Updated September 22, 2021
One of the oldest pieces of wisdom that people have passed around about buying a car is that it’s always better to buy a used car. In fact, nearly 70% of Americans say they would consider buying a used car, according to Cision. Is this age-old wisdom always true when it comes to used vs. new cars? What about in a strange year like 2021?
Today, we’re going to take a look at several factors that influence the new vs. used car buying decision, including factors that are unique to 2021.
When we compare used vs. new car values, we’re comparing equivalent vehicles that vary primarily based on model year. We all know that a 10 year old car will cost less than a brand-new car, so we need to compare equivalents (the same make, model, and trim) to honestly address the question, “Should I buy a new or used car?”
What’s Unique in 2021?
We all know that 2020 and 2021 have presented the world with unique problems. One of these problems is a semiconductor shortage. Semiconductors, also referred to as integrated circuits, ICs, and “chips,” are used in nearly every electronic device, which means there is a generally constant (and increasing) demand for them.
When the pandemic hit in 2020, semiconductor manufacturers had to shut down and then re-open with new safety restrictions. Doing so hurt productivity, along with the productivity of the entire supply chain.
Since it takes so much time to produce a semiconductor, it has been a slow struggle to catch up to the demand that multiple industries are placing on chipmakers.
The second issue is related to other inputs that are required to manufacture vehicles.
Earlier in 2021 there was a severe winter storm that hit Texas and knocked their power grid offline. This storm resulted in oil refineries halting production, including the production of byproducts. One of these byproducts is used in foam seats in cars. Because of this, many automakers were struggling to secure foam so that they can continue to produce new cars.
There was also a rubber shortage that effected automakers.
More recently, we’ve seen automaker struggle securing other raw materials, such as resins and steel.
All of these factors have made 2021 a unique year in which to purchase a car. Keep these factors in mind as we proceed to examine which is better value; new or used cars.
Used vs. New Car: Comparing Current Value
Let’s begin with the most important attribute: Value. What is the current value of the car that you’d like to buy? You must understand the current value to decide whether to buy new or used.
We recommend using our Market Price Report to help determine the value of the car that you’re after. Our report will compare actual sales prices from various dealerships in your area to determine what a fair price might be for the car.
Run a Market Price Report for the target car that you have in mind. The price that we suggest as a fair price isn’t the entire story. To understand the full price that you can expect to pay, you’ll need to click through to the website of the dealership selling the car. Read through their listing and look for any manufacturer or dealership incentives.
You may discover that there is a $3,500 rebate on your car or some sort of dealer incentive for financing that will impact the purchase price. There may even be credits or rebates that apply to certain people, such as first responders and members of the military.
Deduct the dealer incentives from the price that we’re telling you is fair and you’ll have a great idea about the current value of the car.
You’re not done yet! To truly compare apples to apples for a used vs. new car, run another Market Price Report for a used car variant of the same make and model. For example, if your new car was a 2021 Honda Accord, you might run a new report for a 2019 Honda Accord.
Do the same thing and click through to the dealership website. Notice how there are no added discounts, incentives, or credits? Used cars generally do not have any added discounts.
Now, you have an excellent idea about the true value of both new and used cars for the make and model you’re interested in. Even though you can now answer the question about which one is a better value, there’s much more to consider before you make your purchase.
Used vs. New Car: The Negotiability Factor
The price that someone is asking for a car is hardly ever going to be the actual price that someone else pays, something that’s true for both new and used cars. As such, to truly answer the question at hand, you need to consider how much you can negotiate with the seller.
When you run a Market Price Report, you’ll see a negotiability score towards the top. This score is calculated based on how long the car has been on the lot as compared to the average in the region. If a car has been on the lot for 70 days and the average in the area is 20 days, you’ll likely have some great luck negotiating for that car.
As such, when you’re comparing new vs. used car values, you need to keep in mind how much you can potentially negotiate off of the vehicle. There’s always plenty of room to negotiate with a new car, but the attitude with used cars is often “the price is the price.” Keep this in mind as you determine whether to buy a new or used car.
Negotiating doesn’t just happen when you’re haggling down the MSRP, it also happens when you’re seeking financing. Speaking in generalities, you’ll receive better financing offers when you’re buying a new car, along with having more room to negotiate on those offers. Used cars are usually a bit more cut and dry.
Used vs. New Car: Comparing Warranties & Condition
What difference does a warranty make in the used vs. new car battle? Your new car is going to come with some type of warranty to protect you from manufacturer’s defects. It may even have another warranty for powertrain components. Additionally, the car will be in factory-perfect condition, so you won’t need to worry about a pre-purchase inspection.
On the other hand, a used car is going to have whatever may be left on the warranty from when the car was initially bought. In many situations, that means there will be no warranty or that you only have a year or two left. Plus, you’ll absolutely need a pre-purchased inspection to make sure that you have a solid understanding of its condition.
Should you buy new or used? How important is the warranty to you? If it’s vital, then new cars are the way to go.
New or Used Car: Which Way Should You Go?
You should do the leg work to determine whether a new or used car is better in your exact situation. Our tools will do most of the hard work for you, but you still need to use them to determine whether a new car is better than a used car for the make and model you’re investigating.
When it comes to 2021, our conclusion is that buying a new car is generally the way to go, due to the material shortages that are impacting the industry. These shortages have raised the prices for used cars, which are more in demand, although this may change as the year goes on. While you may not have as much room to negotiate with a new car, you’ll still find more value with a new car than with a used car that has a temporarily inflated price.
Anyone looking to buy a car, whether it’s used or new, will benefit from using our Market Price Report. You can run three searches for free, which allows you to compare cars and make your ultimate decision. Head on over to the Market Price Report and run one today!