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It’s funny to admit it, but I’ve never owned a new car. That’s not to say I’ve done the whole car ownership thing “the right way.” I have made plenty of mistakes, and owning certain vehicles definitely falls into that category. …like that one time I owned a Jeep Grand Cherokee – V8. Yeah, even though I purchased it used, it was a gas hog and really expensive to maintain. Not my finest transportation moment. Fortunately, I’ve wised up since then. What about you? When it comes to buying a car, do you go for something shiny and new that may cost more upfront? Or, do you opt for something older that may cost more in the long run? With that said, let’s dive into this discussion!
First up on our discussion list is the purchase price. When it comes to upfront cost, are older cars cheaper? Answer: Yes. 100% of the time.
Older cars also come with more room for negotiation – you generally won’t be able to negotiate the price of a new car, but with an old car you have a lot more wiggle room.
And that’s not all, here are two quick lists of more things to consider!
The case against new cars:
- The purchase price is basically non-negotiable.
- After just three years of ownership, the average car depreciates to less than half of its original value. Yikes.
- Older cars generally hold their value.
- The depreciation clock starts ticking the second you sign on the dotted line. Aside: Do dotted lines still exist?
- You might need to obtain a car loan to complete the purchase. And most car loans are packaged with interest. Depending on your financial situation, your interest rate could be significant.
The case against older cars:
- They’re older and might not have all the bells and whistles.
- Maintenance and upkeep could be costly.
- Potentially shortened lifespan – depending on mileage at purchase.
- They’re not going to be perfect. Think scratches, dings, and dents.
After the purchase price, you’ll want to consider the cost of insurance. It used to be standard that new cars were always more expensive to insure due to their inherent value. However, nowadays this isn’t always the case. Car insurance rates are based on a ton of factors, including your age, accident history, and marital status – crazy, I know.
Two more considerations for insurance companies are safety and reliability of the vehicle. Some new cars come equipped with additional safety features, making them less risky to insurers. On the other hand, some older cars have proven reliable over time and have a low accident rate, also making them less risky to insurers.
All in all, insurance rates vary based on many things. Because of this, it’s probably a good idea to check insurance rates on any vehicle you’re considering purchasing BEFORE you actually purchase it. This will ensure you’re making the most informed decision possible.
If you want to use your car to get you from one place to another, you’re going to have to consider the cost of fuel. Any car, new or old, can be a gas guzzler. To avoid spending your entire paycheck on getting to and from work, consider what you actually need in a car and go from there.
For example, if you’re a single person working 20 miles from home, you might want to opt for the fuel-efficient Honda hybrid over the gas-guzzling Ford Explorer. Just sayin’.
In some countries, the purchase of fuel-efficient vehicles, particularly electric vehicles and hybrids, can also result in a tax credit, the free use of certain parking areas, and reduced road tax rates. And yes, road taxes are A Thing.
After you consider the cost to get your car moving, you’re going to want to think about the cost of upkeep. So, here we go.
Maintenance And Repairs
All cars will suffer from natural wear and tear. There is no arguing around this. But, an older car might need initial maintenance as early as the day you purchase it. This can make them more expensive in the short term and long term. Depending on how old the older car is, replacement parts may also be hard to find.
That said, older cars are often less complex under the hood, and that means specially-trained mechanics won’t be required.
New cars, however, could be less likely to go into the shop, but that doesn’t mean they’ll cost any less for maintenance or repairs. Given the extent of variables and cost differentials for each model of vehicle, it’s important to do your research before jumping into any purchase.
Other articles you might enjoy:
- Cars Drool And Cash Rules
- We’re A One Car Family In A Two Car Household
- Motorcycles vs. Cars: Financial And Other Various Factors To Consider
- Why I Regret Buying My Inexpensive, Fuel-Efficient Car
Depreciation is a measure of how much the car loses value over time and it’s an important factor to consider if and when you eventually decide to sell.
As stated before, new cars can lose over half of their value in the first three years, so don’t expect to make a significant amount of your money back when you list it on Craigslist or the FB Marketplace.
Older cars also depreciate, but oftentimes it’s at a much slower pace. In this case, you’re likely to not lose nearly as much money when deciding to give your ride the boot.
Note: In some rare cases, it’s possible for older cars, especially vintage or highly-sought after models, to actually start gaining value, but this is the exception, not the rule.
So, Which One Is The Better Financial Option?
Because there are so many factors to consider when it comes to purchasing a vehicle, there is no clear-cut answer as to which one is the better financial option. Generally speaking, an older car is cheaper. However, if you purchase a new car with cash or at a 0% interest rate, and you keep it for 10+ years, you might end up in a better financial position than you would have had you purchased an older car. In my opinion, it can be a crapshoot.