Consider the price vs. value
The simplest and usually most significant difference between a new car and a used car is the price. The upfront cost of a used car will be less than a new car. As anyone who has ever purchased a new car will have heard: the value depreciates as soon as you drive it off the lot. The value of your new car will continue to decline over time.
By contrast, the value of a used car can be expected to be somewhat more stable than a new one — the depreciation in value is more dramatic for a new car that becomes a used car. Also, in many cases, you may find that you’ll get “more for less” with a used car: all those features that are costly optional extras with a new car — if they are present in a used model, then they are already included in the price.
Factor in service and fuel efficiency costs
Unlike a used car, buying a car that’s brand new means you don’t need to consider its condition or service history. A new car is generally considered more reliable and is sold with warranties on parts and after-sales service. New cars also tend to be made to the latest efficiency and emissions standards, so they may offer lower costs in the form of better gas mileage than an older model.
It’s hard to know how a used car was previously handled or why it ended up in the used car lot. You may find yourself having to repair a used car much sooner than expected. When buying a used car, you will want to look into the cost and availability of parts and services, especially in the Caribbean, where essentially all cars and car parts are imported. This means the makes and models that are easiest for local mechanics to maintain change over time.
Understand the financing options available to you
You may also find that there are more financing options for new cars than for used ones. Despite the inevitable drop in its value, a new car’s presumed greater reliability makes it better for lenders than a used vehicle. Terms for new car financing are often more generous, including potentially longer loan periods, 100% financing, or cash-back incentives.
Used car loans might need to be paid back over a shorter period of time, offers no cash-back incentive and may require a deposit to be paid. Consequently, though a used car may be cheaper, for some it may be easier to acquire a new car thanks to the greater flexibility of financing options.
Know the regulations in your country
In many Caribbean markets, you may find you have to wait for a brand new car to be shipped in. You may have the option of getting exactly what you want, it might not be available for a while.
When buying a car that’s used, what you see is what you get: buy it and drive it away.
It’s also helpful to know how the markets for new and used cars operate in your particular country or territory. For example, in Trinidad and Tobago, recent changes to the laws governing importing of used cars mean that only vehicles three years old or less can be imported. This means the pool of foreign used cars on the market is up to three years old and therefore more expensive.
Ultimately, choosing a new or a used car comes down to your personal preferences and priorities. Understanding the benefits of both options may help you streamline your search and choose the car that works best for you.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.