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Servicemembers, arm yourself with basic car buying skills—Should you buy a new or used car?

Last week, we discussed the importance of shopping for financing, and understanding key components like your annual percentage rate and the length of your financing. Another important decision to make before buying a car is whether to buy a new or used vehicle. The average price of a new car is more than $35,000 whereas the average price of a used car is around $19,000. It’s always nice to have a new car with all the latest bells and whistles, but it’s also important to consider the possible savings benefit from buying a used car.

Should I buy a new or used car?

One of the first choices you will make is whether to buy a new or used car. While we can’t make that choice for you, here are some things the Federal Trade Commission (FTC) suggests keeping in mind when making your choice:

How to shop for a used car

Before you start shopping for a , do some homework. It may save you serious money. Consider your driving habits, what you’ll use the car for, and your budget. 

Whether you buy a used car from a dealer or an individual be sure to:

  • Test drive the car under varied road conditions—on hills, highways, and in stop-and-go traffic.
  • Go online and research Certified Preowned Cars (CPO). These cars are low mileage trade-ins and lease returns that are reconditioned to the specifications of a new vehicle. Also, after these CPO vehicles are restored, the manufacturers may extend their original warranty. This can save you money from buying an extended service contract.
  • Ask for the car's maintenance record from the owner, dealer, or repair shop.
  • Determine the value of the vehicle before you negotiate the purchase. Check the National Automobile Dealers Association's (NADA) guides Edmunds Kelley Blue Book , and Consumer Reports . Some of these organizations charge for this information.
  • Research the upkeep costs for models you’re interested in, including the frequency of repairs and maintenance costs.
  • Check whether there are any unrepaired recalls on the vehicle. Start by asking the dealer if the vehicle you’re considering has a recall. You also can check yourself by entering the VIN at .
  • Consider hiring an independent mechanic to inspect the car.

The FTC’s Used Car Rule requires dealers to display a in every used car they offer for sale. Dealers must also give it to buyers after the sale. The Buyers Guide tells you:

  • The major mechanical and electrical systems in the car
  • Some of the major problems you should look out for
  • Whether the vehicle is being sold "as is" or with a warranty

How to shop for a new car

A is second only to a home as the most expensive purchase many people make. The average price of a new car sold in the United States is about $35,285. Think about what car model and options you want and how much you’re willing to spend. Do some research. If you prepare you’ll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal. 

Consider these suggestions:

  • Shop around to get the best possible price by comparing models and prices in ads and at dealer showrooms. You can also contact car-buying services and broker-buying services to make comparisons.
  • Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, often between 10 and 20 percent. Usually, this is the difference between the manufacturer’s suggested retail price (MSRP) and the invoice price.
  • Consider ordering your new car if you don’t see what you want on the dealer’s lot. This may involve a delay, but cars on the lot might have features you don’t want—and that can raise the price. But, dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock car meets your needs.

There are pros and cons to buying a new or used car and you should weigh your options carefully before making the decision to purchase. Buying a used car is not only less expensive, but it will also save you money on car insurance rates and registry renewals. A new car, however, has its advantages as well, as it may be more reliable and have the latest technology. Thinking about your budget, bills and expenses, and the other things you want to spend your money on now and during the years you will have car payments may help you decide between a new and a used car. Whether you buy a new or used car, you should arm yourself with information to get the best deal.

This is the second post in our blog series written in collaboration with the FTC. Read the other three posts in the series on shopping for auto financinghow to trade in your car, and standing your guard when it comes to add-on products. Learn more about auto financing and the car buying process at  and at www.cfpb.gov/auto-loans.

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