care and upkeep, the vehicle can last for a long time before needing to be replaced.

If you still need help figuring out what type of vehicle to go with, give us a call! Our team is always happy to help answer any questions you have about buying a vehicle, no matter if you purchase from us or not.

Be sure to also check out our tips for What To Look For When Buying A Pre-owned Car to help aid in your research. Happy shopping!