If you’re planning to finance your next vehicle, you may be stuck between getting a new or used car. A brand-new vehicle has all the bells and whistles, while a used car is a more practical choice. Choosing between a new or used car loan can be tricky, as both have benefits and drawbacks. So, what type of car loan is right for you?
Below, we’ll review both options’ pros and cons to help you decide whether a new or pre-owned car works best for your budget, financial goals, and lifestyle. We’ll also discuss how a pre-approved car loan from Auto Loan Hub can simplify your purchasing experience. Keep reading!
Key Factors to Consider When Buying a Vehicle
When selecting the make, model, and brand for a new vehicle, choosing one that fits your lifestyle and doesn’t become a financial burden is essential. Do you travel on the road a lot? If so, you’re likely searching for a vehicle with low mileage to accommodate the many kilometres you drive regularly. If you’re on a tighter budget, you may be more focused on the durability and reliability of a car over its aesthetic or more updated features.
Other important considerations include the vehicle’s resale value, cost of maintenance, and how your loan payments can reasonably fit into your budget (if you’re not quite sure, you can use our Auto Loan Budget Calculator to get a better idea of what you can afford!).
New Vs Used: Pros and Cons
New and used vehicles both have their merits. One is not necessarily better than the other, but it accommodates different lifestyles and circumstances better. Below, we’ll examine the pros and cons of purchasing new and used vehicles to help you understand what works best for you.
New Car
Pros: Newer vehicles provide all the conveniences of modern technology, from heated seats to Bluetooth connectivity. Many drivers prefer newer cars due to their reliability. They haven’t been driven beyond a few road tests from interested buyers, creating virtually no wear and tear or need for immediate maintenance.
Due to their reliability, newer vehicles often have better warranty coverage than used cars. Loans for newer vehicles also tend to have lower interest rates, particularly for buyers with a good credit history.
Cons: Price is one of the main drawbacks of newer cars. New models with modern technology, sleek designs, and advanced building methods cost much more than a used vehicle. Monthly payments for a $50,000 vehicle can add up quickly and put some car owners under financial strain.
In addition to newer cars being expensive upfront, their value depreciates much faster. Within the first year of ownership, most new cars depreciate by around 30%. If you wish to sell your vehicle in the future, you will get less return on your investment than you initially put in.
Used Car
Pros: Getting a loan for a used vehicle is a perfectly viable option for drivers who aren’t overly concerned with keeping up with the latest trending car models. The used car market is broad and has a lot of variety, giving you plenty of options from reputable brands!
Used also doesn’t need to mean old- you can find pre-owned models from the past 5-10 years with relatively updated technology and features, allowing you to enjoy a comfortable ride without taxing your wallet! Used cars also depreciate slower- while they will lose that initial 30% in their first year, the following years only decrease the value by around 10% per year, allowing you to retain more of your investment down the road.
Cons: A pre-owned vehicle, even if it’s been well-looked-after, will have some wear and tear, from minor cosmetic damage like scratches to more well-used portions like the brakes and tires. It may not be long before you have to take your car in for maintenance and repairs, which can be costly depending on the level of wear.
While your initial purchase upfront will be less expensive than a new car, many used car loans require higher interest rates- the older a vehicle gets, the harder it is to estimate its value. Your warranty period will also be shorter since it began with the original owner. Therefore, you may have to request an extended warranty or service contract to get more protection for your vehicle.
The Final Verdict
Overall, new and used car loans are both good choices for purchasing a vehicle. Which one is right for you comes down to your personal needs, lifestyle, and budget. If you can afford a higher initial payment and enjoy the benefits that a new vehicle offers, a new car loan may be a viable option. On the flip side, if you’re working with a tighter budget, a used car loan may be a better fit.
Get a Pre-approved Car Loan with Auto Loan Hub
If you’d like to simplify your car search, apply for a pre-approved car loan with Auto Loan Hub! Within minutes, you can find out whether you qualify for a pre-approved loan from a lender in our vast network. Whether you’re looking for something fresh off the dealership floor or a more economical model, we’ll help you locate the perfect vehicle from one of our partnered brands.
Visit our How it Works page to learn more about our hassle-free process and get started on your car search today.
