Buying a new car

PROS:

1. You get peace of mind: new cars come with full factory warranties, so you will spend very little on maintenance and repairs for the duration of the warranty
2. Manufacturers offer excellent financing offers at very low interest rates
3. Get the specific colour, accessories, and add-ons you want
4. You don't have to worry about how the vehicle was maintained by a previous owner

CONS:

1. Usually costs more up front than used
2. Depreciates sharply at the beginning – its value drops instantly as soon as you drive off the lot
3. Your only purchase option is from a new car dealership

Buying a used car

PROS:

1. Usually costs less than new. If you pay cash, you get big savings on interest over time
2. Someone else has paid most of the major depreciation cost
3. New car dealerships sell "certified pre-owned" (CPO) vehicles. These late-model cars have low mileage, are thoroughly inspected and come with a factory-backed warranty
4. A late model used car requires less maintenance than an older used car, is usually still covered by a portion of the factory warranty and may also be eligible for special financing deals
5. Used cars can be purchased at a new car dealership, an independent used car dealer, or through a private seller

CONS:

1. You can't be sure how well the car was serviced and maintained by its owner. Therefore, any privately sold used car should undergo a pre-purchase inspection by a mechanic, which costs you extra
2. Warranties could be void, if the seller did not maintain the vehicle properly, or modified it

Other factors to consider

Cash or financing?

Thanks to outstanding financing rates (sometimes 0% interest) and dealer incentives on new cars, a new car can actually be more affordable than a used car over time. For example, a certified pre-owned car financed at 5% interest can have an identical monthly payment to a new car that is financed at 0.9%, even though the purchase price is less. In this situation, paying cash for the used vehicle makes the most financial sense.

What about car insurance costs?

Overall, you may spend less on auto insurance if you buy a used car, although there are instances where a specific used car model is more expensive to insure (such as a sports car or one that is more likely to be stolen). In some cases, your used car only needs collision coverage, whereas a new car needs a comprehensive plan.

Which is best: new or used?

It's a big decision. Be sure to factor in the price you are willing to pay, your lifestyle needs, and your tolerance for risk. Weigh the cost of buying a new car against the cost of maintenance and repairs for a used car. If reliability and the "new car smell" are most important to you, choose new. If you like to change cars frequently, can make some of your own repairs, and want to spend as little as possible, choose used. And remember, you might be able to experience the best of both worlds by purchasing a late-model used car with most of its warranty still intact.

For more on this topic, visit:

CBC: Buying a used car?

Globe and Mail: Is it still cheaper to buy a slightly used car?