New Or Used: What's The Better Deal?

July 1, 2010

That new car smell is strangely alluring, but do you really need to buy something right off the showroom floor? Well, millions of North Americans do just that each year, but even more of us seem to prefer the used car fragrance of carpet shampoo and deodorizers. The question is, who’s the smarter shopper?

“If you buy only with your head, you would always buy used,” declares George Iny, president of the Automobile Protection Association. “New costs more, and not just in the initial outlay, but also in the steep depreciation that occurs.”

For example, a new car can lose up to 15 to 20 percent of its value in each of the first three years of ownership. That means a $20,000 car may only be worth about half of its original sticker price in that short time. After the first three years, however, the depreciation slows considerably.Iny also points out that with the popularity of leasing there is a glut of good quality vehicles languishing on dealership lots, and that’s helping to drive used car prices even lower. “These are forced returns of three- to four-year-old vehicles, not somebody trying to get rid of their old clunker,” he says.

Many of these vehicles are sold at new car dealerships as “certified pre-owned” vehicles, meaning they’ve been through a comprehensive inspection and may qualify for new car perks like additional factory-backed warranty, free roadside assistance, 30-day exchange privilege and even low-interest financing. But be prepared to do a little homework. Not all certified used car programs are created equal and some offer very little in extra value.

And of course, not everyone feels comfortable buying a used car, no matter how many 150-point inspections it has passed. Some people prefer buying new cars simply because they don’t want to worry that they could be driving somebody else’s lemon. Other new car advantages include a full bumper-to-bumper warranty and financing or lease rates as low as 0%. Used car financing typically starts at eight to 10 per cent interest for those with good credit and moves up quickly from there. But if you do buy new, the experts recommend hanging on to your vehicle for a good 10 years to make the most of your investment.

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