Is A New Car The Best Use Of Your Money?

Are you in the market for a new car? Well, "new" doesn't have to mean a brand new car as much as it means a car that is new to you. There are so many options for replacing your vehicle, and sometimes it can be a bit of a bother to try and sort out what the best choice is.

Do you buy a used (otherwise euphemistically known as "pre-owned") car, or do you take the plunge and buy a new one outright? Then there's the possibility of leasing. Which of these is the best approach?

Never fear, for here you will find the pros and cons of each choice. Check them out, and decide for yourself. If you still need more information, why not read "Should I Buy A New Car?" for added perspective?

Research your options before closing a deal on a car loan

Buying A New Car
Pro: When you buy a new car, it has a warranty that covers pretty much everything that's not considered standard wear and tear. That way, if for instance the steering wheel is acting funky, you can take it back to the dealer, and they have to fix it. Furthermore, there are stages of the warranty, where things like the power train have longer coverage periods, so even a year or two later, you're probably still covered for certain things.

Having a new car also looks good on your "assets" column when a situation comes up where you need to list your property and debts, usually associated with something like taking out a loan or mortgage.

Con: Really, there are only two major drawbacks to buying new. First of all, congratulations, you've now incurred a new debt that could affect your FICO score and requires you to make a monthly payment. Secondly, if you take out a loan, the lien holder requires you to fully insure the vehicle, even if your state has voluntary insurance. Hey, the loan company needs to have its investment protected until you pay the debt off!

Buying A Used Car
Pro: Used cars aren't as expensive as new cars, so there's a big cash savings there. In fact, if you get a lucky enough break, you may find yourself in a situation where you can buy a used car outright, and not bother with a loan. There used to be an old bumper sticker that proclaimed "It may not be much to look at, but it's paid for!". Quite a lot of truth there! Secondly, it costs less to insure a used car, since the value is less than a new car. Additionally, if you own it outright, you are not legally obligated to insure it to the hilt in order to satisfy some loan company or bank.

Con: My father once told me "When you buy someone's old car, you buy the car's problems too!". Then he went out and bought a used car that wound up needing constant repair. Still, it's true. Who knows how the seller treated that car?

On a related note, if you find a late model car that is being sold for an absolute killer deal, check into why it's such a bargain. This is a case in which having your mechanic check it out beforehand may be a smart idea.

Leasing A Car
Pro: Leasing a car means little or no down payment, and you usually only end up having the car for a couple of years, which means you always have a late-model car that entails fewer problems, and hey, you're driving a nice, new car that you would otherwise not be able to afford if you bought it! Also, lease payments tend to be smaller than loan payments, as a rule.

Con: Leasing is often a complicated and confusing process, especially if you find yourself needing to terminate the lease prematurely (brace yourself for fees!). You don't own the car, so you really can't do any major modifications or customizations (think of it like renting an apartment). You have no equity in the car, you usually have a limited amount of miles you can drive (often ranging between 12,000 and 15,000 a year), and you're responsible for any charges for repairing excessive wear and tear.

So as you can see, it depends on your unique situation, how much money you have on hand, and how much hassle you want to put up with. Take a good look at your finances, see what you can handle, and go for it.