Most of us do not purchase vehicles every day. In fact, the average Canadian keeps their car for 6.4 years! So naturally, when the time does come for us to purchase our next vehicle, there are a lot of unknowns that cause us stress and discomfort. To simplify this process for you, we have been working on a series of articles to help guide you in your buying process – the questions you should ask, whether you should use your line of credit or not, etc.
In this particular article, we will address the question of whether purchasing a new or pre-owned vehicle would be the best option for you and your family. We have gathered some of the most important aspects of a vehicle purchase to a new buyer and we’ve compared each in the case of a new or a pre-owned vehicle.
You have probably heard the saying that a new car loses up to 20% of its value as soon as it finds its first owner! Unfortunately, this is the case indeed. As soon as you drive off your brand-new $30,000 vehicle off the dealer lot, it is now only worth $24,000! On the contrary, when you purchase a 2-3 year old $30,000 pre-owned vehicle, most of its depreciation has already happened and after a year it would be worth somewhere around $27,000 or $28,000 (based on the condition)! This higher re-sell value is a HUGE benefit to you as it saves you a significant amount of money down the road.
Let’s be honest! We all love having cool features in our vehicles. Listening to the satellite radio, using your back-up camera and navigation, having a heated steering wheel during the winter… it just contributes to this amazing driving experience, right? If you are one of us, and convenience features are really important to you, think about this!
It makes sense that a $20,000 pre-owned vehicle would come with a lot more features than a $20,000 brand-new vehicle, correct?! On a $20,000 budget for a brand-new vehicle, you would be lucky to get a back-up camera! On the other hand, for the same budget, you can find a very well-maintained vehicle that’s only 2-3 years old and has features such as navigation, back-up camera, pano roof, heated memory seats, leather interior, satellite radio, etc. Which one makes more sense to you?
Many people are surprised to learn that new vehicles have higher insurance rates. But of course they do – they cost more, so insuring them requires more resources, right! On the other hand, insuring a fully loaded pre-owned vehicle which has had most of its depreciation already take place, will cost you significantly less. Make sure you check your rates with your insurance broker before making a purchase – it will save you tons of money!
What lures many people into buying a brand-new vehicle is the factory warranty. This coverage is usually pretty extensive and it’s great. The only problem is that it is made to last for a certain number of miles or years (whichever comes first). These factory warranties are designed extremely well and they usually end shortly before any major maintenance needs to occur. So you are basically paying a lot of money but cannot optimize the coverage you get.
Compare that with getting an extended warranty on a pre-owned vehicle. Most pre-owned vehicles’ factory warranty has already expired and a lot of buyers consider the extended warranty as an additional coverage option. In general, extended warranties are a lot cheaper and more comprehensive. Based on the package, you can get bumper to bumper coverage for up to 220,000km for an unlimited number of years! And you can actually utilize this coverage when maintenance costs are much higher!
We hope this information helps you make an informed decision during your next vehicle purchase. If you’d like to consult with one of our Business Managers, give us a call at (613) 260-0373 and book your appointment at a convenient time for you!