OLD BULL MOTORS

Buying a car is one of the biggest financial decisions you’ll make other than buying a home—and making such a sizable purchase can be a challenge. One of the first buying hurdles to cross is whether to buy new or used, and while conventional wisdom suggests that a used vehicle is the economical choice, that’s not always the case. Though you don’t want to buy a new car just for that new car smell, you also don’t buy a used car just because you think it’s the affordable route—at least not without doing the math first.

We’ll walk you through some cost considerations when it comes to a new or used car purchase and try to help you find a car that best fits your budget.

CONSIDER COSTS BEYOND THE PRICE TAG

Though a brand new car can give you sticker shock, it’s important to consider other costs, too. If you’re taking out a loan to purchase your car (and most of us do), interest rates can vary depending the length of the loan and whether you’re buying new or used.

A percentage difference in the interest rate can make a notable difference in how much you’re paying over time, so it’s important to look at the current rates and see what deals are being offered by your dealership before you decide what to buy. Low-interest financing offers might make a new or used car more appealing, depending on what’s available.

Car insurance is another major expense and you should check with your insurance company to see what the rates are for models you’re considering before you buy. The conventional wisdom is that new cars, with their higher values, are more expensive to insure than used cars, but this can vary depending on make, model, and trim level.

Beyond the straight-up value, insurance considers how likely a car is to be stolen, the cost of repair, and how safe a car is when pricing a policy. This equation sometimes means new cars are more expensive to insure; however, with better safety features and (sometimes) lower costs of repair, it can be cheaper to insure some new cars. Check with your insurance agent before you decide.

Repair and maintenance costs are a big potential downside to a used car—and they’re certainly something you should consider before you make a buying decision. New cars always come with some kind of warranty the will cover (or at least defray) the cost of repairs and you’ll have the choice to pay for an extended warranty when you buy, for even more peace of mind.

Used cars might have a warranty if you buy a dealer-certified used car or a car that’s new enough to still be under its original warranty, but they might not. Find out what kind of warranty your new or used vehicle would have and what kind of expenses it will cover. If you’re looking at a car without a warranty, make sure you check its age and mileage and look up common repairs for a car that age.

Another thing to consider: some cars are simply more expensive to maintain and repair than others, so no matter what you buy; it’s a good idea to investigate repair costs beforehand. Whatever you find, be sure to factor those costs into your buying decision.

Gas costs are another thing to keep in mind. The miles per gallon (MPG) a car gets can have a big impact on what you’re spending to run it—and though anything that gets a better MPG rating than what you’re driving now is good, a better MPG rating means you’re spending less over time. While it varies depending on the make and model, you’re still more likely to find better ratings on newer cars.

WHEN YOU BUY MATTERS

Like the pricing on anything, the pricing on cars, especially new cars, isn’t stable throughout the year—which means there are times you’ll pay more and times you’ll pay less. If you time your purchase right, you might find buying a new car makes good financial sense.

A good rule of thumb is that buying the first 2015 model available will always cost you more than buying the last 2014 model on the lot—you’ll often find better deals on this year’s model when dealers are trying to clear them out to make room for next year’s model. With the right timing, you can get the price of a gently used car for a new car purchase, right off the car lot.

USED CARS ARE NOT ALWAYS THE CHEAPEST OPTION

A car loses a lot of its value as soon as you drive it off the lot, and it’s the fact that cars depreciate in value so quickly that makes used cars so appealing. Once they’ve taken that depreciation hit, they’re often much more affordable. However, depending on what make and model you’re looking at, buying used might not make any more sense than buying new.

Popular models can retain their resale value well, which makes it hard to find a good used deal—and when buying used doesn’t save much money, a new purchase looks a lot more attractive.