Although the pandemic affected many businesses, one industry that took a major hit was the auto industry.
When businesses were asked to shut down, the car manufacturing companies also had to stop the production of new cars. Because of this, new car sales tanked, for there were fewer new cars to sell. In turn, many car dealerships had to shut down temporarily. To make matters worse, people were anxious about leaving their homes in fear they would risk contracting COVID-19, and they wanted to conserve money as they were unsure of the unforeseeable future due to the pandemic.
The pandemic also affected the used market supply because people were wary of visiting others, let alone buying someone else’s used car. With a lack of new cars on the market at the time, it decreased the desire to trade in a current car for a new one. If someone was looking for a used car, there were limited options.
As months have passed, restrictions have eased. Now is a great time to purchase a car both new and used. The dealerships are working on getting rid of their 2020 models to make room for their 2021 models. Furthermore, as people continue to avoid mass transportation and are more sensitive to auto costs, used cars are a great option. To help you decide whether to buy new or used, here are some factors to consider.
Advantages of Buying New Cars
1. There’s No History
When you get a new car, you get a fresh start. You can decide how you want it to look and how you’d like to take care of it.
2. You Can Get New Car Deals
During holidays such as Labor Day, Columbus Day, and at the end of the year car dealerships tend to offer sales and other promotions.
3. New Cars Are Cheaper to Finance
With new cars, the value of your car is known, which gives lenders a more accurate estimate as to what the car is worth and what loan rate they can offer you.
4. You Can Get the Latest Features
In new cars, they have more safety and technology features such as Apple CarPlay, Maps, etc.
5. You Get Full Warranty Coverage
Most cars come with coverage for at least three years or 36,000 miles, and a new car warranty is included in the car’s price – so you don’t have to pay extra to get the coverage.
Disadvantages of Buying New Cars
1. They’re Expensive
On average, a new car costs more than $37,000, according to Kelley Blue Book, while the average used car price is about $20,000.
2. You Have To Buy Them From a Dealer
When you buy a new car, you are tied down to purchasing from a specific dealer. With used cars you have options: car dealers, used car superstores, and private parties.
3. Sales Tax Can Be Expensive
When you buy a new car, you’re taxed on the entire price you pay. With a used car, you won’t pay nearly as much due to the lower transaction price.
4. They’re More Expensive To Insure
With new cars, you may be required to have greater coverage, especially if you are leasing or financing a car.
Advantages of Buying Used Cars
1. They’re Less Expensive
A used car is generally cheaper to purchase. This is also the case when you buy auto insurance and when you have to pay taxes.
2. You Don’t Take a Huge Depreciation Hit
A chunk of the vehicle’s value is lost during the first few years of ownership, with less depreciation occurring later in the car’s life. Depreciation is one of the largest costs of car ownership, and you will notice the impact of the depreciation when you go to sell the car and learn the vehicle’s current value.
3. Your Financing Is Less Likely To Be Underwater
Because you are likely to have a smaller loan with a car that is depreciating at a slower pace than a new car, you most likely won’t owe more on your car loan than the vehicle is worth.
4. You Can Buy a Better Car
Used vehicles are much less expensive than new cars, which gives buyers the opportunity to buy a nicer car that they might have been able to afford if it was new.
5. You’ll Know What Problems To Avoid
Once a car has been on the road a few years, it will develop a reliability record. This helps you avoid the models that are known to have huge expenses in the long run.
Disadvantages of Buying Used Cars
1. You Never Truly Know Its History
Vehicle History Reports are pretty accurate, but it may not show everything if work was done under the table or if work was done recently but hasn’t shown up on the records yet. Also, unless an accident occurred, you’ll never know how hard or easy the vehicle was driven by the previous owner.
2. Most Used Cars Are Sold As-Is
When you purchase a used vehicle, you don’t have as much freedom when it comes to customization of colors, trim, etc. Another consideration is that once you leave the dealer, all of the challenges that could occur fall on you to pay for financially.
3. There’s Usually No Warranty Coverage
The only warranty used cars have is the one you have purchased. Without a warranty, you’ll have to pay out-of-pocket for any repairs that are needed.
4. Your Financing Will Likely Be More Expensive
With used cars, there is increased risk due to both the value of the vehicle being financed and the credit risk of the member which causes lenders to charge higher interest rates on used cars than they do for new vehicles.
Overall, the decision to buy a new or used car will depend on your personal circumstances. As you review the advantages and disadvantages of each, one option may be better suited for your needs than the other.
Do you need help deciding on your new 2020 vehicle?
As we work together to get through these ever-changing times, let us know how we can help! We have auto loan options available to help you finance your dream car. Please give us a call at 800-835-3400 to speak with one of our Member Advisors, or visit us online at caminofcu.org for more information. We are here to help you on your financial journey.