Money Smarts Blog

With sky-high inflation, the past year has been less than ideal to buy a new car. According to Kelley Blue Book, average new car prices set a record high in November 2022, selling for $48,681 — up $2,250 from one year prior. The lack of microchips (yep, that’s still a thing) and continued shortage of other parts has manufacturers focusing on luxury over value vehicles.

And “value” anymore seems to have taken on a different meaning. My almost 15-year-old son will be a new driver soon, so I’ve been on the lookout for something reliable for a while now. Even a beater that would have sold for less than $5,000 a handful of years ago is now upwards of $10,000-$15,000. Demand is still outpacing supply, particularly for those low-mile, sub-$25,000 vehicles. I’m not kidding when I say to jump on a deal if you see something that even remotely fits your criteria and is within budget (if you don’t, someone else will).

If it’s time to replace your ride, which option is better — new or used? According to member and IHMVCU Marketing Brand Strategist Melissa Brown, new was the right option for her family, simply because they travel so much for softball tournaments.

“My family had been casually looking for a vehicle for at least a year, but the car shortage and rising interest rates held us back from purchasing right away. Since my 2014 Ford Explorer was closing in on 10 years old and had almost 250,000 miles on it, it was time to get serious,” Brown said. “In February, a dealership I’d done business with in the past had three potential options in stock, so I made an appointment to check them out. I’m now the proud owner of a 2022 Ford Explorer, complete with a heated steering wheel (you might laugh, but it was important to me)! Because of the overall costs of the new car, we decided to keep our old vehicle and pass it down to my 16-year-old daughter.”

Avoid getting burned in this red-hot car market. Check out our pros and cons of buying new vs. used.

New Car Pros

• Manufacturer incentives, such as lower interest rates
• New manufacturer warranties so repairs are covered
• Newer technology
• Better overall reliability
• Option to lease

New Car Cons

• Up to 20% value lost in the first year alone. A car’s make and model, age, condition and mileage all play a part in its overall value.
• Higher sticker price/monthly payments
• Higher insurance costs
• Limited inventory

PRO TIP: SHOP LAST YEAR'S MODEL Don’t mind last year’s model? May is an ideal time to shop the showroom since dealers are getting rid of “old” inventory — and will often slash prices during Memorial Day sales leading into summer.

Used Car Pros

• Lower initial cost
• Slower depreciation
• Lower purchase price/monthly payments
• Lower insurance rates (if not a sports car)

Used Car Cons

• Higher overall cost of ownership
• Hidden costs (less fuel efficient, hard to find parts, etc.)
• Less reliable
• Limited inventory

PRO TIP: CHECK THE HISTORY Buying used? Check out the car’s maintenance history and get it inspected prior to cutting the check. If it’s not certified preowned, look into a manufacturer’s extended warranty (although these tend to only cover defects, not necessarily regular maintenance).