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Alnico's cost more to produce, but I've heard it said that a well-designed ceramic pickup often costs more in labor, design and production than an alnico one, (not sure if this is always the case though.)

Most companies use ceramic for high-output "distortion" pickups.

But most players who want more versatility, or like classic "vintage" sounds, prefer alnico.
Alnico comes in different forms. II, and V are the most common with guitar pickups, though III and IV are being used by some companies. Alnico II is the softest and most compressed sounding, while Alnico V is the strongest and most bright and powerful of the group.

Some new pickups are using Alnico IIX, which is even more powerful and bright. Many people feel that it offers the power of ceramic with some of the characteristics of Alnico.

Neither Alnico or ceramic is best: it's just whichever is best for you and your guitar. There are great, (and terrible,) examples of both.



The best advice I have is to replace your pots, caps and electronics with high-quality parts, and play as much as possible.

After a while, (esp. if you play live,) you'll have a much better idea of what kind of pickups you'd like, should you need to upgrade.