If you're in the market for a vehicle, it pays to know the pros and cons of buying new. When you buy new, you are responsible for the full cost of the vehicle and whatever happens after you buy it, including depreciation. Drivers have the option to pay off the entire vehicle at signing time, but most people choose to finance their purchase.
Some dealerships offer zero percent financing for five years, while others will offer an annual percentage rate on the term, which can vary in length. Be sure to ask for the lowest possible rate.
Benefits of buying a new car include:
• A full factory warranty. Buyers also have the option of adding an extended warranty.
• An abundance of available options, including color, accessories and technology, whether you're considering a Ferrari or Ford Fusion.
• The latest safety features and fuel-efficiency standards.
• Incentives, including favorable interest rates and possible rebates or dealer cash-back offers.
• The satisfaction of being the vehicle's first driver and knowing everything that has been done to it. At least early on, you should expect fewer mechanical or repair issues.
Despite all the advantages, there are reasons to consider buying used or leasing. For one thing, that new-car smell will fade long before your payments are over. Other caveats to buying new:
• Depreciation is one of the biggest negatives. Auto dealers say a new car can lose as much as 10 to 20 percent of its value as soon as it's driven off the lot.
• Because of depreciation, even a 1-year-old used car will cost thousands of dollars less than a brand-new car.
• Leasing allows drivers the option of always having newer, more updated, vehicles.
If you're set on buying new, be prepared before you walk into the dealership. Our researchers offer these tips:
• Bring a friend or family member to keep you focused and less likely to become emotionally attached to a particular vehicle.
• Know how much you can afford, as well as the trade-in value of your current vehicle. Check Kelley Blue Book at kbb.com to get an estimate.
• Research models and pricing and consider what options you really need.
• Most important, remember that you're in control. Don't let anyone pressure you, and be prepared to walk away.