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Step 5: New Car versus Used Car

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Cars and buyer
New and used cars are enemies for more than few decades. Many experts have brought out their point of view based on many factors with supportive logics and reasons. For us, there is no correct answer that can be applied to anyone who is looking to buy a car. There is no one size fits all but you can find the size that fits you the best. Here we created a list of conditions to help car buyers to find the best answer based on the situation.

Car price and depreciation

The biggest attraction why two out of three persons prefer used more than new is because of the depreciation. A car depreciates every minute since the moment you drive it out from the dealer’s lot or show room. It depreciates the fastest during the first two years. Depreciation is what used car buyers see it as “earning”. It is also the profit for used car dealers. The biggest advantage of buying a used car is to avoid the heavy depreciation for the first few years that hurts. It could up to few thousand dollars depending on the car model. Savvy consumers who hunt for new car often prefer model with least depreciation, for instance, Mercedes-Benz,Toyota, Ford or Honda. Sometimes, new car price will be cheaper after the technology become more common. The new 2012 Toyota Camry is a good example; it is $965 cheaper than the 2011 model.

Sometimes, a high quality used car will have the same price tag with a new car. For example, a used Mercedes-Benz E-Class may have the same price tag with a brand new Ford Fiesta. It depends on what you prefer when it comes to situation like this. A used Mercedes-Benz E-Class or a brand new Ford Fiesta? Do you prefer a bigger car but older model or small car but brand new?

Maintenance

There was once Suming’s customer told him that “Buy a new car, I sleep well every night. But when I own a used car, I kept worry that I will have to spend extra money for the maintenance and repair.” Buy a new car give you a peaceful mind without worrying the car will give any problems. Extra money is needed for repair if there are problems. New car has warranty coverage from the manufacturers for at least a year up to several years. Some cars such as the European-built Kia Cee’d offer a limited coverage up to 100,000 miles or seven years. It is currently the longest warranty. If expensive parts need to be replaced, owner does not have to worry about the cost. New car does not sound any risks at all. Over the years, many branded cars have been recalled back to the factory for repair which frequently happened as human made mistakes.

There are definitely some risks when buying used car. Some of the used cars sit in dealer’s lot are former lease cars or rental cars. Generally these cars have been raped before and sometimes the maintenance may cost more than what you earned for the depreciation. Used car buyer will get benefits if they understand about car and able to maintain the car in good condition and keep it runs well. Warranty will not be an extra point for people who do not concern much about warranty protection. There are many things could be done for used car hunter to have a lower risk which will be explained in detail in Chapter 3.2 Buying a used car.

Think about future plan

What are you planning to do with the car? How long you expect to own the car? We have seen some people walk into a car show room, make a payment, drive the car out from show room and then sell it after three months. We have also seen some people bought a used car and use it for many years until the car is unwilling to run anymore. We would recommend you to buy a new car if you love the car and planning to keep the car for a long time. In other words, if a car is temporary needed for few months up to a year or two, a used one may be more practical because not much of money will be lost on the depreciation.

Generally, new car is able to withstand more mileage compared to used car. Parts need to be replaced over the time including timing belt, coolant, gear box, brake pad, tires, clutch plate, and among others. 15,000 miles or 25,000 km a year is the average number. If you will use the car more than average, a new car should be consider, otherwise, a used one is adequate for your needs too.

Insurance and Loan

New car often have some incentives that used car does not have. These incentives are cash rebates, low insurance cost, better loan rate, and sometimes, free accessories are given too. Most of these things could not find in used car deal. The total interest paid at the end of the day could have a huge different if the interest rate is just 1% difference. This is also the reason why interest rates at banks, dealers, and credit unions can differ so wildly. We have made a detail calculation in 3.1 for better understanding.

The smell and technologies

New car will come with new smells which make you feel better. Some used cars owned by bad drivers who smoke in the car will have bad smell. Sometimes you can find cigarette burn on the car seat. Other than smell, technology is what matters. You may follow the best car buying guide to buy the best used car that compatible with you, but you will never get the newest technology. For example:

  • Hybrid technology: New hybrid technology like what it has in the Toyota Prius achieves the fuel economy of 51 city/48 highway mpg. This is something we could not find it in used or old cars. Newer technology often gives better fuel consumption. For example, the 2012 Toyota Prius plug-in is even better and this technology could not be found in used car market.
  • Advance features: Airbags, electronic stability control system, auto-cruise, better stereo system, digital meter on the dashboard or even iPod auxiliary port are other great examples.
  • Airbags: Earlier cars do not have airbags but new car comes with airbags. Some advance models even come with more airbags include frontal airbag, side airbag, knee airbag, rear curtain airbag, center airbag for better safety.
  • Auto-cruise: Auto-cruise feature allows better fuel economy for long journey compare to cars without this feature.
  • Entertainment: Earlier cars always with the least entertainment features. We can see the evolution from cassette player to CD player, and now DVD player with built-in GPS system. That is the evolution of technology and the latest can only be found in new car.

Other things to consider

Car manufacturers make millions of vehicle each year and vehicles sit in the dealer’s lot is often more than drivers. This has given used car buyer more choices compared to new car. As we mentioned before, depreciation is the biggest attraction for used car buyer. That is also the reason why two out of three cars on the road are used car. It’s about money money money, if money is not the problem, new car always smell better.

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