What are the Pros and Cons to Buying a New Car?

A new vehicle purchase is second only to your first home. Potential buyers should be aware of this fact before they sign on the dotted lines. While there are many benefits to buying a new vehicle, there are also some drawbacks. You can discuss the pros and cons with us below. However, you can also consult a financial advisor in order to make the best decision for you.

The Benefits of Buying A New Car

Low Interest Rates

Over the last several years, the Federal Reserve has maintained historically low interest rates and they have been reflected in auto loans. The interest rates have started rising for the first time in the last few months. It is important to think about buying before they rise further. Although rates are currently low, they will not stay that way forever.


A majority of vehicles come with a three-year or 60,000 mile manufacturer’s warranty. Vehicles often come with a 10-year, 100,000 mile powertrain (engine or transmission) warranty. Dealers will often offer extended warranties beyond what the manufacturer expires. This makes it safer to buy large quantities of equipment, in the event of an unexpected problem.

The Latest Technology

Although a 1990 Camaro may be your dream car, it will not have the latest model’s navigation system, satellite radio or built-in MP3 players. The mileage on newer models (2015 and later), can exceed 10,000 miles without oil changes. Other perks include collision avoidance systems, lane departure warnings and self-parking. You can also get a hybrid or all-electric vehicle that will dramatically lower your gas bills.

The Cons and Benefits of Buying a New Car


Edmunds says that a car loses 11% its value the moment it is driven off the lot. The car will have a value of approximately 40 percent by the time the five-year loan is paid off. This is assuming you take good care of your car. The depreciation rate for more expensive cars is much higher. Popular Mechanics highlighted a 2008 Cadillac Escalade with a price tag of $60,000 and 41,000 miles that sold for $32,000 a few years later.


Dealers and financial institutions require that you have full coverage for your vehicle, even if it isn’t fully paid. The vehicle’s age and driver are some of the factors that influence insurance premiums. The premium for full or partial coverage will go up the older the vehicle. This is because it will cost more to repair the vehicle in the event of an accident.

Return On Investment

Many people purchase homes in areas with high property values and new construction. You will not make any profit whether you purchase a car in Beverly Hills, or Skid Row. A $20,000 vehicle with a modest 6% interest rate will end up costing $22,545 after a five-year basic loan.

Bottom Line

Your personal preferences and financial situation will determine whether you buy new or used. Talk to a financial advisor before you make a decision about buying a car. A new car is one of your largest investments. While the answer to this question will be different for each person, you won’t ever be able to recoup the cost of a vehicle. The quality of your vehicle’s life, safety, and enjoyment will be more important than the return on investment.

Tips for Buying a Car

  • A major life decision, buying a car should be taken seriously. A financial advisor may be helpful to you in deciding whether to buy or lease a car and how much to budget based on your financial goals. It doesn’t take long to find a qualified financial adviser. SmartAsset’s free tool matches up to three local financial advisors. You can then interview the advisor matches for free to determine which one is best for you. Get started now if you are ready to find an advisor that can help you reach your financial goals.
  • Are you ready to purchase a car? The decision is now between buying new or used. Find our more about the latest development sin the automotive industry before you decide to change your car.

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