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Benefits of Buying a New Car

by Ryan Guina

new carBuying a vehicle is a big investment. To get the best deal, most people will tell you to buy a used car. But sometimes the benefits of buying a new vehicle outweigh the savings of buying a used car.

Here are some of the benefits of buying new:

Full warranty: New cars come equipped with a full warranty, so you know your car will be guaranteed against certain faults for a set period of time. This is a great benefit because the warranty lowers the chance of high maintenance bills during the first couple years of ownership. Some warranties cover more than others, so be sure to understand the exact warranty details of the car you purchase.

Better finance rates: Banks will almost always give a better loan rate for a new car vs. a used car. Why? Because new cars are typically worth more and offer better collateral. They are also less likely to break down. If a car is no longer drivable, some people just decide to stop making payments. The difference in interest rates for a used car can be as much as a full point or two higher, and sometimes more.

Ownership and maintenance history: When you buy a new car, you know everything that has happened to it – which until you own it, is pretty much nothing. Once you take ownership, you know how the car was treated, if it was driven roughly, the accident history, if it has been maintained, etc. When you buy a used car, you have to take the word of a third party for the car’s history – either the previous owner, or a company such as CarFax.

But even a report from a company such as CarFax isn’t always reliable for accident history (if the accident wasn’t reported to an insurance company, chances are CarFax doesn’t know about it). Their reports also do not inform buyers whether routine maintenance was performed on a regular schedule, or the previous driver’s habits.

Another thing to consider – many used cars on the car lots are former rental cars. Unfortunately, many people who rent cars treat them roughly. Would you want to buy a car that has seen heavy use by a large number of people who will never see the car again? Probably not.

The freedom of choice: When you buy new, you select the make, model, color, trim, accessories, etc. If the dealer doesn’t have it in stock, you have the option of going to another dealer, or having the dealer order the car for you. When you buy a used car, you are left with whatever is available. Sometimes, your dream car is available with your exact specifications. Other times, it is nowhere to be found.

Is a new car in your future? Some people will say “never buy a new car,” because they depreciate too fast, and you shouldn’t put that much money into a depreciating asset. But as you just read, sometimes, buying new is not a bad idea.

photo credit: Michal Zacharzewski, SXC.


Published or updated August 6, 2009.
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{ 4 comments… read them below or add one }

1 Paul

Good blog…! In order to get an instant auto finance loan you need to consider a couple of things before you decide to go and get yourself for New Auto Financing loan over the internet.

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2 Matt

You forgot the biggest reason… identical product. I can get a never-been-driven grey 2008 Honda Odyssey with a DVD player and leather seats from *any* Honda dealership. And once I get my first quote, I can take that to some other dealer and ask for the same product at a lower price. And so on; and so on. Provided there are no outside market influences (i.e. first model year), you can purchase a car for a thousand or so over invoice (several thousand below MSRP).

Once you enter the used car market, there are hundreds of differentiators even given the same make/model/features: this one has dealer added pin stripes, that one is cleaner, this one has two fewer door dings, etc. You can no longer go from dealer to dealer and compare apples to apples.

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3 Ryan

Very true, Matt. Thanks for pointing that out. :)

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4 Andy Smith

All that sounds like bad advise unless you’re rich, pay cash for the new car, and don’t mind the 60% depreciation hit you’ll take in the first four years. If you’re smart you’ll pay cash for a used, reliable, car or truck and retire a wealthy person. The new car smell and dvd player don’t seem worth the debt and financial stupidity. More people file bankruptcy or credit destruction on new cars than any other financial decision.

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