Benefits of Buying a New Car
Purchasing a new car is a major investment, but there are a lot of good reasons for the expense. Additionally, used cars have some inherent drawbacks that you'll need to consider.
Freedom of Choice
When you buy a new car or truck, you have the opportunity to consider a wide variety of vehicles in your size and price class. You can test-drive all of them. You can select your favorite color. You can equip the new one with whatever features you need or want. You can choose between leather and cloth upholstery. You can upgrade the audio system. You can add high-tech gizmos such as a communication, entertainment or navigation system.
If you don't find what you want either in the showroom, on a dealer's lot or online, a dealer will special-order a new car to your precise specifications. Before you order a vehicle, ask the dealer to search a regional or national computer database to see if what you want exists in another dealer's inventory. Dealers frequently trade vehicles to satisfy a customer, or a dealer will outright buy the vehicle from another dealer.
If a dealer search comes up empty, you'll have to special-order the vehicle. Be aware that a special order will take time and could cost you more than buying a vehicle directly off the lot. Special orders typically take five to six weeks from domestic manufacturers. If you are ordering a particularly popular car you'll likely have to wait even longer. Popular cars in high demand fly off lots as quickly as they arrive, and a dealer may even have a list of customers waiting for the arrival of the popular vehicle. Your order then falls to the back of the line.
In addition, your special order probably won't be eligible for any rebates, low-interest financing or other incentives. Perks are hefty these days and run from $500 to $5,000. Advertised specials typically cover only the vehicles in dealer stock. There's also little chance that you'll be able to haggle on the price if you make a special order. Your chances of negotiating a deal are better if you pick an automobile on the lot because dealers are anxious to move vehicles they have in stock to cut their costs and make room for new merchandise.
If you want to special order, you'll likely be limited to domestic manufacturers. Import manufacturers, especially in Japan, generally don't make special ordering widely available, if at all, because of the long pipeline to assembly plants overseas. Acura, Honda's luxury division, offers its models equipped one way at one list price, from which you can haggle somewhat with the dealer. The only features you can choose — from what is already available — include the color, an optional navigation system and, in some cases, the addition of a sunroof (if one isn't already included).
Popularity and Strong Resale Values
Depreciation (which we talk more about in Reasons to Buy Used) is usually a reason to buy used instead of new, but vehicles in high demand have higher value. For instance, new vehicles that sell for more than the dealer's list price suggest stronger resale values and less depreciation. The Mercedes-Benz CLK-Class, for instance, has been in strong demand ever since it was introduced; thus it has strong resale value. Certain brands, such as Honda, Mercedes-Benz, Toyota and Volkswagen, have lower depreciation and stronger resale values because of their quality and reliability records.
While depreciation may not matter initially to you, it will have an impact when it comes time to trade in your vehicle, so it's worth considering when you buy a new car.
Better Finance Rates
While a used car may cost less than a new one, the interest rate you pay could be higher. To begin with, you wouldn't get limited, low-interest financing or a cash rebate that usually is offered as an incentive to new-car buyers. Furthermore, financial institutions generally charge a higher rate of interest on loans for used cars — usually a full percentage point or two. However, some of the automakers' certified pre-owned programs do offer discount financing on certain models.
Another disadvantage of buying used instead of new is that you don't get the latest and greatest features. Every model year, manufacturers add new technologies and features to vehicles either as standard or optional equipment as a way to lure buyers to new cars from their current ones. Those technologies may be important safety breakthroughs, like airbags and antilock brakes were some years ago, or they may just be convenience gadgets — things that make life in your vehicle more enjoyable — such as DVD entertainment systems or navigation guides. The only way to get the most advanced technology and the latest convenience features is with a new vehicle.
Airbags are a prime example of the evolution of technology. The earliest versions sometimes caused injuries to children and small adults. As automakers revamp vehicles, they install depowered airbags that deploy with less force, which reduces the chance of injury. Electronic stability systems are also becoming more common in new cars. Certain Ford and GM models already come standard with stability control, but older used cars are unlikely to have this feature.
Automotive electronics are evolving so rapidly that unless you buy a new car, your vehicle's technology is already outdated. For instance, satellite radio, available by subscription from Sirius and XM Satellite Radio, is only now becoming widely available on models from all of the major manufacturers.
Finally, some 1- and 2-year-old used cars on dealers' lots are former rental cars. Rental cars generally get considerable use and abuse in a short time, so they may not be good choices. Some leased vehicles may offer a better alternative. Leasing companies carefully inspect the vehicles before they put them up for sale. People who lease are charged for all necessary repairs. This policy encourages people who lease vehicles to take care of them.