When Should you Buy New versus Buying Used?

Whether it’s a household appliance or an automobile, sooner or later you will ask yourself the question, “Should I buy this new or used?” Let’s take a look at both sides of the question.

The Advantage of Buying New Items

Anything that comes “straight from the factory” is more-than-likely going to work right out of the box. But when you buy a used vehicle or appliance there may be hidden problems that underlie why the item was put up on the secondary market in the first place.

New vehicles and appliances now typically come with factory warranties, sometimes with dealer warranties, and they may also be eligible for extended warranties. Although you pay for an extended warranty (it is essentially a form of insurance) you can usually return any defective vehicles or appliances to wherever you bought them for repair or replacement.

Factory-trained technicians are more likely to be employed by dealers who sell new vehicles and appliances, which means they will have the tools, the knowledge, and the parts (or access to the parts) to make repairs quickly and efficiently. After-market repairmen may be very competent but they may not have access to all the right tools and parts; in some cases parts will no longer be available from the factory and you’re forced to rely on salvage.

How Warranties Differ between New and Used Purchases

In an ideal world any used vehicle or appliance is going to be repaired and cleaned up so as to make it more marketable. However, in the real world we are now dealing with two secondary markets: the “as is” market and the “certified” market. The “certified used” market for just about any type of purchase includes the cost of evaluating, repairing, and insuring whatever is being sold. The “as is” market puts the responsibility of making repairs and cleanup on the buyer.

A warranty may be available for a used vehicle or appliance, even one that is not certified. These “after market” warranties may not cover as many failures as new-purchase warranties. After market warranties may also be sold by companies with fewer resources than the new market dealers. Hence, you may have to go farther or wait longer for warranty repairs even though the work will be completely satisfactory.

Some new-purchase warranties may be transferable but most are not. The extended warranties that cover additional expenses on repair and replacement for items that were bought brand new usually expire whenever ownership changes. This may change in the future depending on how many consumers complain about inadequate warranty coverage.

The Advantage of Buying Used Items

There are two chief advantages for buying used vehicles or appliances. First, you’ll realize a substantial price reduction even for items that are only 1-2 years old. That is because these items have seen enough use that they are no longer legally considered to be “new”.

In some rare cases you may actually be able to buy a “new” item at discount prices if the model year has changed and the dealer is trying to clear out old inventory. These are not truly “used” items but they are “old models”. Older models sold on clearance may or may not come with factory warranties but they are often eligible for extended warranties that you cannot buy for used merchandise.

When you buy certified used vehicles and appliances you are only considering merchandise that has been inspected and, if necessary, repaired and cleaned up. The wholesalers who trade this kind of merchandise will only invest as much money in a vehicle or appliance as will increase the value of the item being sold at wholesale. Let’s say a wholesaler acquires an appliance for $100 and it needs $100 (in labor and parts) to bring it up to “certified” status. That wholesaler needs to be able to resell the item to a dealer fro more than $200 in order to recover the cost of purchase and repair while still making a profit. And, of course, transportation and other fees may also be tacked on.

Hence, when you buy a certified used item you are paying for the retained value of the item without the factory warranty. Many people actually keep certified used vehicles and appliances longer than the people who buy brand new merchandise.

The other advantage to buying used vehicles and appliances is that you may acquire something that actually increases in value over time. After about 25 years working models are considered to be antiques and therefore may be collectibles. If collectors are interesting in buying a working antique vehicle or appliance its value increases the older it becomes. All damage and equipment failures detract from the overall value of the item.

You Do Not Want to Buy Junk Just Because It’s Cheap

Although your household budget may not allow you to pay for big purchases easily, and your credit may be hurting, it’s better to find help when you buy a big-ticket item than to settle for junk.

That junk will need to be repaired and the cost of repairs comes out of your pocket. Sure, you might be a handyman capable of fixing anything, but if that is what you do all day the chances of your doing that when you get home are pretty slim. People do not like to bring their work home.