It used to be that there was only a clear-cut choice between purchasing a vehicle that was new or used. There is now the third option of purchasing a certified pre-owned vehicle, which offers elements of both new and used car buying. You now have three potential choices when purchasing your next ride – new, certified pre-owned, or used.

New

Purchasing a new vehicle can be appealing for several reasons. Your new car may not require significant repairs for years; it will likely only need regular maintenance. Any repairs might be covered under the manufacturer’s warranty. You will also have access to the very latest technology. If you are savvy and watch for the dealer’s specials, you might find opportunities to secure a deal on very low interest-rate financing. This alone could help reduce monthly costs.

Unfortunately, purchasing a new vehicle tends to involve several hefty costs. You will pay a higher price for the new model than for a used one. You will also likely pay more for the sales tax on the vehicle, along with potentially higher insurance premiums and annual state registration fees.

Certified Pre-Owned

The newer kid on the block is purchasing a certified pre-owned car. It is a used vehicle that is only a few years old. When the dealer gets a lightly-used vehicle from a trade-in or end-of-lease, their mechanics inspect all the systems and parts on a very long list. Any part or system that fails is either replaced or repaired. A certified pre-owned (CPO) vehicle from most major manufacturers often comes with some type of warranty, such as a multi-year powertrain or possibly a bumper-to-bumper warranty.

In addition to a warranty, a CPO vehicle often comes with benefits like cheaper insurance payments, lower sales tax, and reduced annual state registration compared to a new model. Since the vehicle will only be a few years old, you will likely find it has many of the newer technology and safety features. Also, finance rates may be lower than those for a used but uncertified vehicle.

You will not be the first owner of your CPO vehicle, so there may be minor signs of use, like smells and dings. Certified pre-owned vehicles generally cost more than a used model.

Used

A used vehicle that is not certified pre-owned can be the affordable option for purchasing vehicles of the same model. You avoid much of the steep depreciation during the vehicle’s first few years of service, which means you could save significantly. You may also see reduced costs to insure the vehicle, lower annual registration fees, and less sales tax. With all the money you save, you might consider upgrading to a nicer car or the same model with better features.

One potential downside of a used vehicle purchase is the likelihood of paying more for repairs over time. You can purchase an extended warranty from a reputable provider to help manage unexpected repair costs. You may also find that you will pay a higher interest rate if you need to finance your used vehicle purchase.

Today, there are three main options for purchasing a vehicle: new, certified pre-owned, or used. Budget is a critical consideration for most. However, CPO warranties and extended warranties can make a used car purchase more appealing than in the past. Taking time to shop for the ideal financing rate may also help save money throughout the loan term.

Disclaimer: This content is for informational purposes only and is not intended as financial advice, nor does it replace professional financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.

Published by Zane L.