When purchasing a car, three pivotal questions often arise: Should you buy new or used? What make and model should you choose? And where should you secure financing? This article delves into these questions, providing detailed insights and statistics to help you make an informed decision.
The decision to buy a new or used car is often the most significant one in the car-buying process. According to Kelley Blue Book, the average price of a new car in 2023 is approximately $48,000, while the average used car costs around $28,000. This substantial price difference explains why used cars outsell new cars by a ratio of three-to-one (Kelley Blue Book).
New car loan rates are generally comparable to used car loan rates. However, the loan terms differ significantly. New car loans often extend up to 72 months, whereas used car loans typically max out at 36 months. This longer loan term for new cars can make monthly payments more manageable but may result in higher overall interest costs.
Depreciation is a critical factor to consider. New cars can lose up to 20% of their value within the first year and about 60% over five years. In contrast, used cars have already undergone the steepest depreciation, making them a more financially sound choice for many buyers (Edmunds).
Choosing the right make and model can significantly impact your car's resale value and overall satisfaction. Vehicles from prestigious brands like Lexus, Mercedes-Benz, and BMW tend to hold their value better than others. On the other hand, models like the Jeep Grand Cherokee, Ford Explorer, and Ford Taurus depreciate faster.
To make an informed decision, utilize online resources to research performance ratings, safety records, and customer reviews. Websites like Consumer Reports and Edmunds offer comprehensive reviews and ratings.
If you're considering a used car, always request maintenance records and check the vehicle's history on CarFax. A thorough inspection by a trusted mechanic is also essential to ensure the car is in good condition.
Securing financing before you start shopping can give you a significant advantage. It positions you as a serious buyer and prevents dealers from pushing you into their financing options, which may not be the best deal.
Approximately 27.5 million of the 60 million new and used cars sold annually in the U.S. are financed through subprime loans, catering to buyers with a FICO score of 620 or lower (Experian). If you fall into this category, you won't qualify for the attractive "0 Down," "0 Interest," or "Low APR" deals often advertised. However, you can still find competitive rates through online lenders.
"Consumers should shop around for financing with the same vigor that they shop around for a car," advises Jack Gillis, public affairs director for the Consumer Federation of America. Even a one or two percent difference in interest rates can significantly impact your overall cost.
Online lenders like LendingTree offer free applications that can quickly provide you with loan options tailored to your credit profile. This can help you understand how much you can borrow and at what rate, giving you a clearer picture of your budget.
Buying a car involves several critical decisions that can significantly impact your financial health and overall satisfaction. By carefully considering whether to buy new or used, researching the best make and model, and securing favorable financing, you can make a well-informed choice that meets your needs and budget.
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