Devil's advocate: Buy a brand-new car
Many personal-finance writers say it's always better to buy used, but let's take a look at the other side of that argument.
This post comes from Jim Wang at partner blog Bargaineering.
The tenet is true: Buying a good used car will save you money over buying a brand-new car. There are, however, plenty of reasons why buying new might make more sense.
In this latest installment of the Devil's Advocate series, where I argue the other side of classic personal-finance advice, I'll look at the reasons why buying a brand-new car might not be so bad after all.
Car history. The biggest reason why buying new is better than buying used is that you know the history of the car. You don't know if the former owner maintained it as well as they have claimed. Did they make every oil change as scheduled? (Unlikely.) Did they get every checkup as scheduled? (Unlikely.) Even the most well-intentioned owner misses checkups and oil changes by a few hundred, or a few thousand, miles.
For manual transmissions, you also don't know if they were seasoned drivers or learned how to drive stick on that car. Did they completely ignore speed bumps and run right through pot holes? Even the most thorough inspection won't be able to tell you those things with absolute certainty.
When you pay more for a new car, you are buying that certainty. You are writing that history. Post continues after video.
Depreciation. A new car loses value when it drives off the lot but it's not nearly as much as people believe. I’ve heard numbers as high as 50%! Depending on which car you buy, the actual depreciation is much lower. According to Bankrate, a car loses 15% to 20% of its value each year, with a steeper drop in the first year for a variety of reasons but much of it has to do with the other costs of buying new. For example, taxes and licensing are costs that the car "loses" immediately.
Also, dealers offer a variety of promotions that, if you take advantage of them, can reduce the price of the car. The key is to take advantage of those offers. While you won't be able to prevent the car from losing value, you can cut into the big drop as much as possible with smart decisions.
Scams. It's pretty hard to get scammed by a car dealership as long as you do your homework. If they try to pull one over on you, it's usually to upsell you on features, or get you to overpay for the car or pay too much for a car loan. They're usually not trying to sell you a lemon or hide a defect from you. When you get ripped off on a used-car sale, it often to do with a hidden defect, improper title, and other things that prey on your trust. I know I painted with a pretty broad brush but I think those generalizations are fair.
Ownership period. If you buy a brand-new car, take care of it, and drive it a few hundred thousand miles, it won't matter if you bought it new or used. That's why a car's longevity is so important. You may lose 15% to 20% of the car's value each year but that only matters if you look to sell it. The car's value is irrelevant if you drive it until its final miles.
As for that new-car smell? It's best not to inhale it too much; it's just nasty chemicals.
More on Bargaineering and MSN Money:
I would like to see on paper how buying a used car is better than buying a good reliable new car like a honda accord. I buy new and then run them into the ground at (225K) There is only three reasons
to buy a honda accord and sell it after three years. first is the leasee who cares not about the long term vitality of the car. second is a person in economic trouble who will skimp on maintenance.
Third the guy who needs to have a new car every two or three years but lacks focus. none of the three would I like to buy from.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
Tired of your wallet taking a beating at the grocery store? Here are some creative ways to save big on food costs.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'