Taking on a loan for at least six years but more often seven for a new car is something some people don’t take lightly. And there isn’t much of a reason to take on that kind of debt when used cars are such a deal. If you buy one that isn’t more than six or seven years old, it can almost be like driving a new one.
Leasing a car is sometimes a better option than buying one so that is a viable option as well. You’ll have monthly payments to make just as you would if you had financed a new car, but you are only locked in for a couple of years before you are free.
There are pros and cons to each scenario. Not everybody is going to have the same needs, budget or lifestyle to make it an easy decision. In this article, we will compare the two so you can decide for yourself.
Used car advantages
Here are some advantages you can feel good about when looking to find used cars by location close to you.
The biggest advantage is the huge savings on the initial purchase. For a car that is only a couple of years old, you can save many thousands compared to the latest model on the new car lots right now. You’ll probably be financing if you buy a newer model used car but since the initial cost of the car is low, you can put a few thousand in a down payment and have very manageable payments. Or, you can go for a shorter loan term and pay more per month but then pay off the car sooner.
Your insurance costs are also likely to be lower than when you buy new. You can shop around for a good price on insurance when your car is used. New cars follow roughly the same price structure no matter what company you use. Thieves tend to target new cars which are advantageous to a used car driver in the form of lower insurance payments.
Used car disadvantages
One of the biggest disadvantages to owning a used car is the fact that your warranty will expire shortly after you’ve bought it depending on the age. It may already have expired if it is more than five years old. Everybody knows that as soon as the warranty is over the repairs begin to mount. Even routine things that are not unexpected can add up. Things like replacing the timing belt, replacing the brakes and frequent tune ups will all end up being expensive in addition to making car payments if you financed.
You will likely be paying for many repairs out of pocket. If the person who owned it previously didn’t take good care of it then those are now your problems. Sometimes people that know that they won’t have their car for long don’t bother changing the oil or replacing spark plugs and things like that to help the car run smoothly.
Another con is the fact that you can’t customize the car. When you buy new you can add on many features. Buying used means buying as is. There are aftermarket add ons that you can do, but getting your dream car is more difficult when you buy used.
Leased car advantages
Your initial outlay of cash to get into a lease is usually less than what you would spend on a used car. With the added advantage that you are getting a brand new car that can be customized the way you like. There are sometimes programmes running with no down payment as an incentive to clear the lot of their leased cars.
Monthly payments are also usually lower than what you would pay for a new car that is financed or even financing a slightly used car. The equivalent new car will cost far more in monthly payments. The idea is that if you decide to buy the car at the end of the lease, the dealer will make up for the low payments with a buyout price that is advantageous to them.
Many repairs and maintenance costs are also paid for by the dealer so you can save quite a bit there. Then you bring the car back and wash your hands of it before any maintenance issues crop up.
Lastly, some people love the idea of having a new car every few years when they lease. Most people don’t trade in new cars after a couple of years to buy another one as it ends up costing much more money. Leasing is easy and inexpensive so having a new car is nice. And, in some cases if your leased car is for work matters you can write off the monthly payments on your taxes.
Leased car disadvantages
The two biggest disadvantages are the fact that you will be making payments towards a car that you don’t own and the fact that insurance usually costs more because the car is new. Once you bring the car back to the dealer, you have nothing to show for it. It’s true that cars depreciate and there is no equity built in, but if you buy used, at least you still have a car at the end of a couple of years. And in many cases no further payments to make.
You also need to be careful about how much you drive when you lease as you will pay per mile if you go over the maximum allowed. People who commute long distances can see a very big bill come in the post as they likely will be going past their allotted miles. Once you start approaching the limit, then it can be something of a pain to have to decide if a trip is worth it to run the risk of going over. Most people don’t want to think about how much they’ve driven and can just get in and go.