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Should You Ever Buy a Brand New Car?

True penny pinchers always buy used cars over new ones for one rock solid reason: new cars depreciate by thousands of dollars the second you drive off the lot. But three years ago, before my financial epiphany, I bought a new car, and I don’t regret it. I concede that buying used is usually best, but there are times buying new isn’t as bad as some say.

To understand how I arrived at the conclusion it is sometimes OK to buy a new vehicle, you have to understand that I went from thinking I was being smart buying a new car, to deeply regretting it, back to being at peace with the decision after all. Talk about a flip flopper!

But before I justify owning a new car, let me recap the advantages and disadvantages of buying a new car or a used car.

Advantages of Buying a New Car

  • Factory warranty
  • No previous owners (and unknown accidents or mechanical incidents)
  • Low financing rates usually available
  • Few maintenance costs for 2-3 years

Disadvantages of Buying a New Car

  • More expensive
  • Immediate depreciation
  • Unknown reliability for model year
  • Higher tax and insurance costs

Advantages of Buying a Used Car

  • Less expensive
  • Slower depreciation
  • Lower tax and insurance costs
  • Reliability data available from Consumer Reports, etc.

Disadvantages of Buying a Used Car

  • Unknown accident and mechanical history
  • Higher financing rates
  • Higher dealer markup
  • Higher maintenance costs

On paper, the new vs. used debate seems fairly balanced. Financially, however, one can usually prove that buying used will save you a lot of money – even when markups, interest rates, and maintenance costs are factored in.

Why I Bought New

I admit my new car purchase was driven by the frustration of 10 years of driving used cars. Not just used cars, but 10-15 year old, 150k+ miles, USED cars. The kind of cars that I prayed would start each morning, and the kind of cars that I prayed didn’t just die on me driving 75mph down I-95. And they were the kind of cars that did not start many mornings and often did die on me driving down I-95.

When it seemed like I could afford a car payment, I jumped at the chance to buy a brand new 2WD Toyota Tacoma pickup. It had utility, excellent reliability ratings, and was a 4-cyl 2WD model, so it still got decent gas mileage. It seemed like the perfect compromise between practicality and the itch for a new car.

Why I Started to Wish I Bought Used

For the first six months, I was ecstatic with my decision. You don’t second-guess yourself when you still enjoy that new car smell each day. And then, while I was parked on a suburban street, somebody swiped my driver’s side door and left a softball-sized dent.

I was a wreck. I am embarrassed to admit, I was a bit attached to my truck back then. But I had dealt with dings and dents before. And I knew people who drive around Boston and get a fresh bruise on their car every single day! I was so upset, however, because this was still a brand new car!

That’s when I started to realize the futility of trying to protect a shiny new car, and the drastic effect actually driving a car around (dings or not) sends the car’s value plummeting.

Why, Ultimately, I am OK With Buying New

Eventually, I decided not to repair the dent. My insurance deductible is $500, and I estimate it might cost $1,200 or so to repair if I did it on my own. If I ever thought I would resell my truck, I would have to get the repair, but I decided to drive the truck into the ground. The dent doesn’t affect the body or drivability of the truck in any way, just cosmetics, and $1,200 – even $500 – for cosmetics, especially on a “truck”, seems silly.

The reason I know I will never trade my truck in or sell it is that I drive way, way too much—more than 25k miles a year. I figure if I drive for eight years and 200k miles, it won’t be worth anything and I will replace it.

For somebody who drives as much as I do, and who is OK with driving one car for 8 years, I think a new car ultimately made sense. I wouldn’t be able to get 200k out of most used cars, and I would start hitting costly maintenance much sooner given how much I drive.

I expect that when my life settles down a bit I will drive much less. At that point I will probably buy my next vehicle used and – hopefully – pay cash!

What About You?

Have you ever bought a new car? Are you happy with the decision?

Next Thursday, check our cars topic for “10 Driving Habits That Will Cost You”. Need a reminder? Subscribe to our RSS feed.

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Do you really think that “higher dealer markup” is a disadvantage of buying a used car? It doesn’t affect you, does it? I think that “little or no warranty” should be the fourth disadvantage as opposed to the dealer markup. Just my .02

  2. I’ve never bought a new car and probably won’t ever but I’m not opposed to it in theory (for other people). If that’s what you want and you can afford it, then by all means.

    What I did for my most recent purchase (and will probably do in the future) is buy certified pre-owned. I still am under the factory warranty and receive free maintenance and the dealer had a financing promotion which was better than that of my credit union. It’s the best of both worlds to me.

  3. Coolest Gifts, you raise a good point, I guess I’m not sure how the dealer markup affects buyers, only that when you negotiate for a new car you can pretty easily find out exactly how much the dealer paid for the car.

    I was going to include “lack of warranty” in the used car disadvantages but then was thinking about the certified pre-owned options and how used warranties are getting better, as savvy said.

    So thanks both of you — excellent points!

  4. Great article…I bought my car new when I was 18 and still drive it today. I have no regrets about buying new. I think it makes sense if you are going to drive a lot of miles and don’t mind driving the same car for a long time. My car is now 9 years old and has over 130,000 miles on it and runs good (knock on wood). There have been many times that I have thought about buying a new car, as all my friends, colleagues and relatives have been doing. Sometimes, I do feel like a dork driving my old shitbox, but I rather keep the money in the bank and have it grow rather than try to impress people or keep up the Jones’. I plan on driving payment free for at least a couple more years.

    • Smart choice. When you do finally decide to buy a “New” car go buy something used.

      You can buy a Used Porsche Boxster for around $15,000 on eBay. A New one cost $50,000. When you pay $15,000, your getting the SAME CAR you get when you pay $50,000 except it’s got a few miles on it. It’s still the SAME CAR.

    • Hi! Would you mind telling me what name brand is your car? I’m looking to get a new car and need one that’s good with the rain and snow and that it’s not too expensive. Since you’ve had yours for 9 years and you have no complaints, sounds really good to me (:

  5. I don’t care how you rationalize your choice to buy a new car. The Fact is you wasted a lot of money buying new. You could have had the SAME CAR used for a lot less money if you know how to buy used.

    You also discuss Financing in your post. You should NEVER Finance a car. Pay CASH and buy a NICE used car, couple of years old, not many miles, still looks brand new.

    I buy cars on eBay all the time for $10,000 less than what you would pay at a dealer.

    Buying NEW is just giving into the brainwashing of Car Dealerships and Banks who want you to finance everything and pay interest.

  6. when one can afford brand new cars comfortably,it would be ridiculous to go for a used car, afterall do you buy used shirts and socks if you could afford new ones. Ha. silly

  7. Johanna says:

    I had good reasons to buy a hybrid, and they just weren’t available used in 2008.

  8. I was always told, “never buy a new car because you will lose a lot of money if you do.” Fair enough… and I find that to be mostly true.

    That being said, we bought our car new in December of 2007. It was a 2007 car and dealerships were trying to shove them out the door so there were a bunch of incentives and rebates. Our car was the basic (I mean, cruise wasn’t even installed) version. We paid just over 12k for it and 3 and a half years later, kbb has it valued at over 9k. I’m pretty happy with that depreciation. We paid cash so there was no financing to worry about.

    Would I buy new again? Maybe. It depends on if the right vehicle came at the right price.

    • read my comment. its all about end price not just interest or sale price its all ABOUT END PRICE.
      i meat to write 25 years not 15 years although 15 years sounds good

  9. Only car I ever bought new was a 2009 Jetta TDI, bought new for $21K since used were bringing rediculous money, the new one had no sales taxes and tax credits so it made more sense than used. It was fuel efficient but still did not justify the $20k+ price vs a used junker, sold it a year later for $500 more than I paid new. Was an experiment to sell it and would only do it is someone offered more than I paid and I found that person. Been driving a $700 cheap car a friend wanted gone getting 30 mpg for 2 years now with no issues. I love not having to spend time caring about a new car, washing it, parking it far, hoping somone does not hit it, the taxes, insurance.

    Key thing with buying a new car, make sure you get a deal! If no deal, look elsewhere. These days, better deals can be found on a new car than a lightly used car, case in point me selling my car used for mare than I paid new. If you are going to buy new it can really makes sense if you intend to keep it a long time, you can make sure it is properly maintained and will last a very very long time. When buying a used car, do you think the owner took care of it, NO! I had bought so many used cars, you also need to just get them very cheap to make up for the lack of maintenance the previous owners never do.

    In general, people buy new cars out of fear. they see 150k on on the odometer and think the wheels will fall off, when perhaps if maintained most good quality cars will last over 300k miles these days

  10. This is a tricky question. Why because it depends on who you are and what youre going to do with the car. I keep hearing this resale value crap and it pisses me off. What ever happen to keeping your car until it DIES? Thats what im planning to do with my 2011 Nissan Altima 2.5s. I bought for 23k with taxes and all the crap included, that means extended warranty for 100k miles. maintenance package. My payments are $390 a month and zero percent financing for 60 months. I will keep this car for about 15 years therefore resale value means nothing to me. Stop buying cars and selling them, keep them. We use to do it in the 50′s 60′ 70′s 80′s