Vehicle Loans

Q: I need a new set of wheels and I’m wondering if it’s better to spring for a new vehicle or to go the cheaper route and buy a used vehicle. What do I need to know about each kind of purchase? 

A: Any decision surrounding a purchase as large as a car needs to be made with careful research and consideration. There are pros and cons on both sides of the fence here. Your final decision, though, will depend on your budget, personal preferences and particular needs. 

To make your job a little easier, we’ve outlined the pros and cons of each purchase type below. 

Pros of new cars 

• Status symbol. The strongest allure of owning a new vehicle is obviously its attractiveness. You don’t hear many people bragging about their just-purchased used car or posting pictures of it all over their social media pages.
• Fewer repairs. With a new vehicle, you can assume you won’t be dealing with major repairs or maintenance issues for a while.
• Easier shopping. When everything is completely new, there’s no need to drag your prospective new car to the mechanic. It’s also easier to determine a fair price for the car.
• More financing options. If you’re considering a new car, you’ll be offered attractive incentives like cash rebates from the carmaker and better interest rates from the lender.
• Improved technology. Cars are getting more updates, and recent models have incredibly convenient technology, such as programmable settings, autonomous emergency braking, adaptive cruise control, blind spot monitoring, built-in Wi-Fi hotspots or lane-departure warnings.
• Automaker’s guarantee. All new cars come with warranty coverage for their first three years or 36,000 miles, whichever comes first.

Cons of new cars

• Price. Of course, a new car is going to be more expensive. But it’s not just the price that puts you at a disadvantage – it’s the fact that you can get a perfectly comparable vehicle for much less.
• Depreciation. New cars go down in value as soon as they leave the lot. In fact, a new car can lose 20% of its value once it’s owned. At the end of the first year of ownership, your new car can drop another 10% thanks to the mileage you’ve clocked and the wear and tear.  You’ll feel this loss if you try to sell your car a few years down the line.
• Higher premiums. Insurance companies charge more for newer vehicles. You’re also more likely to want the maximum coverage and protection when every dent in your new car is enough to bring you to tears.

Pros of used cars

• Price tag. Let’s be honest here: No one would think of buying a used car if it weren’t for the savings. And those savings can be enormous! Consider this: according to the National Automobile Dealers Association (NADA), the average American own 13 cars in their lifetime. A typical new car costs $30,000.  If each car that a person owns throughout their life is just 3 years old and costs $20,000, the driver can save $130,000 on car costs throughout their life!
• Less depreciation. The savings on a used car don’t end at the dealer’s lot. With the previous owner absorbing the initial depreciation on the car during its first few years of ownership, your vehicle will only experience a minimal drop in price. You can save yourself thousands of dollars in loss if you want to sell your car a few years down the line.  
• Lower insurance premiums. With your car weighing in at a lower value, your monthly insurance premiums will be more manageable. You can also opt out of full protection when your car isn’t a new model anyway.
• Lower interest. If you choose to finance a used car instead of a new one, you’ll likely have a higher interest rate. However, since the loan amount is lower, you’ll save in total interest payments over the life of the loan.
• Predictability. When purchasing a just-released car, you never know what issues might crop up in the future. But, when you’re buying a model that’s been around for a few years, you’ll have a wealth of research and ratings available on your car so you’ll know what to expect.

Cons of used cars 

• Complicated purchase. You won’t be able to walk into a lot and walk out with your new car an hour later. With a used vehicle, you’ll want to get a vehicle history report, ask to see the vehicle’s service records and bring it to a mechanic for a professional inspection.
• Fewer choices. When buying pre-owned, you don’t get to be picky about things like colors, upgrades and features. If you find something in your price range that meets most of your specifications, you grab it!
• Risk. Even if you do your homework well, you still run the risk of walking out with a lemon when you buy a used car.

It’s a multi-faceted decision, but by carefully weighing your options and personal preferences, you’ll drive off of the dealer’s lot with a real winner! 

Once you have been pre-approved for an auto loan with San Francisco Federal Credit Union, we encourage you to try one of the following FREE auto buying services:

• AutoSMART Online Vehicle Shopping Quotes
• Special Incentives with Enterprise Car Sales

Get your stress free auto loan from San Francisco Federal Credit Union.  All loans are subject to credit approval.

• San Francisco Federal Credit Union

  Rating: ★★★★★ 5 / 5 stars

  Rated By Melanie A.

  “[SFFedCU was] recommended by a friend while I was searching for an auto loan. Their low rates could not be matched by competitors. I was on a time crunch to get a car…I was approved for a loan the same day…I got the car I wanted the next day!”

   

  San Francisco Federal Credit Union

  Rating: ★★★★★ 5 / 5 stars

  Rated By Maria P.

  “I was in the market for a pre approved car loan which prompted me to pay the credit union a visit. I left with a loan, a great rate and outstanding service. Within a week I was able to purchase my new (used) car. SFFCU offered me options, extras and personal service.”