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Because we're not a big bank, we're here to help YOU, not stockholders! Follow our new blog for financial tips ranging from balancing your checkbook to buying a home. Our goal as your financial partner is to help you make educated financial decisions for yourself and your family.

Should I Buy New or Used? 4 Things to Consider First

SDCCU | 1/13/2015 09:44 a.m.
What’s more important to you – a bargain, or that new car smell? Do you want to switch cars every few years, or keep one until the wheels fall off? Some might think buying a brand new car is too expensive and that might be true. But this decision mostly depends on the costs associated with the following 4 factors.

1. Down Payment
Buying a new car may require a down payment, so evaluate how much you can really afford to pay up front. While a larger down payment may lead to better terms on your loan, do the math. After you make that down payment, do you still have enough money in your emergency fund? Will your monthly auto loan payments allow you to still contribute to your savings after living expenses?

Typically, the down payment needed to buy a used car is lower and some may even qualify for 100% financing. While financing the entire purchase of the vehicle will drive your monthly payments up, the overall price of a used car may be low enough to work out for you in the end.

2. Depreciation
Do you want to drive a new car every 5 years, or do you want to buy once and drive it long term? Depending on your preference, depreciation is a huge factor. According to, after just 5 years, a new car is worth only 37% of the price you paid at the dealership. That means if you plan to sell your new car in 5 years, you’ll be taking a huge loss in the form of depreciation. Used cars depreciate much more slowly than new ones, especially in the first year of ownership.

Given the fact that a new car could require a substantial down payment and will depreciate sharply in the first 5 years, used cars are usually the better choice for buyers that like to drive something different every few years. If you plan to drive a car for the entirety of its life, depreciation becomes a less important factor and it may make sense to buy a new vehicle. 

3. Insurance and Registration
Insurance premiums and vehicle registration are higher for new cars. Check with your current auto insurance provider for an estimate on what your premiums will be, and while you’re at it, check with other providers. You’ll likely find that premiums are lower for used cars and they become cheaper still as the car ages. Annual registration for new vehicles can sometimes cost hundreds of dollars more than used cars. You can calculate the approximate amount your registration will be at the California Department of Motor Vehicles website.

4. Maintenance
Unlike depreciation, repairs and maintenance are hard costs that you incur whenever they come up. Some carmakers offer a warranty on new cars for upwards of 5 years or 60,000 miles, whichever comes first. This can be a huge source of savings depending on the maintenance needs and the details of the warranty – and it’s a big reason that many people choose to buy their vehicle new. While used vehicles don't normally come with the same warranties as new ones, the original factory warranty on a new car is often transferable (in part or entirely) to a second owner. Authorized dealers sell relatively new, certified pre-owned cars that come with the remainder of the original warranty, so this might be a way to split the difference between new and used.

Once You’ve Decided
These aren’t the only 4 factors you need to consider when making a purchasing decision but they are an important start. Do your research, take your time, and once you’ve decided, let SDCCU® do the work for you. San Diego County Credit Union can not only finance your car, we can help you get a great deal on a new or used vehicle with our easy Online Auto Buying Service powered by TRUECar¹. It provides you with upfront dealer pricing for new and used vehicles and you’ll receive Guaranteed Savings Certificates before you leave home. The service is FREE and there is never an obligation to buy!

¹TrueCar is not affiliated with SDCCU.
Guaranteed Savings not available in all states. In these states, a Target Price is shown, which is a market-based example of what you can reasonably expect to pay for your vehicle as configured. Your configured vehicle may not be available or in-stock at the Certified Dealer.


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