Buying a car is one of the first stepping stones to one’s financial independence, and for some, a benchmark to achieve greater things in life. The first car for someone is not a car per se, but a feeling, a sense of accomplishment, a sense of moving forward to achieve more and to do more in life. The car might be a darling for some or a machine to commute on for the others. When you are out in the market to buy a car, one question always bugs your mind: a new car or used car. This question is the basis of all the sales the car companies have and also for the sales decline of the companies. But we’re talking from the customers’ perspective and when there is a tough decision like this measuring the pros and cons of the same is very important.
Starting off with a new car, what all will buying a new car give you?
Well, to start off, you get a factory warranty which covers all the parts in the car. The warranty is there to give you peace of mind in case of a mishap.
Secondly, the new car is a blank slate with no previous owner. You are the first owner and you can use the car as you like. Want to go on a camping trip? Fine. Want to do some 0-60 mph runs? Great. Want to do quarter-mile runs at a drag strip? Proceed! There are no worries about the past maintenance records because you are the one carrying on the maintenance.
Thirdly, banks are very friendly to the customers of new cars when it comes to financing. New cars attract lower financing rates and make the cars affordable upfront. Lower rates mean the lower amount that will go out of your pocket as an interest to the bank. This point is especially for those who want to finance a car and is invalid to those who’re paying for the car in cash.
Another point is the lower maintenance that you will have to incur for the initial 2-3 years. The maintenance for the initial years includes the routine maintenance and replacement of wear and tear parts like engine oil, brake pads, etc. the maintenance costs start to rise up when the car is considerably old and needs heavy changes in the brakes, or the powertrain. These are usually covered by the company’s warranty, but there is a lot of T&C to the same.
But a new car is not as merry a ride as you think.
Your biggest enemy will be the depreciation that the car will incur the second it leaves the shop floor. This expense is inevitable, not in anyone’s control, and affects the resale value of a car. A new car will be expensive to buy upfront with all the fees and charges added to the MSRP. Yes, financing will help you obtain the car easily but the amount you’re financing is inclusive of all the taxes, rates and charges levied on the car’s purchase.
When you buy a new car, you don’t know how reliable the car maybe. The model might be reliable but there is a chance that you might be handed a lemon and have to go through the tedious Lemon Law to get compensated for your loss.
To avoid these risks, people usually go for used cars. What does a used car save you from?
The upfront cost that you pay for a used car is far less as compared to a new car. Buying a car that is 2-3 years old will cost you nearly 60% of what it would’ve cost if bought a new one. How you ask? Depreciation. When the car is there in the market for quite some time, there are a lot of factors, qualitative and quantitative, that come into play and decide a market price for a particular car. this market price is a fraction of the cost of a new car. This also means that the car has incurred the most depreciation rate that it could’ve attracted and will now depreciate slowly. If you sell a used car in the market, assuming the same condition you bought it in, the price reduction is considerably lower.
The insurance costs for a used car are lower than those of a new car and also, the tax levied on such cars reduce drastically. Adding to this is the reliability track record that the car has had over the years in the market which will beware if the model you’re eyeing had been a consumer hit or a market failure.
There are some points to keep in mind that might not be as favorable when it comes to a used car.
You never know the complete history of the car. The dealer surely does keep the car all clean and tidy and most of the time, the customer falls for how shiny the car is and ignores to check all the possible mechanical and accidental history which might bug the customer in the longer terms.
Adding to this woe is the fact that dealerships usually charge high mark-ups on the cars. There is no dealer that sells a car for the price they bought it at. This variable is very qualitative and differs from dealer to dealer. The maintenance costs depend on how the previous owner has maintained the vehicle. The costs tend to rise when the car ages and as the second owner, the cost is on you.
Both the cases have their pros and cons and the final decision is up to the end-user to decide. But, if you want to go down the used car route, we do have some delicacies that you’d like. We’ve considered the cars on the basis of their cost to own, based on Edmund’s True Cost to Own estimate. The ranks have been provided on the basis of their average listing price.
2019 Ford Explorer - $24,014
For nearly 3 decades, the Ford Explorer has been one of the quintessential family SUVs in the American market. It helped start the SUV trend and over the years has also gone through quite a few changes which is why the 2019 Ford Explorer is the best-used family SUV you can buy. The 2019 model year marks the end of the fifth generation of the Explorer and thus the deals on the pre-owned market are very lucrative for this particular SUV. The towing capacity is impressive the interior is comfortable, the driving experience is smooth, and is a very well-rounded SUV.
The Edmund’s True Cost to Own estimate for the 2019 Ford Explorer is $37,368.
2016 Toyota Prius - $20,500
The Toyota Prius is the world’s best-selling and most famous hybrid car and is the vehicle of choice for the people who not only want to be green but also want to be seen green as well. The Prius is one of the most practical hatchbacks out there which can easily double up as a weekend getaway car while giving a fuel economy that won’t break one’s bank.
The Edmund’s True Cost to Own estimate for the 2016 Toyota Prius is $24,940.
2019 VW Golf GTI - $33,245
The VW Golf GTI is one of the most famous hatchbacks on sale in the American market for over 4 decades! The sales have been very strong – so much so that the Golf GTI has been the benchmark for all the other hot hatchbacks to beat. It is that good! The MK7 Golf GTI had been around since 2015 and had already sold to 11,672 customers in 2019 itself. The car is a very feature-packed experience for anyone looking for having fun in a compact package. It is a very practical car too with good trunk space, 4 doors, decent rear seats, and a decent fuel economy!
The Edmund’s True Cost to Own estimate for the 2019 VW Golf GTI is $31,795.
2017 Toyota Camry - $17,800
When you talk about mid-size sedans, the Toyota Camry is a staple in everyone’s minds. The Camry is very competitively priced and is very well-equipped for what price it demands. Toyota promises a lot of reliability in the Camry and there have been examples that have run 100s of 1000s of miles without any major breakdown with regular check-ups and maintenance done. The car drives great, is very comfortable for day-to-day usage, and can fit a lot of luggage in case one needs to travel on the weekends. The 2018 Camry was slated to be more powerful and given a complete refresh leaving the 2017 Camry with very affordable prices in the pre-owned market.
The Edmund’s True Cost to Own estimate for the 2017 Toyota Camry is $27,468.
2016 Lexus GS - $38,400
Just like mainstream carmakers, the mid-size segment is a very important part of a luxury carmaker’s portfolio. The Lexus GS has always been in the shadows of the better-selling Lexus ES. But it does manage to emerge as an underdog in the pre-owned market because of the price that it comes in, there’s no other luxury car available! Sure, the GS has seen its share of depreciation over the years but what the car offers is more than one could ask for. It is comfortable, and can be the luxurious bargain that you were thinking of!
The Edmund’s True Cost to Own estimate for the 2016 Lexus GS is $49,501.
