Buying a New Car vs a Used Car: What's The Best Decision?
Buying a New Car vs a Used Car: What's The Best Decision?
Posted on June 7, 2024
When considering buying a new GMC or Chevrolet over a used car, you'll have the wonderful choice between the fresh-off-the-showroom-floor experience with the practical, budget-friendly advantages of a pre-owned vehicle.
On the other hand, used cars of all makes offer benefits in upfront costs, potential savings, and value retention, alongside how the car fits into your lifestyle. It's always worth a look at both sides, helping you make an informed choice for your next trip to Okotoks GM!
Key Points To Help You Decide Between New or Used Cars
- Total Cost Of Car Ownership = Purchase Price + Insurance costs + Maintenance costs + Fuel + Depreciation + Interest costs (on car loans), & more.
- New vehicles lose around 20% in the first year alone, and by as much as 60% over five years as a general rule, but it's not always the case, as some models are less prone to depreciation.
- Used auto depreciation was inverted at -18% in Canada in the early 2020s as a result of supply chain issues as well as domestic and foreign demand, according to Canadian Black Book.
- Okotoks GM is always ready to appraise your used vehicle and buy it for a fair price!
- Lifestyle needs and preferences play a significant role in the car buying decision, with considerations for daily commutes, family size, towing capacity, and more.
Deciding Between New Cars and Used Cars
When our customers come through our doors in Okotoks, they don't always have their minds made up. And some, understandably, are torn between what they see in the new car showroom and our used car lot; some vehicles in the used lot even look like they should be in the new showroom!
When it comes to choosing between a new car and a used car once you get there, you might find the need for balancing your budget with your lifestyle—weighing immediate satisfaction against long-term planning.
The latest models promise cutting-edge technology and modern features. But is the latest and greatest in features enough to sway your decision? Let’s look into the details and explore the factors that should guide your choice.
Assessing Your Budget
First and foremost, consider your budget—the bottom-line in your car-buying journey. New cars often come with a higher price tag, reflecting their pristine condition and the latest advancements.
If your budget allows, you’ll enjoy the peace of mind that accompanies a full warranty, fewer maintenance surprises, and the thrill of being the first owner. However, if you’re budget-conscious, a used car might be the wiser choice.
Well-maintained used cars offer excellent value for money, even if they require more frequent maintenance. Let's also look at how to get that bottom line going, known as total cost of ownership.
Total Cost of Ownership
When calculating the total cost of ownership, consider the following key factors:
- Purchase Price: The initial cost of buying the vehicle.
- Depreciation: The loss in value of the car over time.
- Insurance: The cost of insuring the vehicle, which can vary based on the car's age, make, model, and your driving history.
- Maintenance and Repairs: Regular maintenance costs and unexpected repair expenses.
- Fuel: The cost of fuel, which depends on the car’s fuel efficiency and your driving habits.
- Financing: Interest rates and loan terms if you’re financing the purchase.
- Registration and Taxes: Fees for vehicle registration and applicable taxes.
- Opportunity Cost: The potential financial gain you forgo by investing in a car instead of other investments.
By considering all these factors as a plus/minus operation, you can get a comprehensive understanding of the total cost of owning a new or used vehicle.
Lifestyle Considerations
Camping is one thing our Okotoks customers do a lot. Whether you're in the mountains or on a long camping trip, your new or used vehicle should be suited to your lifestyle and what you do.
Now let’s discuss lifestyle. Are you an early adopter who craves the latest gadgets and features? Or do you lean toward practicality, prioritizing reliability and functionality?
New cars cater to the tech-savvy crowd, supplying cutting-edge infotainment systems, safety enhancements, and fuel efficiency—sometimes through a turbocharged engine and better transmission. J.D. Power and Canadian Black Book provide a great look at them.
On the other hand, used cars have their own advantages. They’ve weathered a few miles, but they’ve also proven their durability.
You might be a seasoned Albertan driver who values a comfortable ride, a spacious interior, and a reliable engine—known for its long-term success on car forums and social media sites. In that case, a well-maintained used car might be your ideal match.
Future-Proofing Your Purchase
Look ahead—how long do you plan to keep your car? New cars offer the latest safety features, advanced driver-assistance systems, and connectivity options. If you’re thinking long-term, investing in a new car ensures you’ll benefit from these innovations for years to come. Plus, the resale value of a new car tends to hold up better as technology tastes of the late majority catch up.
However, if you prefer changing cars frequently or want to minimize depreciation, a used car could be the savvy choice. Their gentle depreciation curve means you won’t lose as much value over time (because its already lost value). You can think of it as future-proofing your investment—whether you’re eyeing a sleek sedan like the new Chevrolet Malibu or a rugged SUV like the GMC Yukon.
The Financial Side of New Car Ownership
When you’re deciding between a new car and a used car, there are financial implications to buying new. The pull of a brand-new car is undeniable—the smell, the pristine condition, and the status it brings. But as the odometer ticks, costs might not be immediately clear. Let’s break it down.
Understanding New Car Depreciation
Double Declining Depreciation is something accoutants are familiar with, but it affects everyone in the used auto market. A new vehicle undergoes this, but good brands like Chevrolet or GMC are resistant to it at least.
Think of car depreciation as the vehicle's gradual loss of value over time. When you drive a new car off the lot, it takes an immediate loss in value. That’s why buying used can be a wise decision; the steepest depreciation has already occurred. Keep this in mind when assessing long-term costs.
When you choose a new car, it's normal to lose 20% in the first year alone, and by as much as 60% over five years. Though we also have to mention that it often depends on the model and the type of vehicle, as some depreciate slower than others. A new car transforms into newer used, as soon as you leave our Okotoks dealership. But newer used vehicles are not to be underestimated!
Changing Depreciation Rates
Depreciation rates can also change. A Canadian Black Book and Fitch Ratings report in recent years cited reasons the depreciation rates inverted (meaning used cars actually appreciated in value. Exports to USA, limited availability of new vehicles due to supply chain issues, and increased demand for used vehicles were all reasons why the general rule of depreciation stopped working.
Insurance and Registration Costs
Insurance premiums typically vary based on the car’s age, make, and model. But there are some bonuses you might not have heard about! Gap insurance is a way to get insurance costs to cover depreciation costs. If you can get a policy that allows you to collect on a diminished value clause, you're in a much better position.
As for new vs used, new cars may come with higher insurance rates due to their higher replacement value. On the other hand, used cars may have lower premiums, but it depends on factors like repair costs and award-winning, cutting edge, and effective safety features—like GMC Pro Safety Plus. Older used models won't have this package!
Exploring Auto Loan Options
If you’re not paying cash upfront, auto loans come into play. New cars may qualify for lower interest rates from our lenders, but they also come with higher loan amounts. Conversely used cars can be more budget-friendly, but interest rates might be slightly higher.
It all depends on what our trusted lending partners can do for us in the moment. Still, auto loans can ease your budget when it comes time to own a new car. Auto loans from our auto finance department are the first step in your new car buying journey!
Advantages of Opting for a Used Vehicles
Our inventory is full of great GM vehicles that haven't lost all value just because they're used. Take the Tahoe for example. An early 20s model like this one can provide value to a new owner easily.
When it comes to deciding between a new car and a used car, you might favour financial practicality over the latest in GM safety and infotainment technology. To that group, a used car isn’t just about affordability; it’s a smart move that can save you money in the long run. Thanks to our customers who want newer used vehicles, new vehicles, or some cash on hand you can always sell us your used car!
Slower Depreciation Curve
Cars undergo a double declining method of depreciation as a rule. Even when we account for the variation, and changing trends in depreciation like we saw 2021 onwards, it's the most appropriate method for valuing a used automobile. Key to this method is a slope down, sharply dropping and then levelling out.
A key feature of double declining depreciation is the way it frontloads most of the depreciation! This doesn't mean it's value is gone; it just means the vehicle's depreciation rate slows down after a few years. And to be fair, cars in their first year are covered by all warranties and will be for years to come; the drop in value shouldn't convince you that it's low quality, however.
Lower Insurance Premiums
Used cars often cost less on insurance, meaning your total cost of ownership reflects a drop in insurance costs. Insurers know they’re budget-friendly on the insurers end when it comes to repairs or replacements.
The Value of Used Car Vintages
Some years of our vehicles get better recognition from authorities on reliability. For example, the Chevrolet Trax is a good car all around, but consumers and J.D. Power reviewed the 2020 model particularly favourably. Should you buy the Trax new or used? It depends on how you feel about insurance premiums, lower purchase price, and a gentler depreciation curve once you take ownership!
The Benefits of a Brand New Car
When it comes to the emotional appeal of a brand-new car, it’s more than just the gleaming paint and untouched interior. It’s about the promise of an asset that’s always been yours, granting you control over its destiny. Let’s explore why choosing a brand-new car has its own set of perks.
Cutting-Edge Features
Finding out how far along the tech features in your vehicles have come is all part of the process of showing our customers new GM vehicles. The cutting edge is one reason to keep on buying new!
An impressive view of a dashboard with cutting-edge features can pretty much do it for some of our customers. But there’s more to features than meets the eye!
From advanced infotainment systems to safety enhancements, a new GMC, Chevrolet, or Buick is brimming with technology that adds value, no matter its cost.
Plus, you’re the first to experience the reliability experience it all amounts to. These features retain their value, and beckon newer used customers years from now. As reliability authorities and car value authorities assess your new car’s initial splash on the market, you might find yourself contributing your story of reliability on forums and social media site.
The Value of Cutting-Edge Features: GMC Pro Safety and Pro Safety Plus
When it comes to new cars, one of the most compelling reasons to invest is the advanced safety features they offer. GMC Pro Safety and Pro Safety Plus are prime examples of cutting-edge technology that enhance driver and passenger safety. These systems include features like:
- Automatic Emergency Braking: This system helps prevent collisions by automatically applying the brakes if it detects an imminent crash.
- Lane-Keeping Assist: Helps drivers stay within their lane by providing gentle steering corrections if unintentional lane departure is detected.
- Forward Collision Alert: Warns drivers of potential front-end collisions, giving them time to react and avoid accidents.
- Additional Safety Features: Includes various other technologies that provide an extra layer of security on the road.
Not only do these features contribute to a safer driving experience, but they also add significant value to your vehicle. New cars equipped with GMC Pro Safety and Pro Safety Plus often have higher resale values, as these advanced safety systems are highly sought after by future buyers.
Investing in a new car with these features ensures you're getting the latest in automotive safety technology, making your driving experience not only more enjoyable but also more secure.
The Power of Model Updates Each Year
Key to the evolution of new models is building on what worked best in prior years, and from the Acadia to the Equinox, you get to experience tremendous iterative improvement over time—especially when you stick to a model you know with a newer release date.
Case Study: The GMC Acadia
The GMC Acadia is an outlier in GM's ever evolving lineup of new vehicles. Come down to our showroom to see how the latest safety features bring the whole package together. It's great to buy a new Acadia.
The GMC Acadia is very reliable and has seen significant improvements in recent years, making it a standout option in both the new and used car markets.
With it being on the forefront of GMC's push to compete in the SUV arena, it sports enhanced safety features such as lane-keeping assist and automatic emergency braking, upgraded infotainment systems with seamless smartphone integration, and maximized performance through improved engine options and better fuel efficiency. It builds on what worked in the past and
As one of the first models with Pro Safety and Pro Safety Plus packages it's a great example of keeping up with the expectations of the SUV market.
While a used Acadia offers many of these benefits at a lower price, the latest models provide the most advanced technology and performance, making a new Acadia a worthwhile investment for those seeking the best in automotive innovation.
Case Study: The Chevy Equinox
The Chevy Equinox also earned a reputation for reliability and versatility, making it a compelling choice in both the new and used car markets. Similarly, recent models in particular have seen significant upgrades in safety features, as well as enhanced infotainment systems with intuitive smartphone integration.
Improved engine options and better fuel efficiency further add to its appeal, ensuring a balanced performance for a variety of driving needs. While a used Equinox offers many of these benefits at a more affordable price point, the latest models provide cutting-edge technology and superior performance.
The Joy of Customization
Want leather seats, a sunroof, a paint colour to your taste, buying new puts you in the designer’s seat. When you buy new, you get to tailor your ride to your heart’s content.
We stock a variety of new vehicles in every model so you get your dream car, based on our responsive inventory management. And let’s not forget that new car smell—it’s a symbol of this creative process.
Confidence in Condition
Your new GMC has tech and mechanical components built to last. If you're the sole owner in its history you can maximize control over its condition and preserve it, despite your Acadia's numerous fishing trips in BC.
With a new car, you’re starting with a clean slate. No hidden surprises, no mysterious past. It’s all about reliability. Plus, most new cars come with a manufacturer’s warranty (hello, GM warranty!), covering you for a set period. Our customers who buy new often look visibly relieved when they hear how much peace of mind comes with a new GM under warranty.
Let's not forget. Today's new car is tomorrow's newer used car, and the used car of the day after that. Key to making a car you can sell for a lot more money than you'd hoped is the car's condition. You're in control of the confidence that the next owner has in the car through diligent servicing.
Navigating Used Car Purchases
Buying a used car isn’t just about finding a set of wheels—it’s a journey of diligence and discovery. It’s always a great experience to go through the used vehicle inventory we have, evaluating each option carefully to uncover that ideal choice among the available vehicles. We want the best for our buying customers, so we want the best from our selling customers too!
When we buy your used car, we focus on getting accuracy out of our appraisal. Our used auto value calculator on our website is based on black book values. When you use this calculator you can get a sense of what our sales advisors will be able to offer on a trade-in or straight up sale!
Investigating the Car's History
For a more detailed history, used car buyers can always ask about paid services like Carfax. They reveal ownership, accident records, and other crucial info.
Moreover, a thorough mechanical inspection is part of our used car buying process. It’s like a second opinion—a thorough check beyond what the history reports provide. Not that you have to worry much about our vehicles, but used cars do demand a look at vehicle history.
Financing a Pre-Owned Vehicle
This GMC family of newer used vehicles is available in Okotoks to customers working with various types of budgets. Because they've retained so much value, they cost more than used cars of old, so you might consider used car loans as a part of the purchase—just as you would when buying new
Our finance department makes this part easy. While knowing your credit score matters, it’s also something we can work with —even in bad credit scenarios. This part affects the interest rate you’ll get on your used vehicle. Prior to buying you’ll want to keep it in good shape by paying bills on time and keeping credit card balances low.
Because used cars are valued a lot more in recent years, we are always glad to get one! But this new supply and demand curve for both new and used cars has made the traditional 20/4/10 rule. Financing a used car can make just as much sense as financing a new car nowadays.
Negotiating the Best Deal
If you've never bought a used vehicle from our sales advisors at Okotoks GM, you know it's not something you have to worry about. Our sales advisors have training that makes them courteous, knowledgeable, and above all helpful!
Our professional and courteous staff can answer the common questions customers have about our used autos. What your neighbours here in Okotoks sell us, is what you will buy—and we have a vested interest in keeping everyone happy.
Before You Sell Your Used Vehicle
Ask a repair tech to get your used vehicle for sale in tip top shape. That way when it comes time to buy a new or newer used vehicle, you'll get maximum value on trade-in! It helps to keep on top of this well before you start selling us your vehicle.
Visit Okotoks GM for Help Deciding Between New or Used Cars
GM brand vehicles, from Chevrolet to GMC are investments you can rely on. They're sporty, rugged, and come with comfort and safety features that make buyers think twice about passing up on them, whether new, newer used, or used.
After covering car buying, from the sparkling allure of new vehicles to the value-laden paths of used cars. Whether seduced by the latest features and warranty comfort of a new car or swayed by the slower depreciation and insurance savings of a pre-owned vehicle, the journey is deeply personal and subject to your very own financial philosophy.
Will you save up and buy a new or used car outright? Or will you factor financing into a balanced total cost of ownership calculation. Ready to find your perfect ride? Visit Okotoks GM today and take a new or used model for a test drive! We can answer any burning questions you have and hear about how the experience in both types of owned cars went for you.
Frequently Asked Questions
How much more expensive is car insurance for a new vehicle compared to a used one?
Car insurance for a new vehicle can be significantly more expensive compared to a used one, as the higher value and repair costs pose a greater risk for insurance companies. On the other hand, used cars generally have lower insurance rates due to their lower value and age; insurance companies can buy a replacement vehicle for less if it's an older model without a new car ticket price.
Don't forget though, that in Alberta, insurance companies can ask for an additional vehicle passing inspection if the vehicle is older than 12 years.
What Are the Disadvantages of Buying A Used Car?
The disadvantages of buying a used car include potential for partially known history, higher maintenance needs after 5 years and repair costs of around CA$900 per year for makes like Chevrolet or GMC.
When you buy older than a certain age, you might get a warranty that's almost up, no warranty at all, outdated technology that makes the car harder to flip, and the risk of inheriting previous owners' problems. But at our dealership we ensure there's still peace of mind in this process.
Additionally, used cars may have higher interest rates on loans and less customization options compared to new cars; we can only sell the trims we have available, without the supply chain advantages of new models.
How much value does a new car lose when it's driven off the lot?
A new car can lose around 10% of its value as soon as it's driven off the lot, and then another 10% to 20% within the first year. The best used vehicles tend to retain 50-60%+ of their purchase price. Retained value is something you'll want to compare against the total cost of ownership of your GMC or Chevrolet vehicle.
What should I look for in a vehicle history report when buying a used car?
Look for past ownership, accidents, service records, and any major incidents like floods or accidents that could impact the car's value and safety in the vehicle history report. This will give you a clear picture of the car's background. Look also for status. You'll want an active status, and you should be careful of rebuilt status, since it means the repair took almost as much money as buying a newer used model of the same make and year would.