New, Used or Lease?
NEW, USED OR LEASE?
Whether it’s time for a new ride or you’re in the market for your first car, you’re faced with a big decision: should you buy a new car, buy a used car or get a lease? What are the pros and cons of each? We’ve done a little research to help you find the option that’s right for you.
Buying a New Car
New cars can be very exciting! You get to pick out the exact make, model, color and features that you want. They typically come with a warranty which can provide peace of mind when you’re out on the road. And since everything is brand new, you likely won’t need to worry about befriending the mechanic for quite a while.
However, new cars can lose up to 20% of their value as soon as you drive them off the lot. That’s a huge loss for a brand-new purchase. On top of that, that depreciation can grow to 30% over the course of the first year. That means that if you bought a $30,000 car, after 1 year its value could be as low as $21,000. That’s a $9,000 depreciation! While nearly all vehicles lose value over time, new cars do so at a much faster rate.
Buying a Used Car
Some may hesitate to buy a used car, but this option can save you money! Modern cars tend to be more reliable than in the past and have longer lives, so if your used car isn’t too old, it might still run as well as it did in the beginning. The recommended maintenance intervals of modern cars also tend to be farther apart, which means you may not have to spend much on maintenance. Keep in mind though that if you buy a used luxury car the parts and maintenance may cost more. Many cars today can go up to 100,000 miles before needing any major repairs. If you purchase a used car with 20,000 miles on it, you can potentially use it for quite a long time worry-free.
There are many tools today that can help you shop for a used car. You can check the car’s value online at Kelly Blue Book as well as check CARFAX to make sure the car does not have a salvaged title. Another advantage to buying a used car is that the insurance is typically lower than it is for new cars. You may even be able to afford a more luxurious car than if you bought a new car.
There are potential downsides to used cars to watch out for. Even if you’re careful, you may get a car that has hidden problems. It’s always a good idea to have a used car checked out by a mechanic before purchasing it.
Leasing a Car
Leasing a car is an entirely different option. In this case you won’t ever own the car; leasing is more like renting it for an extended period of time. You will typically have an annual mileage limit, and any unusual wear and tear on the car is your financial responsibility. In general, if you lease cars for a long period of time you will end up spending more money than if you just bought a new car and kept it for that same period.
Why would anybody lease a car? When you lease, you generally have less of a down payment and lower monthly payments. That means you could drive a brand-new car every couple years but only pay for part of the vehicle cost. A great advantage to leasing is that routine maintenance is usually covered with a leased car. So if you like to change cars often, always drive a new car or not worry about maintenance, leasing may be for you!
Different car-buying options are better for different people. Take some time to research the best option for you. Consider what you want out of a car, what’s important to you and how much you can afford. You’ll feel more prepared and most likely will be more satisfied with your car when you know it’s the right decision for you.
Click here to learn more about the pros and cons of buying a new, used, or leased car including warranty, depreciation, maintenance, and insurance costs.
