Buying a New or Used Car in Canada
When that time finally rolls around every couple of years that you need to consider replacing your vehicle, it can be challenging to decide whether a brand new or used vehicle will best suit you. For a lot of people, it seems like the obvious choice to simply pick a used vehicle – usually because of the lower price. But when you dive a little deeper, you begin to notice that both decisions have distinctly different impacts on your wallet.
Let’s analyze that a little further, beginning with buying a new car.
At first blush, the immediate deciding factor for most people is that buying a new vehicle costs more up front. Vehicles are a depreciating item rather than a growing asset, and they lose a good chunk of their value when they drive off the lot. While this is true and can sometimes be a significant difference, there are other factors you need to consider.
The first of which is simply maintenance and repair costs. Taking care of your vehicle is critical to getting the most value and longevity out of it as it ages. This is where buying a new vehicle has some distinct advantages. Firstly, most new vehicles for the first while will only require regular upkeep and maintenance. New vehicles in 2017 come with some form of both comprehensive and powertrain warranty; This means some of the repairs you may need to do later down the line outside of regular maintenance will usually be covered under warranty.
So, it’s important to gauge the options here. Buying a new vehicle may end up costing you thousands more than one a couple of years old, but repairing the used version of your vehicle over time can exceed that. This balance is of course different for every individual vehicle. Who drove the vehicle before you? How well did they take care of it? Does it look much worse under the hood than the story told by it’s cover? Buying a new vehicle can alleviate these fears and save you future hassles you cannot foresee down the road.
When it comes to buying used, the most appealing factor is that it simply costs less up front.
However, most people simply do not pay for a new or used vehicle in cash. As a result, interest costs become a new factor, on top of your insurance costs. Now assume you have to finance a used vehicle. This is where the lines begin to blur a little.
Sometimes new vehicles can come with very appealing incentives such as near 0% financing for a set time. Generally, used cars have higher rates as the manufacturer does not subsidize the rate. The exception may be on Certified used vehicles which may have a much lower interest rate than other used vehicles.
Depending on the rate you are getting, the length of the term, and the initial cost; It may cost you more (between higher interest, repair costs, and lack of warranty) to own a used vehicle than it would have to just buy new. The bottom line is that you need to do your homework and consider more than just the price of the vehicle. The key to buying a used vehicle is to look for cars that have a proven record of reliability. Look for something you know was well taken care of and pay close attention. A maintenance history (if available) and a Carproof report which details any previous accident or damage should be provided by the dealership upon request. Some dealerships will even provide this information online in their used vehicle listings.
How does Insurance factor in?
The final big consideration here is the cost of insuring your vehicle purchase. Most of the time you can expect to pay more for insuring a new vehicle than you can with a used one simply due to the higher replacement cost of the new car. Generally – the newer and more expensive the car – the more expensive the policy.
Best of both worlds
A great way to get the best of both worlds here is to consider a late-model (2014 – 2016) used car under a manufacturer’s certified program. Just because you are buying used, doesn’t mean it needs to be a 15-year-old clunker. Buying a vehicle 2-3 years old can be a big advantage as your biggest depreciation year (the first), has already happened. You will be buying a vehicle that has an extended powertrain warranty with the ability to upgrade it to a comprehensive warranty. Plus, you will usually be eligible for a lower interest rate than on a non-Certified used vehicle. You get the lower up front price advantage of buying used while getting the peace of mind of warranty coverage..
Weigh the costs of new vs used based on the lifestyle you live, how you like to pay for things, your budget, and the value you place on having peace of mind.
As always, if you are ever having trouble making this decision and are still on the fence. Come on into Honda West and let one of our associates help you make the most educated decision for your lifestyle.