Benefits of Buying a New Car – When Buying a New Car is a Good Idea

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Benefits of Buying a New Car
Buying a vehicle is a big investment. To get the best deal, most people will tell you to buy a used car because new cars depreciate quickly. And in most situations, buying a used car is the way to go. But sometimes the benefits of buying a new vehicle outweigh the savings of buying a used…

Buying a vehicle is a big investment.

To get the best deal, most people will tell you to buy a used car because new cars depreciate quickly.

And in most situations, buying a used car is the way to go. But sometimes the benefits of buying a new vehicle outweigh the savings of buying a used car.

Benefits of Buying a New Car

Buying a new car is not for everyone. But there are many times when it makes sense to buy a new car versus rolling the dice on an older used car.

Take a look at some of the perks that come with purchasing a new car as opposed to a used one:

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 of years of ownership.

What does a standard warranty cover?

Most new cars come with what’s known as a bumper-to-bumper warranty, a plan covering either 36,000 or 3 years, whichever one the driver reaches first. Some warranties go much longer, with Kia and Hyundai offering the original owner a drivetrain warranty of 10 years or 100,000 miles, whichever comes first.

In addition to that care, which encompasses a number of repairs and services on factory issues your vehicle might encounter, you can buy an extended warranty to cover more miles.

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 former rental car that has seen heavy use by a large number of people who will never see the car again? Probably not.

Reliability

Along those lines, you get peace of mind knowing your new car is fresh from the factory, newly inspected, and backed by both the dealership and the car manufacturer.

With every advancing year, reliability ratings get more specific and standards more stringent.

Safety is at the forefront of most drivers’ minds when they get out on the road.

And saving money is great, but not at the cost of safety.

Knowing your vehicle has made its way through a procession of checkpoints before ending up in your driveway is reassuring, as is knowing your car hasn’t yet experienced the wear and tear of a used car.

Another benefit of purchasing a safer car?

Some safety features can also help you save money on your auto insurance.

Advanced user experience

We can talk about the money you’ll save on buying an older car all day, but if having the most tech-savvy model of your vehicle matters to you, then you might want to buy new.

It’s easy to assume a year or two doesn’t actually make a big difference to a car’s features.

Tell that to someone who purchased an SUV in the mid-2000s, only to miss out a backup camera or sound system incorporated in the next year’s model.

We’ve entered an era of innovation in vehicle technology, and the newer your car, the more features it’s likely to have.

Do a side by side comparison of the car you’re interested in to see how its technological features have changed over the last few years.

The progress might just be worth the price tag.

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.

You may have more leverage, depending on market conditions. You can get a lot of information about new car prices online, making it easier to compare pricing between dealerships.

Pricing used cars is not always as easy, because there are often more variables, such as mileage, condition, accessories, color, and other factors.

These tips can help you with your next car purchase.

Best Websites to Check Used Cars

It feels like there are more and more automobile marketplaces coming online each day.  These are three of the legit options:

I Bought a New Car, and Why it Was a Good Idea For Me (at the time)

Most people recommend not to buy a new car because they depreciate so quickly.

And we all know you shouldn’t put a lot of money into a depreciating asset – especially one that most people won’t keep long enough to pay off.

Well, I went against that advice and bought a new car in November of 2005.

There were several reasons I bought a new car, but I will tell the story and the reasons will unfold.

The first reason was –

I needed a different vehicle

The truck I owned at the time was a manual transmission, and I was scheduled to have back to back knee surgeries (one on each knee).

I lived alone at the time, so I needed a reliable means of transportation that wouldn’t cause me pain to drive. In other words, I needed a car with an automatic transmission.

Oh, and I lived in a location where having a car is a necessity due to the complete absence of public transportation.

Lack of local options

I lived in a fairly small, military town in west TX.

There are several recurring themes in military towns – one of which is the propensity for auto dealerships to charge much more than they would in other towns.

The other thing I had going against me, was small-town dealerships often charge more than dealerships in large cities (less competition means less reason to drop prices).

It only made sense for me to go to a larger city to buy my car.

So I traveled

Thankfully, my parents lived in Houston, a large city with plenty of dealerships fighting for sales.

One weekend I made the 6.5-hour drive to visit them and shop for another car. I had done plenty of research and determined I wanted a late model used car, and I had several models in mind.

But there was a problem. A big problem.

A natural disaster

November 2005 was shortly after Hurricane Katrina, and almost all of the used cars in the Houston region were bought up by hurricane refugees who relocated to Houston after the Gulf Coast region was devastated.

The remaining used cars were almost as expensive as new cars, and damaged cars were just starting to “flood” the market (pun intended).

There was a substantial amount of automobile fraud around this time period.

Based on the price I would have had to spend to buy a used car, and the added risk of buying damaged goods, it was actually better for me to buy a new car.

I did my research and narrowed down my choices to a few selections, then test drove them. Then I compared new car prices online to make sure I knew what the market was for that make and model.

In the end, I purchased a brand new car that was relatively inexpensive, economical, sporty, and is fun to drive (it has a Tiptronic style automatic transmission with a manual shifter).

I also got a full warranty and a guarantee that the car had not been subjected to the ravages of flood waters. In that post-Katrina environment, that was a very big deal.

I made a fair offer

I will write a more detailed article about this later, but basically, I went into the dealership and told them the car I wanted, how much I was willing to pay based on my research, and what I wanted for my trade-in.

The offer was fair and they accepted it with minimal back and forth.

You can try to squeeze every dime out of the dealership, but at the end of the day, they won’t make the sale at a loss unless they absolutely need to move the inventory.

For my situation at the time, buying new was the best choice for me

If I were in the same situation again, I would make the same decision. Now though, there is no premium on used cars and there aren’t as many flood-damaged cars on the market, so my decision would probably be different.

But I do not regret my decision.

I have had this car for several years now, and I expect that I will have it for quite a few more.

Update: Personal Experience with the Car I Bought New

The new car I bought, mentioned above, was 2006 Mazda 3. I bought it new, based on the situation described. It was the right decision at the time, based on my specific situation.

I drove the car for almost 12 years before I traded it in for a Certified Preowned Honda Accord.

The Mazda 3 was still in great condition and had low mileage for its age. However, I wanted a larger vehicle for my growing children, and I wanted a car with a more powerful engine because I frequently take long drives on the highway.

The Honda Accord was a V6, so it had plenty of power and was large enough for my growing children.

The Honda was 3 years old, and I saved a substantial amount off the sticker price.

Like Mazdas, Hondas have a great track record, and I should be able to drive this car until it is 12 years old (or longer).

Should You Buy New, Or Used?

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.

And in your particular case, that line may ring true.

With a new car, you get reliability, customization, better rates, and peace of mind, in addition to a major purchase that’s yours and yours alone.

But a used car has its benefits, too, like significantly lower costs (and consequently lower loan values and lengths), for what could still be a nice, well-maintained vehicle.

It’s a risk, but it might be worth your while.

The bottom line, as always, is careful research.

Whether or not you need a new car or a used one depends completely on you and your unique needs and expectations for the car.

  • Know your needs. What features are critical in your new/used vehicle?
  • Know your wants. What features would you like your car to have, if your budget permits? These are less important than your essentials but definitely worth factoring in. You should enjoy a purchase as substantial as a car!
  • Know your finances. Take a good hard look at your finances. Is a new car a smart purchase for you right now? What payments should you be able to afford in the future?
  • Know your goals. Are you planning to drive your new car for the foreseeable future or use it for a set period of time then upgrade? Likewise, are you trying to make money by selling it later, or could you not care less because you’re buying it for the actual value of driving it?

Knowing the answers to these questions is key to deciding if buying a new car is worth it.

And as you’ve read above, sometimes, buying new is not a bad idea.

Related Post: How We Manage Our Money on a Daily Basis

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Josh says

    I did by a brand new car back in 2005 (Pontiac Sunfire). Paid the sticker price for it because I was uneducated in the field of purchasing cars. Paid it off early and gave it to a family member. Its still driving so I guess it was worth it but I still wish I was smart about my purchase.

  2. Bonny says

    My estimate 8 to 16 or so years of driving before a car becomes a safety hazard. You don’t know when something will go out and sensors only do so much. Sure some people will say you can get 300,000 miles, but you are doing so at a risk. There is so much rubber and plastic that tears and breaks over time and you don’t have any way to maintain all of those even if you wash everything including underneath regularly, but it does help. Look at anything plastic or rubber that has been outside for years and you will see it doesn’t hold up forever. Salt, heat, cold, etc. wear down lots of stuff that maintains your car’s safety and effectiveness. Cars really are disposable but with car and maintenance you should get your money’s worth.

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