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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.

By MSN Money Partner Jul 12, 2011 8:46AM

This post comes from Jim Wang at partner blog Bargaineering.

 

One of the major personal-finance tenets of buying a car is that you shouldn't buy a brand-new car. As I once gracefully put it, "Buy used and let some other sucker pay the new-car premium."

 

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:

2Comments
Nov 15, 2011 10:54AM
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buying a used car is often a much better idea. with carfax, autocheck, certified programs, have the car checked out by mechanic. you usally save thousands and technically to you its still brand new isnt it? for example i have my heart set on a certain mitsubishi, now brand new this car is 30-40 grand. Buying an 03-06 i will pay half that and its basically the same car, less a few bells, but for 15k instead of 30k, with a mechanical check saying you should be good for another 25000 miles before you have to change a thing, how can you justify going new? i think im getting my cake and eating it too. granted there are lemons out there and jerk salesman that want to stick you in the cheapest car on their lot, but its not their fault, they are just doing their job. its yours, use some common sense, ive met people that buy cars without even test driving them. i sell cars for a living, ive seen more brand new cars come in for repairs than most used ones. you see a car with 200k miles and think junk, but just think about how it made it to that 200k miles, thats proven reliability. (i am not saying go out and buy cars with 200k miles but you get the idea)
Jul 12, 2011 11:55AM
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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.

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