Pros and cons of buying a new car

For many people, there's no better feeling than driving off the dealership lot in a brand new car. It's shiny, clean and has that delightful new car smell.

But something else — not as pleasant — also happens when you drive it off the lot. Auto experts say a new vehicle can depreciate in value by thousands of dollars, or as much as 20 percent, immediately after purchase.

If you're in the market to buy a car, it's important to know the pros and cons of leasing, buying new and buying used. This article focuses on buying a new vehicle.

“My opinion on buying new is that every person needs to evaluate their personal situation,” said Jason Heard, with highly rated Frank Ancona Honda in Olathe, Kan. “For some folks, buying a new car is the best way. For others, it is leasing. And still others get the most benefit from purchasing pre-owned. By finding a professional automotive sales consultant and talking through your needs and wants, they can assist you with making a great choice.”

The benefits of buying new

Leasing is essentially a long-term rental with the driver essentially paying for the cost of the vehicle’s depreciation over the period of the lease. After purchasing a new car, you are responsible for paying for it in full. Most people choose a financing option to pay for a new vehicle.

“The perks of buying new are no one else has driven it, so you don't have to worry about how the car was treated,” says Ryan Piercy, sales manager at highly rated Bob Rohrman’s Indy Honda in Indianapolis. 

“Everything is new and maintained. There won't be any maintenance for a while. They're also more fuel efficient and have better safety technology as well.”

Some of the benefits of buying a new car, auto experts say, include:

• A full warranty from the manufacturer with the option of adding an extended warranty from the dealership, Heard said. The industry standard that most manufacturers offer is a bumper-to-bumper three-year, 36,000-mile factory warranty. Some follow that with a two-year extended powertrain warranty, which covers the engine, transmission and drivetrain.
• Multiple options available at the driver's fingertips, including more choices in color, accessories and technology. Buyers can add additional features, like a DVD player or an onboard GPS.
• Newer cars are often more fuel efficient, which saves you money at the pump.
• More incentives, such as lower interest rates and possible rebates or dealer cash. Typically, buyers of new cars are offered stronger financing options and cash-back incentives compared to those in the market for a used car. Many automotive dealerships will offer zero-percent financing over a period of time, such as five years, for example.
• You'll be the car's first driver, meaning: “You'll be more comfortable with the car’s history,” Heard said. “As the initial owner, you'll know everything that has been done.”
• Fewer mechanical issues, at least early on.

“If you buy a new car, you really only have the payment, gas and insurance to deal with in most cases,” Heard said. “The budgeting can be easier. Depending on what pre-owned car you buy, you may have to have a fund at the ready for things like tires, brakes or other maintenance issues.”

The disadvantages

That new car smell only lasts so long, though. One of the biggest negatives to buying new is the aforementioned depreciation that occurs by signing the papers and driving it away. By checking with several dealers and looking at online reviews, auto consumers can find the make and model that is more reliable over its lifetime and, therefore, depreciates less.

People looking to avoid that monetary hit are more apt to buying a one- or two-year-old certified pre-owned car. These cars have been inspected, repaired if necessary and passed the dealership or manufacturer's strict guidelines and inspection process, but typically cost several thousand dollars less than their new counterparts. Some manufacturer’ss offer full warranties on certified pre-owned vehicles.

“There are benefits to buying used for people who are on a budget and can't afford a new car,” Piercy says.

Simply put, new cars cost more and consumers can expect to incur more debt when they purchase new compared to a used car or lease. Insurance rates are often higher on new vehicles as well.

Be prepared

Buying a new car is an important decision and the second most expensive one a consumer can make, accorcing to the Federal Trade Commission. The average price of a new car is $30,000, according to the National Autmobile Dealers Association.

If you're set on buying new, be prepared. Know what you can afford and what your old car's trade-in value is by checking resources, like Kelley Blue Book.

Research all the models and pricing and don't focus only on the monthly payments.

If you don’t feel comfortable with the dealer, find another. Auto experts say the buyer is in control.

“In looking for a reputable dealer, ask friends, family, co-workers and do research online,” Heard said. “There are many sites. For example, Angie's List can certainly help you when making decision on where to shop.”

Article Credit: www.angieslist.com

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