The choices faces when buying a “new” (to you) car are astounding- a huge variety of makes, models, options and colours. But before you even begin to narrow down what you’re looking for, it’s important to decide whether you want to buy a brand new car, an “almost new” car (>5 years old), or a “used” car (5+ years old). Each group has its benefits and drawbacks, and what works best for you will obviously depend on factors such as how long you plan to keep the car, what features you’re looking for, your mechanical handiness, and of course, your budget.
In this three-part series, I’ll be looking at the pros and cons of each of these categories of vehicles.
PART I - The New Car
A new car- the dream of teenage boys, the coveted prize on TV game shows. For years, I dreamt of someday owning a new car as I sat in my rusty, old Hyundai Excel (or my rusty, old VW Jetta, or my slightly-less rusty, old Honda Civic, and so forth…). The joys of a new car are many, but they are often short-lived and the payments continue long after the new car smell has vanished. This is almost always the most expensive option, but that’s the price you pay for unbridled freedom, choice, and flawless paint.
Pros
- Unlimited Choice and Customization - When you go shopping for a new car, the world is your oyster. Almost any combination of model and options can be arranged, and you can get exactly what you want, every time.
- Better Financing Rates and Options - When you buy new, you will generally have a much better selection of financing options (buy, lease, term, etc.), and the rates provided through dealers can often be significantly better than those offered through banks. Virtually no bank will offer you a financing rate under 4%, yet rates of 2.9%, 1.9%, and even 0% are commonplace through auto finance companies. In addition, you have access to any number of dealer promotions, including rebates, upgrades, and graduate incentive programs.
- Latest in Safety and Comfort - One of the biggest appeals of a new car is that it’s new. You get access to the latest technologies to keep you safe, comfy, and to wow your passengers. You also get that coveted new car smell.
- Full Warranty - With a new car, you get to enjoy the full benefits of the vehicle’s warranty for the longest possible period. You also get control over the care and maintenance of the vehicle from day one- an important consideration if you’re planning on keeping your car for a long time. You never have to worry if the hours the previous owner spend doing reverse donuts in the Wal-Mart parking lot during the break-in period will show up as transmission problems down the road. Unless, of course, you do those reverse donuts yourself.
Cons
- Increased Cost - The biggest problem with picking up a new car is that you will pay substantially more than a used car. Full stop. Inextricably linked is the…
- Major Depreciation Hit - The moment you take that new car off the dealer lot, it’s worth 10-20% less than it was just moments before. This depreciation continues throughout the life of the car. When you buy or lease, with a new car you are paying the depreciation cost of the car when it is at its worst.
