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Should I Buy a New Car? 6 Reasons to Buy a New Car over a Used Car

By Jason Steele

Despite big promotional events and appealing advertisements, new cars come with hefty price tags and lose their value very quickly due to depreciation. In fact, there are many benefits to buying a used car for cheap over a brand new one.

However, there are a few specific occasions when a new car isn’t just a luxury indulgence and a way to pamper yourself. It actually makes more sense to buy new in these cases.

In the six situations below, a new car might be the wise and worthwhile purchase for you.

Benefits of Buying a New Car

1. New Safety Technology

In the automobile industry, the amazing power of computer processors has sparked a technology revolution, and manufacturers are finally using technology to enhance safety. When you spend on a new car, you can find advanced safety features including:

  • Stability control
  • Adaptive cruise control
  • Lane departure warning
  • Blind spot monitoring
  • Rear-view camera

As with earlier developments like anti-lock brakes, these new features are quickly trickling down from high-end luxury cars to family sedans and even economy brands. It’s too soon to find them in most used vehicles, but you can find affordable new cars with great safety features.

2. Fuel Efficiency Breakthroughs

Federal regulations have average fuel efficiency set to rocket from 27.5 MPG in 2010 to 39 MPG by 2016. While small fuel efficient cars have been on the market for a few years, the mileage ratings of other vehicles – usually the more budget-friendly cars – have languished until now. In the next few years you’ll see minivans, pickup trucks, luxury cars, and even sports cars posting efficiency numbers that were once only found in hybrids and small economy cars.

If you put a lot of mileage on your car, you can balance upfront cost of a new car with the long-term savings of a more efficient engine (especially with gas prices rising).

3. Alternative Energy Advances

Though the ethanol boom has faded, other alternative energy trends are here to stay. Pure electric vehicles like the new Nissan Leaf and the Ford Focus Electric promise to dramatically cut energy costs per mile driven. Their equivalent fuel economy ratings are in the triple digits, making a Toyota Prius look like a gas guzzler. Not to be outdone, GM is now selling the Chevrolet Volt, their plug-in hybrid that will run on either gas or electricity. A plug-in Prius and the Ford C-Max Energi should also hit the market next year.

Don’t forget that electric cars aren’t the only alternative-fuel vehicles. Diesel-engine cars, long popular in Europe, are making a big comeback in North America. They offer very high mileage, especially on the highway. Honda even sells a methane-powered version of the Civic, which is in high demand in parts of the country where natural gas is cheap.

You could save thousands of dollars in energy expenses in just a few years with one of these new vehicles. Electric cars won’t be available in the used car market until a few years from now, and they’re going to be in very high-demand, which means their prices will be higher than most used cars.

4. Cars for the Long Haul

Used cars make sense if you plan to keep a car for a few years and then sell or trade it in for another used car. But if you plan to keep up with maintenance and watch the odometer roll way past 100,000 miles, you may not want the uncertain history that comes with a used car. Rather than worry about a previous owner who skipped oil changes or abused an older car, with a new car you know that you’re responsible for gentle driving and regular maintenance. Owning a car for a decade or more will mitigate the initially high taxes and depreciation enough that they will average out to be close to the costs of a used car.

5. Government Incentives

Cash for Clunkers came and went, and traditional hybrids no longer earn green energy tax credits. But you can still find plenty of government incentives that cut the price of new electric vehicles, plug-in hybrids, and alternative-fuel vehicles. The natural gas–powered Honda Civic GX, for example, comes with a $4,000 tax credit. If you buy a plug-in hybrid or pure electric car, you’ll be entitled to a whopping $7,500 tax credit.

Remember, this is not just a tax deduction, it’s a tax credit: the equivalent of cash back. Learn more about the differences between a tax credit vs. a tax deduction.

6. Simpler Needs, Simpler Costs

You might be drawn to a new car by a low advertised price, only to learn from the car dealership that the base price is for a low- or no-frills model. To get the advanced features like cruise control, voice recognition, a navigation system, and seat warmers, you’ll deal with a list of expensive options, often adding as much as $10,000 to your total – before taxes.

If you know that you don’t want pricey options like “pearlescent” paint coating, larger wheels, or even an automatic transmission, you’ll probably find less of a difference between the prices of new cars and used cars. If you’re just trying to get to the office or train station and back, you can custom order a new car from the dealer without all of the unnecessary options and get a competitive price for a brand new car.

Final Word

Anyone who tells you that the new car vs. used car debate has an absolute winner hasn’t really considered every circumstance.

In most situations, a used car is the lower-cost, higher-value option. But with recent advances in technology and government incentives, new cars have enough significant benefits that they’re often worth the extra expense. It’s up to you as a smart consumer to weigh your needs against the costs and benefits of both new and used cars. Don’t be surprised if you occasionally find that the new car represents better value.

Was your most recent car purchase a new or used vehicle? How did you finally make the decision?

(photo credit: Shutterstock)

Jason Steele
Jason has been writing about personal finance, travel, and other topics on blogs across the Internet. When he is not writing, he has a career in information technology and is also a commercially rated pilot. Jason lives in Colorado with his wife and young daughter where he enjoys parenting, cycling, and other extreme sports.

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  • http://www.debt-tips.com/blog/ KDB

    All good reasons to buy a new car – if you can afford it. But car costs have gotten so far out of hand that I wouldn’t buy anything newer than 2 years old unless I had plenty of dispoable income.

  • Fabian

    Financially there are never good reasons to buy a new car. First used models come on the market after less than 6 months (demos, rentals, buyer’s remorse). If, by paying 5,000 miles you get the 20% first year depreciation, it’s a good deal and you get the latest technological advances. The only reason to buy new is passion. The exact color, the exact trim and options, the smell and knowing that nobody picked his nose in it. It can be priceless if you can really afford it.

  • Blinky

    The $4000 tax credit on the Civic GX expired in 2010. Some states still give a state credit.

  • Ling Chi

    A lot of poor people griping about how expensive cars are. Time to re-assess your life choices!

  • John Mith

    This article is misleading. Yes if your buying a “commodity” disposable car that you will throw away after the warranty has run out and you need to invest in repairs new can be a better option. If you want a higher quality car this is not good advice. For the price of a brand new commodity disposable car you can buy a used Mercedes Benz that even at a few years old has safety items and features that have not yet filtered down into the disposable car market. Nothing makes you smile more than rolling off the lot in a couple year old Mercedes for the same price some moron is paying for a car they will throw away in 5 years. Of course the skeptical here are saying “oh what about service and repair”. If you do your research and buy the right car with the right options and then research the service you can come out at about the same as a disposable car. Of course it does take thinking and research and many people just want to put gas in it and drive. If that’s the case perhaps you should consider using public transport and make traffic better for the rest of us. Or just stay home.

  • rhodies

    It’s all in the timing when you decide to purchase a new car. An example is the current March-April line up of Honda Civics, a car that retains very well it’s resale value. The new 2012 models are coming out NOW with impressive improved MPG ratings and fuel alternatives (gas, CNG, diesel). This leaves dealers jumping to clean house of their new 2011 models. We literally were looking for a 2008-2009 Civic with 24-30K miles, but found a new 2011 at a cheaper price with very little hassle-haggles. The used cars of this model were more expensive than the new car on several dealer lots. Go figure. Add to the fact that used car financing runs approximately 5% and Honda’s financing was less than (yes, less than) 1%. Our local dealer was almost out of Honda Civics (all models), but were still able to secure the color and model we wished by bringing in a car from another state 70 miles up the road. The savings on this new car more than compensated for the initial state tax and insurance cost. It is all in the timing.

  • TNT

    Very nice article, but a tad over-simplified. As someone who works in the auto industry, I’d like to make two points.

    The latest technology is only available on ALL NEW models. A vehicle model will generally run 5 years without a major re-design. Therefore, you can’t expect all the latest bells and whistles simply by buying a 2011 or 2012 vehicle, **you might be getting 2008 technology**. If you buy a car in this situation, you would be better off just buying a one- or two-year-old used vehicle from a reputable source.

    In addition, the start of an ALL NEW model has the inherent risks associated with any new product. It can sometimes have a few bugs that still need to be ironed out by the manufacturer – something that happens in every industry (e.g. the iPhone 4).

    Ads will generally differentiate when a car is “ALL NEW” (first year of a new model) or “REDESIGNED” (each of the next 4-5 years before a fully revamped model). As always, caveat emptor.

  • Shorebreak

    Currently, the prices for used vehicles are very high making the purchase of a new one more attractive. Often, incentives offered from the manufacturer will sweeten the deal negotiated with individual dealers. Financing often comes into play. Financial institutions generally offer lower interest rates for new versus used. Having said that, it boils down to what one can afford and personal taste. I have purchased equal amounts of used and new vehicles and have had good and bad experiences with both choices. My current vehicle was purchased new at a fair negotiated price for cash. As long as my budget allows it, I will probably continue to purchase new vehicles taking improvement in fuel mileage, safety advances, and added standard equipment in consideration.

  • SteveofSanRafael

    I purchased a new car because I was less savvy 13 years ago. I still have the car 135,000 miles, planning on using two more years. Here’s what I did, found out the ads come out in the paper on Friday and run all weekend. A __ at a low price. **While 2 or 3 last sometimes only one. Then I took Friday off after shopping for a month, and when the paper came out I bought the Toyota I wanted, but not in my first choice of color. If you do this you have to be ready with the down payment, ready to sign right then.

  • http://www.rayskillmanchevrolet.com/section/secondary/auto-dealer-indianapolis-service-specials/ Tyra Shortino

    There are lots of advantages when opting to buy a brand new car. Not only it gives a fully functional specs, but it also gives you the privilege of using it for almost five years without repairs or maintenance. Of course, if you’re driving with care and love, it will reward you back with less expenses.

The content on Money Crashers is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers.
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