New cars offer low mileage, extensive warranties and low initial maintenance costs. Buying a new car, however, does have short-term and long-term disadvantages in comparison to buying a used car. Purchasing a new car is a big commitment, and consumers are encouraged to evaluate the pros and cons to get the biggest return on their investment.
Cost
Generally, the initial cost of a new car is higher than a used car. Dealerships might offer temporary low-interest rates to new car buyers. However, once the "teaser" interest rate expires, your monthly payments might be higher than with a used car because of the initial cost. Higher prices often mean longer loan terms, and you might still owe on a new car when you've decided to sell or trade it in. Additionally, taxes and registration fees are usually higher for new cars.
Depreciation
According to the Indiana Department Financial Institutions, a new car might lose as much as 40-percent of its value within two years. Even if a particular make and model has a proven track record of value and performance, you won't discover any of car's shortcomings until later. With a used car, you already know the performance history of a particular make, model and year, offering you the option to buy a car with a solid history without dealing with the initial new-car depreciation.
Features
Advertised dealership prices, including dealership specials, usually only include stock features. Each additional feature added to a new car raises the price. Additional features might include cosmetic as well as functional aspects. Alternatively, many additional features might already be included in a used car as part of the initial package the original buyer purchased. Savings on these features are often passed on to the consumer when the original owner resells the car.
Negotiation
You may be able to negotiate a better deal on a used car with a private seller than with a car dealership as private sellers don't have "markup" requirements a dealership has with new cars. But even dealerships offer used-car bargains when they need to clear out inventory and make room for additional vehicles.
Insurance
New cars have higher insurance rates, as insurance companies must pay higher prices for parts and vehicle replacement when a new vehicle is damaged or stolen. Additionally, if you finance a new car, creditors usually require you to buy full insurance coverage against loss.
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