Once you have an idea of the kind of automobile you want, and roughly how much you’re looking to spend, the next question might be; Should I get a brand-new or used vehicle? Well, both do have their pros and cons because a used car often prices lesser than a brand-new one, but a brand-new car may be more reliable with fewer unexpected repairs that can impact your schedule and budget in the long run.
So today, we’ll be taking a look at these two set of cars, by analysing their actual price, what it takes to finance them, the price of gas insurance, and finally how much it will cost to preserve and repair it. So in order of sequence, let’s start with the first one.
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Actual Price
So let’s say we have a brand-new car with a sticker price of $19,000 and another one which is a used car that is the same make and model as the other one, just five years older than, made for sale by its owner for $10,000. Now, you may be wondering why the used is car so much cheaper than the brand-new car, well, there’re a couple of factors. One of them is that the brand-new vehicle comes with a warranty which will cover some of your repair expenses. However, the most significant factor in this price difference is depreciation. As a car gets used, it loses value, that is, it depreciates.
So, this brand new vehicle that prices $19,000, after five years might only be worth about $10,000, even if you’ve kept it in good condition. And the same car might only be worth about $5,000 in another five years. So it keeps on deprecating like that until it has no value at all.
In other words, a vehicle loses value fastest, the very moment you buy it. So, if you choose to buy a used car, be sure you’re not planning of reselling the vehicle anymore even in the coming years. However, if you do have any intentions of reselling the car in the next couple of years to come, it’d be best for you to buy a brand new one. This is because, buying a used car will be no good in this case.
Financing
Starting with the funding, you may be wondering if you can finance a car you bought from an individual. Fortunately, you can get this kind of financing from a bank or a credit union. But when you purchase a used car, you’re likely going to get a higher interest rate than if you bought a brand-new vehicle. So, let’s say that the annual percentage rate or APR on a five-year loan for your brand-new car is 3.5 percent and the APR on a loan that you got for the used car could be something like 4 percent. Using an online loan calculator, you’ll find out that on the brand new vehicle, you’ll settle about just $20,700 over five years. That’s $19,000 in principle and $1700 in interest, with monthly reimbursements of approximately $345.
On the used car, you will settle about $11,050 over five years, $10,000 in principle and $1,050 in interest with monthly reimbursements of about $180. So, even though you have a higher interest rate on the used car, you’ll settle far less in interest and monthly reimbursements because your principal will be pretty lower than on a used car.
Gas Insurance
Compare gas mileage. So let’s say your brand new vehicle comes with 33miles per gallon, and the used car has 29miles per gallon, and you drive about 15000miles per year. Now, let’s also assume that gas will be at a constant price of $4 per gallon over the five years. Take the miles driven divided by the miles per gallon, times the amount of gas per gallon, and we would be spending about nine $9,100 for gas on the brand-new vehicle and about $10,300 for gas in the used one. Nevertheless, there are insurance rates to consider, and these insurance rates vary based on a lot of different factors. And if you’re looking to compare a brand new car brand-new with a used one, the difference in the price for you will likely be based more on the replacement rate of the vehicle. The more valuable the car, the higher the insurance rate.
So, while a new automobile might get you some discounts for brand-new safety features generally, a used car that’s less valuable is going to price less to insure. Thus, with a brand-new vehicle, your insurance might price $1,570, and in five years, $7,800. While a used car might price you $1,200 a year, and $6,500 over five years.
Preservation and Repairs
Maintaining a vehicle and its repairs are the trickiest rate to estimate because it’s unpredictable, and a repeated occurrence for it can have a substantial impact on your budget. With a new vehicle, major repairs may be covered by a warranty in the first few years. So, for a brand-new car, you’ll spend $3,000 in that over five years on maintaining and repairing it. However, if you bought a used car, you do have the option of buying certified pre-owned. This will price a bit more, but it’ll also come with some warranty.
In a nutshell, buying a used or brand-new car has both its good and bad side However, the most important thing is for you to cloud your judgment by considering the price, the preservation, and the energy that will be needed to sustain the car.