Turn on the TV or radio these days and any financial advisor will tell you that buying a new car over a used car is one of the worst financial decisions young people can make today. Does buying a new car versus buying a used car always have to be financial suicide? There are obvious reasons why buying a new car is troublesome:

  • · Depreciation: according to Edmunds.com, a $20,000 new car depreciates 12.2% of its value in the first year
  • · Typically have to carry more expensive insurance

It is my argument that purchasing a new vehicle over a used one is not just a simple numbers game. I think it’s important to assess the risk of such a purchase as well. Also, there are many other possible costs associated with used vehicles. These TV and radio financial advisors will tell you to go out and buy a $2000 car and pay cash for it. What kind of car is the average person going to get for $2000? A car that probably:

  • · Isn’t feasible to take on extended trips (renting a car for trips = more expenses)
  • · Will require minor to major maintenance
  • · Be less fuel efficient (possibly due to improper maintenance, but this isn’t always the case)
  • · Be less reliable than a new car
  • · Embarrass your kids (joking here; probably true, but who cares what anyone thinks)

As you can see, there are many unknowns when purchasing a used vehicle and if you’re not a mechanic, you may be in for more than you bargained for. Would I personally want to invest in a $3000 transmission on a $2000 car? No and obviously anyone would tell you to go buy another $2000 car. Well at what point does this become absurd and cost more than making payments on a new, reliable, and under warranty new car? Believe it or not, I’m not a car salesman and I’ve never been one. I have purchased used and new vehicles and I’ve been burnt on both, but at least the new cars were under warranty.

I’m not defending one position over another; I just think it’s important to point out that for the average person buying a used car, it may not always lead to a smart financial decision. If by having an unreliable used car, a person is consistently late for work and loses her job, then a used car purchase can lead to a poor financial decision. I think it’s important to thoroughly research ones needs and make a decision based upon many other factors in addition to just the cost, as the cost is typically the only message I hear from financial advisors these days.