Buying a Brand New Car vs. a Used Luxury Car: Should You Buy a New Honda Civic or a Used BMW M5 for $25,000?

Appeal

Luxury cars are designed to appeal to buyers with expensive tastes. Walnut wood, soft-touch plastics, and hand-stitched leather are just some of the high-grade materials used to accentuate the interiors of numerous luxury cars.

Economy cars lack the performance, comfort, and prestige of luxury vehicles. However, there’s one unique advantage that new economy cars have over used luxury cars. New economy cars are always in perfect condition when you buy them. You don’t have to worry about restoring ratty car seat leather or clearing leftover crumbs from nooks and crannies. You get to experience everything your new car has to offer firsthand.

Pros

• Brand-new condition

• New car scent

• No repairs needed

Cons

• Less eye-catching

• Made with cheaper materials

• Fewer amenities

Pros

• Plenty of amenities

• Made with high-grade materials

• Sophistication

Cons

• May need repairs

• Some cleaning may be necessary

• Older vehicles may have a musty smell

Safety Features

New economy cars are equipped with the latest safety features, such as advanced driver assistance systems and stability control systems. These modern car features have changed the way we drive. Some of us can’t imagine driving without them.

Older luxury cars with outdated driver assistance features will struggle to compete with today's tech-driven vehicles. The National Highway Traffic Safety Administration (NHTSA) believes that driver assistance technology holds potential for reducing car crashes and saving lives, since most car-related fatalities are the result of human error.

If you're set on buying a used luxury vehicle, we suggest avoiding older models. Standard safety features like blind spot monitoring systems and improved air bags should be included in luxury vehicles from the mid-2010s and beyond.

Pros

• Updated with the latest safety features

• Commendable safety rating and ride quality

Cons

• Not all models have the latest driver assistance features

Pros

• Luxury cars from the mid-2010s and beyond have improved safety features

Cons

• Older luxury cars have outdated safety features

Technology

Cars today have onboard computers capable of performing various tasks, from active systems monitoring to full smartphone integration. Some of these applications are housed inside an LED screen display with dials, knobs, touchscreen, or voice controls, also known as an infotainment system.

Both new economy cars and late-model used luxury vehicles come equipped with some form of infotainment system. Carmakers always include the latest infotainment systems in new releases. Used luxury cars are unfortunately stuck with the technology they have.

Luxury vehicles come with a plethora of premium features. Some of these features are downright impractical in everyday driving situations, but they perfectly capture that feeling of luxury. Champagne flute, anyone?

Pros

• Latest infotainment systems are installed

Cons

• Infotainment systems often provide the bare minimum

• No luxury features

Pros

• Luxury features give the car a premium feeling

Cons

• Older luxury cars may not have smartphone integration, cloud connectivity, messaging apps, and more

• Some luxury features can seem dated by today’s standard

Fuel Economy

Economy cars are purposely built to be affordable. These types of vehicles typically belong to the mini-compact and subcompact car segment, which have smaller engines that reduce emissions and fuel consumption while idling. Economy cars also require less engine and transmission oil than larger-bodied compact vehicles, driving maintenance costs down. Some compact cars sedans made today are also more fuel-efficient, with excellent miles per gallon (MPG) figures.

Luxury cars tend to have larger and more powerful engines that perform better but lack the efficiency of a brand-new economy car. Some luxury car engines require premium fuel to function at maximum power and fuel efficiency. If you’re worried about high maintenance costs, you should probably avoid bigger luxury cars.

Pros

• Excellent fuel economy

• Less engine and transmission oil needed

• Affordable to maintain

Cons

• Sacrifices power for fuel economy

Pros

• Often have more powerful engines

• Premium gas gives better fuel economy

Cons

• Lower fuel economy compared to economy cars

• Expensive maintenance

Maintenance

New economy cars are easy to maintain. Their brand-new condition means you don’t have to worry about repairs just yet. You can drive around in your new economy car without any problems. Aside from the occasional oil change and tire rotation, new cars don't require much maintenance at the start.

According to the U.S. Department of Labor's U.S. Bureau of Labor Statistics, the annual cost of owning a vehicle in 2019 was $10,742. This included the car’s initial price, gasoline expenses, and other car-related expenses.

Used luxury cars with thousands of miles on them tend to require more maintenance than economy cars that are fresh off the showroom. Their labor cost is usually high because they have specialty parts that are expensive and hard to find. The upfront costs may be similar to a new economy car, but you may end up spending more on maintenance down the line. Used cars also depreciate much faster because of their used condition. While used cars aren't as practical as new economy cars, there's still a lot to like about them.

Depreciation

According to Edmunds, new cars lose 23.5% of their manufacturer’s suggested retail price (MSRP) after the first year and 60% during the first five years. New economy cars have a slower depreciation rate compared to used luxury cars in bad condition. The demand for a specific car can also impact its depreciation rate.

Both wholesale and retail prices for used cars have skyrocketed as a result of the global chip shortage and a lack of inventory on the part of dealers. Toby Russell, co-CEO of an online used car marketplace, has told Forbes that buyers are paying premium prices for used vehicles at wholesale auctions.

"Usually used cars will depreciate 1% per week, but the car sitting in your driveway is likely to be worth 25-30% more than it was in January,” said Russell.

As dealerships struggle to keep up with high demand, you can expect to see a rise in used car prices over the coming months. Manufacturers are hoping to pick up the slack by the fourth quarter of this year, but there are no guarantees that vehicle prices are going down anytime soon. These are extraordinary times for car buyers. Some older models may cost thousands of dollars more than expected. If you prefer used cars over new economy cars, you may want to wait for the market to stabilize before buying one.