Clearly, lots of Americans have been shopping for cars over the past five years.
In fact, the 2017 Manheim's Used Car Market Report states that outstanding auto loans have risen 55 percent in the past half-decade.
Our shopping patterns somewhat reflect our Yankee roots; only about 25 percent of vehicles purchased in the U.S. are new vehicles, while the rest of us opt for used models. That said, U.S. buyers sprang for a record $17.5 million in new vehicles last year.
“It’s hard to believe seven years ago automotive retailing was in the depths of the recession — suffering record losses, franchise terminations and bankruptcies,” the study authors note. “When labor market and credit conditions are favorable, it is inevitable dealers will tap into America’s love affair with automobiles and mobility to create new growth opportunities.”
What’s the best way of deciding whether to splurge on a new car or choose a new model? That depends on several variables, according to Russ Heaps on Autotrader.com.
“Too often the only questions we ask ourselves (are) ‘Will I look good behind the wheel?’ and ‘How big a monthly car payment can I afford?'” he notes. “Neither will help you make smarter car buying decisions. When making the new versus used decision, each of us must examine our unique set of financial and life requirements. A little introspection is good for the soul and the wallet.”
Consider the following comparative advantages of buying new as opposed to used.
Clean, cutting-edge and hassle-free: The advantages of buying new
- It generally requires less research, less in-person shopping and less apples-to-apples comparison of which packages represent the best deals.
- You can usually choose options that fit your needs and personality.
- If you’re a techie, you may appreciate being among the first to have the new bells and whistles.
- New cars offer the latest, greatest safety features as well as cutting-edge fuel efficiency and lower emissions.
- New cars may be financed with little to no down payment if manufacturer incentives are involved.
- Interest rates are generally more favorable simply because new vehicles are worth more than used.
- Your warranty is likely to be the best available.
- You can expect repair costs to be nonexistent or very low for several years, and some carmakers offer free maintenance over several months. By contrast, those opting for used cars must budget for repairs, and even detailed history reports and inspections by qualified mechanics may not reveal needed repairs.
- When new cars are in the shop, dealers often offer loaners, which is rare during used-car repairs.
- New cars often drop in price just before the next year’s models are introduced.
- Those with allergies need not worry that their new car has been exposed to pets.
Fiscally responsible and functional: The advantages of buying used
- The most obvious benefit of used cars is their lower purchase cost, as new cars depreciate by an average 20 to 30 percent as soon as they’re driven off the lot. To many consumers, that feels like throwing money away. Kelley Blue Book’s Cost of Ownership calculator can show you the average five-year costs for any vehicle on the market, including depreciation and maintenance.
- A nearly new used car may still be subject to part of its original new-car warranty. Some makers also offer certified pre-owned cars with factory-backed limited warranties at slightly higher costs than non-certified cars.
- Used cars are subject to lower insurance premiums and personal property taxes than new models.
- Newer-model used cars often appear like new and offer near-cutting-edge features, without the heftier price tags.
- People who don’t wish to drive what everyone else is driving often enjoy the hunt for something different, including options that are no longer in production.
Since a car is a major investment for most people, doing your homework before hitting the lots may be one of the best moves you ever make. In fact, J.D. Power’s New Autoshopper Study recently found 80 percent of car buyers peruse the internet before buying a vehicle, spending an average 14 hours online before making their final choices.
For most people, a new vehicle is the second most expensive item they will ever buy, aside from their home,” advises Christian Wardlaw in the New York Daily News. “Thousands of dollars are usually at stake, not to mention your long-term happiness with the purchase. That’s why it is important to get your choice of a new vehicle right, and to make smart decisions during the entire selection and purchase process.”