19 Major Pros and Cons of Buying a New Car

One of the most significant investments that you make for yourself and your family is the purchase of a vehicle. You can choose to buy something used at a lower price, but then there are fewer guarantees or warranties available regarding its overall condition. When you look at the new car market, you’ll see several different makes and models that come with unique features, pricing, and technology choices.

The cheapest new car in the United States is currently the Nissan Versa, which retails a base model for less than $13,000. The only other option is a Chevy Spark for about $150 more. If you’re paying between that and up to $20,000 for a new car (or more for SUVs, vans, or trucks), then you’ll want to exercise due diligence before agreeing to anything.

You’ll discover that there are many positives that can happen when you purchase a new car. There are also some additional caveats that you’ll need to review before making this investment.

That’s why a complete review of the pros and cons of buying a new car is time spent well.

List of the Pros of Buying a New Car

1. New cars come with the latest technology.
Your dream car from the early 1990s might have had a bumping audio system and cruise control, but today’s features take automotive technology to the next level. Cars built after 2010 can often go 10,000 miles or more between oil changes when correctly managed. Options like lane departure warnings, self-parking, and collision avoidance are on recent models. Older cars won’t give you a built-in MP3 player, satellite radio, or Bluetooth access either.

It might cost a little more to purchase a new car, but the investment gives you access to features that provide dividends every time you get behind the wheel.

2. Low interest rates can help you to manage the expense.
The Federal Reserve may have raised interest rates in 2019, but they are still at historically low levels compared to what customers were paying 10-20 years ago. Your credit history and income levels will dictate much of the risk that lenders will evaluate for this purchase, so it helps to have a credit score above 750 to get a great offer. Most customers will receive something in the 4% range, but well-qualified people could get something in the 2% range going into 2020 and beyond.

3. New vehicles usually come with better warranties.
If you purchase a used car from a private seller, then you might not receive a guarantee or warranty on the vehicle’s condition whatsoever. Buying one from a dealership might give you a 12-month, 12,000-mile option if the make and model are new enough. When you purchase something new, then the standard manufacturer’s warranty is usually 3-5 years and up to 60,000 miles. Most vehicles now come with a 10-year, 100,000-mile powertrain warranty to cover your transmission and engine. You even have the option to choose an extended warranty in some situations that go beyond the manufacturer’s expiration date so that you can receive a complete level of protection.

4. A new car provides some serious curb appeal.
You cannot deny the curb appeal that a new car provides when you get behind the wheel. Not only do you get that famous “new car smell,” but you also have the shiny paint and the clean interior to enjoy. Most of us today live in a consumer-oriented culture, so having a new car in the driveway in an undeniable status symbol of where you are financially. It’s an easy way to contribute to the overall lifestyle you want where life can be beautiful all of the time.

5. New cars have better fuel efficiency standards that they follow.
New cars are more likely than used models to provide the highest possible fuel efficiency standards on the road today. That means you can let your fuel budget stretch further since your vehicle drives farther on each tank. You’ll receive access to many of the latest safety features provided by the industry at the same time, including structural reinforcement, side-curtain airbags, and automatic braking.

6. You can gain access to roadside assistance.
Most new cars today offer a roadside assistance package as part of your purchase. Some Hyundai vehicles provide this in lieu of a spare tire because it’s such a useful option. That means you can receive the peace of mind in knowing that someone will take care of you if your vehicle breaks down for some reason while driving. It can save on towing expenses, schedule a locksmith, or give you a jump. Since that means you don’t need to pay for a separate program, there’s a little bit of money you can save right away.

7. You get to make all of the choices.
When you decide to purchase a new car, then you can order the exact make and model that you want. That means you can get your preferred color, all of the options, and the features that make it your home away from home. Even though a lender might own the title with you, making the monthly payments allows you to maintain control of this asset until it becomes 100% yours.

If you have the cash available to make the purchase immediately, then you don’t ever need to worry about someone coming to seize your vehicle. You’ll own it outright from the very start with everything you ever wanted in the car.

8. Buying a new car means you don’t need to worry about the vehicle’s history.
When you purchase a new car, you know that it came straight from the factory. The only people who have driven it are those who took it for a test drive. Some dealerships might have their staff get behind the wheel to move the car every so often. You can tell how much a new car has been moved about based on the number of miles on the odometer.

You won’t usually find a 0 on your odometer when buying a new car, it should have less than 100 on it. Anything that has three digits is either a dealer swap or the usual test drive car for that make and model. If there isn’t an alternative, then you should ask for a discount or walk away from the transaction. You’ll want to make sure that you are the car’s first full-time driver.

9. It is typically easier to purchase a new car.
When you decide to purchase a new car, then there are fewer questions that need to get asked during the purchasing process. You don’t have as much room to negotiate on the price, but promotional periods can help you to get a pretty good deal. It’s a straightforward experience. You’ll test drive whatever make and model you feel is right for your needs, and then you commit to the process if you like what you see.

When you purchase a used car, then you need to pay attention to every potential imperfection. Unless the manufacturer’s warranty is still available, your transaction is considered “as is” in most jurisdictions. You have a few more outs available when deciding to go with something new instead.

10. You might have access to dealer rebates or other promotions.
There are plenty of incentives available for customers who want to pursue the idea of getting into a new car. You’ll find that certain rebates are available during particular times of the year, helping you to save enough money at times to drop the final cost below MSRP. You might have access to dealer cash, trade-in promotions, and other ways to reduce the final cost of the car in this area.

Even if the options are few, the buyers of new cars have better cash-back incentives and stronger financing options when compared to what is available in the used market. That can sometimes include 0% financing over the life of the loan.

11. There are typically fewer mechanical issues.
As the initial owner of a new car, you’ll know that everything has been done to maintain the value of the vehicle until you took possession of it. That means there are fewer mechanical issues for most drivers through the first 2-3 years of ownership. If you stick to the maintenance schedule provided by the automaker, you can avoid many of the worries that people who buy used must face as they get behind the wheel.

You get to avoid things like brakes, tires, and other maintenance issues. Budgeting becomes easier because you have insurance, fuel, and your monthly payment to manage.

List of the Cons of Buying a New Car

1. Depreciation is going to hit your finances hard.
When you drive a new car off of the lot after buying it, then you’ll lose over 10% of its total value at that moment. If you bought a truck or van, that means you could lose between $3,000 to $6,000 of value instantly. That’s one of the reasons why gap insurance exists. By the time you pay off a five-year loan, your new car is going to be worth about 40% of its original value – and that is under the assumption that you took care of it during that entire time. It’s going to lose about 20% of its value in the first year alone.

That’s why you must drive with a complete insurance package. If you total the vehicle just minutes after driving off of the lot, you could be responsible for the remainder of the loan without having a working car to drive.

2. Your insurance costs are going to be much higher.
Every dealership and lender require you to carry full coverage on your vehicle until you pay it off in full. The actual premium depends on your driving history, the age of each person, and the make and model of the vehicle. You’ll always pay more when you buy something new instead of used. Even with a clean record, most drivers who get behind the wheel full-time are going to pay at least $1,000 per year to protect their investment.

3. You never receive a return on your investment.
Buying a new car is never like purchasing a home. You’re not going to receive a return on your investment for the average passenger vehicle. Only collector cars will ever provide a return, and those items are usually special edition models that don’t receive much time on the road. The depreciation is going to take out whatever wealth you wanted to get, so it might be useful to look at leasing if you prefer to plan for a monthly payment no matter what.

You can avoid the problem with interest if you buy a car in cash, but a loan will cause you to spend more over time. Using $20,000 financing at a 6% rate, you’ll spend over $2,500 more for the privilege of having the vehicle over time than if you paid upfront. That figure further limits the value you can receive upon selling.

4. The car is not actually yours until you pay off the loan.
When you go through dealer financing or a lender provides you with a new car loan, then you get the privilege of driving and licensing the vehicle. What you don’t receive is a clear title. Your vehicle is not technically something you own until you make the last payment on it. If you go into default for any reason, which could mean missing only one payment, then the vehicle can be seized by the lender. That action will damage your credit rating, stop you from having something to drive, and you are still responsible for whatever portion of the loan remains after the bank sells the car.

5. New car loans sometimes come with a variable interest rate.
Most new car loans come with a fixed interest rate so that you have a complete schedule of payments to make over 3-6 years, depending on the options you chose at financing. If the lender decides that you have more risk than they desire, then an offer for a variable rate might come through. That means your payments will change over time based on whether the interest rate increases or decreases.

When you find yourself in that situation, missing a payment means the lender could charge you with a significant penalty fee. You might not receive the option to pay off the vehicle in advance without paying more for that privilege either.

6. You need to provide a large down payment to avoid being underwater.
Because new cars have such a steep depreciation, you are almost forced to provide a significant down payment to keep the vehicle as a meaningful asset. Your credit might allow you to get a 100% financing package, but that setup is almost guaranteed to make the loan worth more than the vehicle once you drive away. If you’re in an underwater situation, then your insurance costs are going to be higher to manage this fact – and it could impact your credit to the point where purchasing another vehicle may become more challenging.

7. You still play the lottery when purchasing a new car.
When you purchase a used car, then you have more information about the make and model that you’re wanting to buy. If the manufacturer had a bad year where engine problems were common, then you can avoid them when shopping for new wheels. If you decide to buy something new, then you have no control over this process. You’re stuck with whatever engine and design the automaker used. If it turns out to be a dud, then you’re going to be out of luck with that experience.

8. Some owners face the pressure of keeping their cars perfect.
When you own a car, it will eventually rack up some dents, dings, and scratches. You can repair these cosmetic issues without much of an expense, but it wouldn’t be as much of an issue if you pursued a used car instead. Dents on something brand new can be deflating because of the depreciation you face. Getting dinged in a car that already has a few is something that you can shrug off rather easily.

Conclusion

The decision to purchase a new car often comes down to an inventory of your finances, personal preferences, and the availability of vehicles in your community. You may want to speak with a financial advisor before proceeding because of the significance of this investment.

If your credit score is not high or your income levels are not stable, it may be a wiser decision to pursue a used vehicle. It may not have the same levels of reliability, but there will be fewer financial commitments to manage.

The pros and cons of buying a new car depend on what your needs are at this moment. Short-term loans can help you to grab ownership right away, while long-term options make it more affordable to purchase upgraded features. You’ll want to compare prices at multiple dealerships whenever possible and negotiate for a fair price based on your research. When you follow these steps, then this guide can help you to make the correct decision.


Blog Post Author Credentials
Natalie Regoli, Esq. is the author of this post and the editor-in-chief of our blog. She received her B.A. in Economics from the University of Washington and her Masters in Law from The University of Texas School of Law. In addition to being a seasoned writer, Natalie has almost two decades of experience as a lawyer and banker. If you would like to contact Natalie, then go here to send her a message.