Key Considerations When Buying A New Or Used Car

By:    Updated: March 28,2017

Purchasing a new or used car can be an exciting, worrisome and risky endeavor. It may bring additional freedom and enjoyment to your life, and it may bring troubles and unforeseen expenses. To ensure that your car buying experience is a good one, keep the following items in mind.

MSRP And Competitive Price

Before you ever speak with a car salesperson, you should scope out a couple of car lots and look for vehicles that may be of interest to you. You can then go on the Internet and do some research on the prices of the vehicles you are interested in.


Every major manufacturer has an Internet site with information on all of its models for the current year. Each vehicle has an MSRP or manufacturer's suggested retail price. However, dealers seldom offer vehicles for this price for several reasons. First, the competitive nature of the car sales industry gives them little room for profit if they sell at the MSRP. Second, the MSRP is for a basic model with the minimum in terms of features. Dealers often add features to cars on their lots because doing so adds profit. Third, there are almost always additional fees above and beyond the sticker price, such as a transportation fee that varies from area to area. However, knowing the MSRP gives you the ability to bargain and know just how good the deal you are getting is.


The MSRP does not apply to used vehicles. To research a used vehicle, look up its approximate value according to model, model year, features, mileage and physical condition. Kelly Blue Book is the industry standard for making such approximations. If a dealer wants to charge significantly more than the Blue Book price, go somewhere else.

Loss Of Value

Unlike real estate, vehicles almost always lose value over time, even if you maintain them well. Used cars continue to gradually lose value as time passes and as you add mileage, but new vehicles drop in value significantly as soon as you drive them off the car lot. This is one factor that causes many people to prefer used vehicles that are still relatively new over new vehicles.


Even though all new vehicles quickly lose value during the first few months of ownership, some lose value more quickly than others. If you intend on reselling the vehicle after only a few years, make sure that it is one that will keep its value relatively well. Otherwise, at some point, you may end up “upside-down” – owing more money on your auto loan than the vehicle is worth.


Even if one car is cheaper than another, the insurance that you must pay for it may not be cheaper. For instance, a sports car will usually have a higher insurance cost than a family sedan of the same price. This is because insurance companies assume that people who purchase sports cars have more of a tendency to engage in risky or dangerous driving. Before purchasing a car, call a few car insurance companies to get insurance quotes. Make sure to factor in insurance costs when making a decision on which car to buy.

Cost For Repairs

While buying a used car can often be a better deal than buying a new car, this is not always the case. A used car that comes at a very low price may have a long list of problems or it may develop problems quickly due to its age. For this reason, a “killer deal” that costs $1,000 may require $10,000 worth of repair and maintenance within the first year or two. Add to this the value of the time you must spend looking for parts, waiting at auto repair shops, etc.

Implied Warranty Of Merchantability

Many states have laws that enforce an implied warranty of merchantability. This is a warranty that is in force on all vehicles sold, new or used. It makes any problems that develop within a certain time period the responsibility of the dealer. However, if you agree to an alternative warranty or if you purchase the vehicle “as is”, that agreement supersedes the implied warranty of merchantability. Even if you purchase a vehicle with the understanding that the implied warranty will apply, make sure to get that in writing, as doing so limits the dealer's ability to deny responsibility later.

Extended Service Contract

An extended service contract is essentially a health insurance policy for cars. For a set monthly price, the contract issuer agrees to take financial responsibility for the car's repairs and maintenance. Auto dealers almost always offer extended service contracts to those who purchase vehicles from them, but these contracts are not necessarily the best deal. They are often more expensive than third-party contracts, and they may only be useful as long as you keep the vehicle within a certain geographic boundary. While it may be a good idea to have an extended service contract, do your research to make sure that you are getting a good deal.


Many manufacturers offer certification on used cars sold at their affiliated dealerships. These used cars may be more expensive than used cars elsewhere, but they have gone through rigorous inspection and repair to ensure that they are in the best possible shape. Such vehicles are often the best deals for car buyers, offering nearly the same quality as new cars for a lower price.

Vehicle History

For used cars, vehicle history is a very important part of the buying process. For instance, if a vehicle has been caught in a flood or if it frequently needs transmission replacements, this may not be evident during the buying process, but it could make purchasing the vehicle a bad idea. To see the maintenance and repair history for a particular vehicle, use its VIN to look it up on CarFax or some other vehicle history reporting service. (The VIN is a series of numbers and letters usually found on the dashboard, visible through the windshield on the driver's side.)

Consumer Reports

For new cars, there is no vehicle history to look at. However, you can find other people's experiences with the same model of vehicle by reading consumer reports. These reports give information regarding continuing performance and repair and maintenance costs. This information is key in deciding between two competitive models.


Keep this information in mind the next time you are in the market for a new or used vehicle. It can help you to avoid buying a lemon or paying more than you should for your new car.

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