New vs used, the eternal car-buying question. Here are just a few of the many things you need to consider when deciding whether to buy a new or a used vehicle.
The New Advantage
Now is maybe the greatest time to be a new car buyer. First, you have access to the vehicles of more manufacturers than ever. In nearly every class of vehicles you can find two or three great options. And more classes are added every day (hello, CUV). And, unlike a used car buyer, a new buyer can pick the exact combination of features that they want. You don’t have to wait for months for the right model (with the right amount of kilometres to come along). On top of that, you have access to a wealth of information from manufacturers, professional reviewers, and normal drivers. But the new vs used debate is usually settled with money.
Specifically, it’s no longer difficult to secure 0% financing. Even Cadillac has gotten into the act. You can get a new Cadillac Escalade and pay no more than the sticker price (plus tax). That’s a first for the company. Of course, 0% financing isn’t a perfect deal for everyone. You loan term will end up being shorter than that of a higher interest rate which means that your payments will be larger. Then again, that means you will pay off your vehicle more quickly and will only pay for its value.
Two things to note. Firstly, used cars are starting to feature more attractive loan rates. You won’t find 0% financing, but some Certified Pre-Owned units can come pretty close – assuming you have a stellar credit rating. Secondly, you should remember just because you secure 0% financing doesn’t mean that you should purchase a more expensive vehicle than you would otherwise.
What’s the biggest cost of owning a new vehicle? Some might answer registration, insurance, or gasoline. But none of those come close to the cost of depreciation. Most people know that a new car loses 10% of its value when you drive it off the lot. But for some reason, the average person doesn’t think about depreciation like a regular expense. But, when considering an important decision like a vehicle purchase, you should consider it as one.
As a point of caution, depreciation rates are complicated. If the market is flooded with used vehicles, they’ll depreciate faster because demand is low. But, we can say that a new vehicle loses roughly 20-25% of its value in the first year of ownership. Fortunately, the rate of depreciation slows down after that. Still, after three years of ownership, a vehicle will have lost nearly half of its value. For some drivers, those first few years of ownership might be worth half of the vehicle’s purchase price. But, I think most people wouldn’t. That’s where shrewd used buyers come in.
If you purchase a vehicle that’s three years old, you’ve dodged the highest cost of ownership, and potentially paid 50% of the vehicle’s original MSRP. As the rate of depreciation slows, more of the money you invested in your vehicle stays there.
New Vs Used
With the diversity of drivers and their needs, we can’t say that buying a new or used car is “better.” New buyers probably want to enjoy the freshness of their vehicle and the latest features that come with it. Or, they want a specific combination of features and styling that they won’t find on the used market. Used buyers, for whom those things are not as important, get to take advantage of depreciation can save a ton of money. Both strategies can be good, as long as you understand advantages and disadvantages before you make the leap.
So, what kind of buyer are you? Hit the link to see our new and used inventory.