When Should You Buy a New Car Instead of a Used Car?

When Should You Buy a New Car Instead of a Used Car?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated December 9, 2021

If you’re looking to buy a vehicle in Canada, one major question almost always comes up. Is it better to purchase a new car or a used car? After all, there are plenty of benefits and drawbacks to either option, both in the financial and the mechanical sense. So, as you can imagine, it’s an important question to consider before you make your choice.

Factors to Consider When Choosing Between a New and Used Car

Although it may be a simple choice for some drivers, there are many different factors to consider before you buy a new or used car, including but not limited to:

The Price

Of course, one of the first things you should think about is how much your new or used car will cost you, immediately and in its later years. For instance, while new cars usually have higher price tags, you typically won’t have to deal with as many maintenance issues and repairs as used models, at least not right away. 

Buying a new car, learn how to budget for your new car

Then again, a new car can severely drain your finances, especially if you make a down payment or have a long financing plan. Since most people cannot afford to buy a new car outright, a used one can be much easier to finance. Plus, if you find a cheaper model, the maintenance and repairs may not be too expensive. You can even shop around for private sellers to save on interest and dealership fees.   

Your Shopping Experience

That brings us to our next factor, what to consider when shopping for a new or used car. Searching for a new vehicle can take a lot of time and effort because you may have to visit several dealerships to find the right one. Not to mention, car financing can be difficult to get approved for if you have bad credit, low income, or debt problems.

On the other hand, buying a used car can be just as inconvenient because it’s harder to tell how it’s been driven by its previous owner(s). In this case, getting a professional inspection done and checking the vehicle’s history is very important, so you can make sure there have been no accidents or subpar maintenance/repairs done.

The Vehicle’s Features & Technology

Generally, newer cars come with better features and the latest in driver technology. With the inclusion of these commodities, the car will likely be safer and more reliable than a lot of used models too. Plus, a newer vehicle can mean that the manufacturer has had extra time to improve their models and iron out any factory defects. 

Thinking of getting a hybrid car? Find out if the hybrid and electric car tax rebates are worth it. 

Unfortunately, a used car may not be as safe or reliable, depending on its age, mileage and previous driver’s habits. Nonetheless, there are plenty of cases where older models far outweigh their newer counterparts because they were built with sturdier materials and higher quality craftsmanship, which some manufacturers don’t produce anymore. 

The Possibility of a Warranty

Another downside to used cars is that there are fewer guarantees. Even some older models from large dealerships will not come with a warranty if the car is beyond a specific age or mileage. However, when you shop for a new car, your dealer will probably offer you several types of warranties with different terms and conditions, that can cover or reduce the cost of all sorts of mechanical and electrical issues.

That said, a warranty can significantly increase the price of your car and may not be worth it, especially for vehicles with low or no mileage on them. For example, if your warranty only covers maintenance for a couple of years or up to a certain mileage. After all, most warranties don’t include wear and tear or incidents that were your fault.

Find out if you should buy an extended warranty for your car

The Costs of Buying a Car – New vs. Used

As mentioned, when it comes to new and used cars, one of the primary factors that every driver should think about is the overall cost. Not just the initial price tag but all the other expenses that come before and afterward too, such as:


  • New Cars – You might think a new car would retain its resale value better than a used one but it’s actually the opposite. In fact, experts say that vehicles lose 17% – 20% of their value as soon as they leave the dealership and every year a car is driven, it depreciates by another 10%. So, if you sell your car 3 years later, you’ll be lucky to get half of what it cost when you bought it, even in good condition.
  • Used Cars – Although a used car can also lose a lot of value over time, it typically won’t depreciate as fast as a new one. For example, if someone purchased a new $40,000 vehicle and it lost 50% of its value over 3 years, it would theoretically only be worth $20,000. However, if you bought it used at this price, you could probably sell for around $15,000 after another 3 years. 

Worried about owing more than what your car is worth? Check out how you can manage your negative equity

Financing Options

  • New Cars – Although you may not be able to buy a new car upfront, you can always apply for an auto loan, then pay it off in installments. While the interest and fees you’re charged during your term can significantly increase the size of your payments, many dealerships and manufacturers will offer you low rates or even 0% interest for several months if you finance a new model.  
  • Used Cars – If you’re worried about the costs, you can buy a used car with cash or a smaller loan. However, some used cars come with higher interest rates due to their lower values or shorter payment plans. Alternatively, you can find a private seller and won’t need to pay any interest or fees. Instead, you’ll have to account for other costs, such as an inspection and the transfer of ownership. 

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Insurance Rates

  • New Cars – While your premium can fluctuate based on a few things (age, driver’s history, etc.), the general rule is that the newer and more valuable your car is, the higher your insurance rate will be. If your car is new, you may also want to spring for collision and/or comprehensive coverage, either of which will increase the size of your final bill.
  • Used Cars – Luckily, you won’t have to pay as much to insure a used car, especially if it’s an older model. If you have a clean driver’s history, good credit and are over the age of 25, you may pay even less. In addition, collision and comprehensive coverage aren’t as essential once the car has been driven a lot and starts collecting dents, scratches and rust.

Need help finding the right car insurance for you? Check out this car insurance guide.

Repairs & Maintenance 

  • New Cars – Hopefully, a new car won’t need any maintenance or repairs for a long time, with the exception of basic procedures, like oil and tire changes. Then again, if you don’t buy from a reputable dealer/manufacturer or you’re involved in some kind of collision, getting your new car fixed and finding the right parts can be extremely pricey unless the damage is covered by your warranty.
  • Used Cars – Remember, it can be tough to tell what shape a used car is in, particularly under the surface. Some require a lot of maintenance, others have had undisclosed accidents or repairs done. Even worse, some cars are total lemons that break down all the time. If you are going to buy used, be sure to get the car’s full history beforehand and, if it’s from a dealer, ask about warranties.

Down Payments & Trade-Ins

  • New Cars – A solid down payment can reduce the amount of interest you’ll pay when financing a new car. However, the recommended down payment is 20%, which can set you back. Thankfully, some dealerships allow you to trade in your old car for a lower price on your new one. Watch out, because your used car must have some resale value and you probably won’t get what it’s actually worth.
  • Used Cars – If you are buying a used car from a dealership, you may still be able to make a down payment or trade-in. Of course, these aren’t usually options with private sellers but that may not be the worst thing if you don’t have enough money or another car. Unfortunately, if your current vehicle has no resale value left, you may have to get it fixed up by a mechanic or scrap it altogether. 

New Cars vs. Used Cars – Overview

PriceHigher initial priceLower initial price
Features Can choose any make, model, trim, colour, etc.Selection is limited to what you can find online, etc.  
DepreciationFaster loss in resale value Slower loss of resale value
FinancingUsually possible. Approval, rates and terms vary based on your income, credit, etc.Sometimes possible with dealerships. Easier restrictions may apply  
WarrantyMore types, longer terms, better coverage, etc.Less possible for older models with more mileage
InsuranceHigher rates/premiumsLower rates/premiums
Repairs & MaintenanceTypically not needed for a long time. Some issues are covered by your warrantyOften necessary and more immediate. May not be covered by any warranty

What to do Before You Purchase a New or Used Car

As you can see, there are plenty of factors to think about prior to buying any new or used vehicle. Don’t get discouraged. Once you get the hang of the process, finding the right car is straightforward enough. Here’s what you should do you make your decision:

  • Research & Get Quotes – A new or used car can be a big financial commitment. So, it’s not always wise to buy the first one you find. Be sure to research multiple car brands and offers online, check the classifieds and contact several dealerships to get price quotes and other relevant information. 
  • Check Car Reviews – Any company can make their vehicles look great with the right marketing but that doesn’t mean every car is reliable or affordable. When doing your research, checking reviews from auto experts and owners can tell you a lot about how long a car will last, how much it’s worth and how much it costs.
  • Book Test Drives – While you might enjoy the feel of a specific vehicle when you first drive it, it’s a good idea to try out several makes and models until you’re 100% satisfied. During each test drive, take the car through the suburbs and on the highway to confirm that it’s safe, good on gas, ergonomic and handles well.
  • Negotiate Prices – Though some dealerships and private sellers will not adjust their prices, it can’t hurt to try negotiating. Obviously, your options are more limited with a private seller but a dealer might at least throw in some incentives if you buy a new or slightly used car, such as extra features or a better warranty. 

Trying to Decide Between a New or Used Car?

In the end, buying a new or used car should depend mainly on your current and future financial situation. For instance, if you have a good income and credit score, a new car can be a great investment. Then again, a used car might be more affordable overall. Either way, it’s best to research and avoid making any quick decisions. 

Need help finding the right financing for a new or used car? Loans Canada can connect you with the best lender in your area.

Rating of 4/5 based on 1 vote.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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