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Picking a Car: Should I Buy a New or Used Car

Car shopping can be confusing, to say the least. Should you buy a new car, a used car, or does a lease make the most sense for your situation? We'll look at the pros and cons of each option to help you make an informed decision.

No matter what you end up buying, you'll need insurance—it's mandatory in most states and a smart idea, period. At Allstate, we have 15 auto insurance discounts to help you save.

Couple purchasing a vehicle

New Cars
The Benefits of Buying a New Car

In addition to that new car smell, buying a new vehicle lets you choose exactly the car you want. You're also getting the latest automotive and technological advancements. That's great when you're just talking about something optional, like an in-dash GPS unit with the latest bells and whistles. But it's even more important when it comes to safety features, like airbags or electronic stability systems.

And while new cars can be more expensive, the Internet has made it easier than ever to track manufacturer and dealer incentives like rebates and low-interest financing.

New cars are less likely to need mechanic visits, which may offer additional peace of mind, especially since many car companies cover repair costs as part of the new car's warranty. Find out more about auto warranty features and limitations in our What's In a New Car Warranty article.

Check out our Bumper-to-Bumper Basics® tool for information about factors in your lifestyle that can influence your auto insurance decision.

And for tips on squeezing every last mile from your gas tank, read our tips for increasing your gas mileage.

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The Downside of Buying a New Car

Unfortunately, there may be a downside to buying a new car, and it hits you right in the pocketbook. New cars can simply cost more than used cars—often, much more. The cliché we've all heard is true: a new car loses several thousand dollars in value the second you drive it off the lot.

Insurance is also a factor. Because a new car can be worth more, insurance is likely to be more expensive.

Used Cars
The Benefits of Buying a Used Car

The main benefit of buying a used car can be summarized in three words: it's less expensive. You may simply get more car (i.e., options like sunroofs, built-in navigation systems) for your money. You can also get recent technology if you purchase an almost-new car.

Rental agencies may be a good place to look when you're buying a used car. Yes, the cars likely have a few miles on them. But they've also likely been immaculately maintained, and most companies sell them after a year or two. This means the rental company has already absorbed the largest portion of the depreciation.

The Downside of Buying a Used Car

Everyone's probably familiar with the stereotype of the dishonest used car salesman. It's not always accurate, of course, but it's wise to remember these words: buyer beware. If you can, have an independent mechanic inspect the used car you're eyeing. Many websites also offer the opportunity to run a title search, which provide a more detailed look at a car's history.

One potentially important issue to look for is flood damage. A car that has been in an accident may show cosmetic damage, but it's more difficult to find the evidence that a flood-damaged car was waterlogged. A few quick tips will solve the mystery:

  • Inspect the interior and engine compartment for signs of water or mud,
  • Peel back the carpet and look for rust or mold,
  • Take everything out of the trunk, including the spare tire, and look for water marks, rust, or dried mud.

Leased Cars
The Benefits of Leasing a Car

A third option for potential buyers is leasing. When you lease a car, you essentially pay for a portion of the vehicle's cost. So if you lease a car for two or three years, you pay a monthly rate based on the car's depreciation. At the end of the lease period, you either return the car or "pay off" the car and make it yours.

So the benefits of leasing are fairly straightforward: You can always drive a fairly new car. And since the car is newer and is under warranty, repair costs will be minimal. In fact, many manufacturers include routine maintenance as part of the lease agreement.

Also, you can often lease a car with little to no money down, which could free up your money for savings, investing, or other goods. And because you only pay for the portion of the vehicle that you actually use, your payments are often lower than if you bought the car.

The Downside of Leasing a Car

Some say leasing simply makes your life more complicated. A leased car typically comes with mileage limitations, usually under 15,000 a year. If you exceed those numbers, you'll be assessed a penalty that could reach as much as 25 cents per mile.

Leasing also isn't for drivers who tend to be hard on their cars. Leased vehicles must be returned in excellent shape or else the drivers are assessed "excessive wear and tear" fees.

Because the terms of leases are binding, leasing works best for drivers with secure financial futures. Terminating a lease is difficult and expensive, so once you sign on the dotted line, you're basically in for the lease's full duration.

Whatever You Drive, Make Sure You Protect It

Drivers who switch to Allstate save money on car insurance-safe drivers can save up to 45% or more-and they also get more protection.

Get a no-obligation quote, talk to your agent or call us at 1-800-ALLSTATE (255-7828) to see how we can help you save on car insurance.

And if you're looking to save money, our tips to increase your mileage article provides great ways to keep costs low at the fuel pump. Protect yourself and your belongings.*

Published: August 2011

The availability, qualifications and amounts of these discounts may vary from state to state. In addition, terms, conditions and exclusions not described above may apply, and total savings may vary depending on the coverages purchased. In some states, we may offer discounts that are not listed here. For more information regarding your eligibility for these savings opportunities, please contact your Allstate agent.

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