New vehicles often have the most up-to-date technology and maintenance, but they also cost much more than a used car that’s just a year older.
If you lease a new auto, you could also end up paying more on the loan than the vehicle is valued. In addition to the higher cost of purchasing a new car, you’ll also have higher insurance premiums depending on if you get comprehensive insurance coverage or not.
Still, it’s hard to deny the peace of mind that purchasing a new car with a maintenance plan can bring. So we’ll weigh the pros and cons of new car ownership to help you decide if a new car is right for you.
When it comes to finances, new cars are heavy on the cons.
The moment you drive a new car off the lot, it loses value. Used vehicles depreciate, but not as drastically as new vehicles. New vehicles lose about 10% of their value during the first month of ownership and 30% by the end of the first year.
The purchase price of a new vehicle is higher than at any other time of its life, so your monthly payments will be higher with a new car than with a similar used vehicle.
There are a few cars that break this rule, classic cars like a ‘68 Mustang Shelby or ‘69 Camaro for example, but typically cars depreciate quickly.
New cars have the edge with maintenance. New vehicles have warranties, so if something goes wrong with the engine, you don’t have to worry about the financial impact of the repair.
You’ll still have regular maintenance costs to pay for, but those are easier to budget for because you can expect them.
Insurance Pros and Cons
New vehicles have both pros and cons regarding insurance.
There are options available that allow you to afford a new car if something happens to yours. New car replacement options cover the cost to replace your vehicle with a new one. It’s only available for new and almost new cars.
GAP insurance is another kind of coverage that helps deal with depreciation concerns. If you have a standard full-coverage policy and your new car is totaled, your insurer will pay what the vehicle is worth without considering what you owe on it.
Since new car owners often owe more on their vehicle than it’s worth, thanks to depreciation, car owners could end up owing thousands of dollars on a car they can’t use.
GAP insurance covers the difference so that the owner can pay off the loan even if their primary coverage isn’t enough.
Insurance for a new vehicle costs more because the vehicle is worth more.
If you have a loan, you have to carry full coverage rather than just liability coverage, which is cheaper. Full coverage is worth the cost for a new vehicle, but it’s still an extra expense.
Practical Pros and Cons of Owning a Car
Practically, there are both pros and cons to purchasing a new vehicle.
The latest technology and safety features are some of the best things about owning a new car. For example, you might love the convenience of being able to start your car from your phone, and you’ll probably appreciate the safety of automatic emergency braking systems.
Customization is another benefit of a new car. You can get the trim level you want, the paint color you dreamed of, and the interior that suits you best.
A new vehicle has no history, nothing has been hidden, and no care has been missed. When you’re the first owner, you control the vehicle’s maintenance, and you don’t have to worry about previous owners who may have neglected it.
You may be able to find a used car with similar safety and technology features for a far lower price.
You might be more anxious knowing that you have a car that’s quite valuable. If someone steals it, it’s a more significant loss. If you crash, you’ll deal with more of a headache than you might have with an older car.
Sometimes even new cars end up with problems. Of course, your warranty should cover them, but it’s bothersome to pay for excellence and then deal with annoyances.
Whether a new car is for you depends on your financial situation and how much value you put on the pros of a new car. Many people choose to purchase a new car and are happy with their decision, while others decide they’d rather buy a used car.
Only you can determine the best choice for your situation.
Melanie Musson writes and researches for the auto insurance comparison site, BuyAutoInsurance.com. She’s passionate about helping others understand their insurance needs so they can protect their financial stability both now and in the future.