(This is the 2^nd post of the 8-part series An investing-friendly car buying guide.)

We have seen in the last post how depreciation eats away at the asset value of a car. Still, there are surely other benefits of owning a new car? Let us start with the obvious one.

1. New car lives longer than a used car. Ask yourself: How long am I going to use the same car? Most people do not drive theirs for more than 5 years, and many in fact change cars after every 2-3 years. There are several reasons for this: change in family circumstance or job requirement, or simply the urge to own the latest “People’s choice of the year”. Technology has made modern cars quite durable, and a 3-5 year old car that is well maintained can easily run for 5 or more years relatively trouble-free.
2. New car gives less trouble over long term. As I just said, a well-maintained and low-mileage used car, with regular care, can run several years just as trouble-free as the new one, and costs several thousand dollars less to own.
3. New car comes with few years of factory warranty. Most new cars have at least 3 years of comprehensive factory warranty, and additional years of “powertrain” warranty (which covers the engine and some other parts that rarely give any trouble over the warranty period). But, thanks to companies like Warranty Direct, you can get an extended warranty for your used car that costs only $1000 or thereabout, and is just as comprehensive. Also, a car that is less than 3-year old often carries the remaining part of its factory warranty that you can still use (more on warranty issues later in this series).

Still, if you know that you are not going to change your car in the next 10 years or more, buying a new car probably makes better sense. But, it is hard to predict what can happen over the next decade; as I said above, your job or family circumstance may change that may make you get a bigger or more fuel-efficient car. In such cases, keeping a 3- to 5-year time horizon in mind while shopping for a car is a good idea, and a used car is a better choice.

On to Picking a budget »

See related posts:

1. A note on extended warranty
2. A new car every 15 yrs, or a used car every 5 yrs?
3. Making a list
4. Picking a budget