One popular question consumers ask themselves before purchasing a car is: should I purchase a new or used car? It’s true that a new car will often depreciate as soon as you drive it out of the dealership, and will then lose 15-20 percent of its value each year. If you plan to keep your car for many years and maintain it well, then you might be very happy purchasing a new car. From a financial standpoint, this is a great time to purchase a new car because interest rates are low. On the other hand, if you like shiny new things and you prefer to trade in your car every few years, then you should consider leasing.
Although you will want to decide whether to lease or buy your next car, there are several other important questions that you should ask yourself. Here are five questions to consider before you decide whether to purchase a new or old car.
1. Can I Survive Without a Car?
This may seem like a pointless question since 95 percent of American households own a car, and 85 percent of of Americans drive to work. Currently, only 5 percent of Americans use public transportation to get to work, while the rest usually drive themselves, carpool, bike, or walk. However, for people who live in a big city, it is often easy to survive without a car. Currently, only 50 percent of people living in New York City own cars. Obviously, New York City has alternative transportation choices that make this possible, but don’t automatically assume you can’t exist without a car. If you live within walking distance, you can walk to work.
Although you may need a car to buy groceries, go on trips, and so on, you may find if you complete a budget that you are better off renting when necessary. You might also find that sharing a car, or changing from a two-car family to a one-car family is a possibility for you. If you live somewhere warm, you could also consider a scooter or motorcyle, both of which would save you money on the initial purchase price as well as gas prices.
2. How Much Will I Drive My Car?
If your answer to the last question is a resounding no, then you can move on to asking yourself how much you will drive your car. If you will be driving often (lengthy commutes to work, several trips out of state per year, etc.), then you will probably want to consider the efficiency of your car. Purchasing a car that gets good gas mileage will cost you less money because you will save on fuel costs, but it will also help the environment (if you are interested in that type of thing.) If you drive frequently, you will probably want to be comfortable as well. How much you plan to drive your car will also affect your choice because some cars are better for long distances. According to Forbes, two great cars for long distances include the Toyota Prius and the Audi A6.
3. Who Will Be Driving in My Car With Me?
If you will primarily be driving your car with no passengers, then this question really doesn’t apply to you. However, if you have kids, you need to ask yourself whether or not a specific car you are considering would work for them. We all know that minivans are popular with parents, but they aren’t the only choice. Several car makers offer minivan alternatives that still work well for families. Some great choices include the Volvo XC60, which includes several safety features, but also has Sirius XM Satellite radio and Bluetooth hands-free communication. The car is also really nice to look at, which is a nice bonus. Other cars that are great for families but also look cool include the Kia Soul, the GMC Acadia, and the ever-alluring Ford Flex.
4. What Is the Resale Value of the Car I’m Considering?
Not all cars are the same — and this is also true when you are trying to sell your car. While a fancy and sparkling SUV might look hot at the dealership, potential buyers might not have the same feeling when you want to sell it down the road. Many buyers will not want a car with poor gas mileage, and this has been particularly true recently. Especially when purchasing a used car, buyers will also consider how cheap it will be to fix any future problems. Other buyers may also want certain options. Of course, buyers will often flock to cars that are known to last for a long time. Each buyer will have their own requirements, so there can be no guarantees, but you can check the Kelley Blue Book site to see the resale value of vehicles you are considering.
5. Can I Really Afford It?
If you have the money to purchase a car outright, then good for you. If you don’t, check your credit history before you start your shopping. What type of loan you can get will depend on your credit history. You can check your credit history once (for each company) per year through TransUnion, Experian, and Equifax. If your credit history is really poor, you will probably not be able to buy a new car using a loan. Even if you can get a good loan, you need to consider whether or not you can actually afford the monthly payments. Depending on your budget, even your used car choices might be limited. One tip to help you get a good deal is to consider buying a car at the end of the month (since dealers often have to meet quotas), or look for year-end deals if you can wait. The type and age of the car you choose will also affect your insurance costs, so you should factor that in as well; insurance companies will often charge you more if your car is lacking certain safety features. The make of your car will also affect your insurance costs, but contrary to popular belief, you won’t be penalized for driving a red car.
If you have read through all of the above and you still want a car, just consider one more point: determine if you have any big ticket items coming up in your budget. Do you have plans to purchase a house in the near future? Take a vacation? Buy an extravagant gift? If not, go ahead and look into cars. The warranty that different cars offer can also be an important item to investigate if you are buying a newer car. Many cars also come with incentives or rebates. If you are still sure you want to purchase a car, narrow your search down, and start by determining if you want a new or used car. Happy shopping!