Buying A Car, Does New or Used Give Better Value?

When looking to buy a car, people fall into 2 categories. Those looking to get reliable transportation at a good price, or those who think a brand-new vehicle is the most reliable choice, despite the fact it will lose a big chunk of its value as soon as it’s driven off the dealership lot.

So, which choice gives a better value? Well, when it comes to buying a car, there’s really no one-size-fits-all answer however whether you buy new or used, it does require ongoing funding. Before walking into a car dealership, consider these;

How much can I afford?

Used cars are definitely cheaper, generally because the original owner has already absorbed the largest depreciation hit. Cars lose value with each passing month and kilometre, but the steepest decline happens right after it’s being bought brand new. Canstar research shows that the average new car in Australia loses about 15% per year in the first three years. Then the depreciation eases off to a more manageable level of about 10% per annum, assuming you drive around 15,000 kilometres per year.

Verdict: Buying a near new used car with balance of its new car warranty still in place may provide the best value if bought under the glasses guide estimate for the same vehicle.

How much will I have to finance?

If you have good credit and employment history, you may find buying new with little or no deposit cost less than buying used. That’s because most manufacturers offer and financing incentives for new cars that’s hard to go past. Financing a used car may also require little or no deposit to be paid, whether the deposit is in cash or as a trade-in depends on lenders policy and the interest rates for used vehicles are likely be higher.

Like financing, insurance premiums can also be affected by the age of a car. In most cases, used vehicles tend to cost less to insure. However, before committing to a vehicle, you should always compare insurance quotes to find the best value policy for the level coverage you desire. Premiums can vary greatly between insurers once the driver history is considered.  And like for fuel, registration or maintenance, you will need to budget for insurance as long as you own and drive a vehicle.

Verdict: Buying new is better where you are getting below market rate finance (manufactures occasionally offer 1% finance offers on new vehicles) however buying used will likely get you cheaper insurance rates.

How long do I intend on keeping the car?

If you intend to hold on to your vehicle for the long haul, you may want to consider buying new. By owning a car from the outset, you can personally ensure it receives the care needed to reach its intended life span. You’ll also be familiar with the vehicle’s entire history, and thus avoiding surprises.

Some buyers steer clear of used cars because they’re worried about inheriting someone else’s problems. When buying a used vehicle, it would be wise to have the vehicle comprehensively checked by a reputable mechanic prior to making any down payments.

Verdict: Buying new is better if you are concerned about inheriting the car’s past problems.

What features are important to me?

The later model a vehicle is, the more up-to-date technology you’ll find inside. Advanced safety features and driver assistance tools improve substantially with every passing year. Fuel efficiency also improves with every new model generation being introduced, there’s a good chance that a new vehicle will deliver better fuel savings as opposed to a similar, but older model. You also cannot add factory options to a used vehicle, particularly if you’re looking for some specific customisable features, like heated seats, a sunroof, or an factory upgraded entertainment system.

Verdict: Buying new is better if you want optimal fuel efficiency and the latest technology. Buying used is better if you’re not too picky about the car’s features or having the most up-to-date tech.

How much am I prepared to spend on maintenance?

Not only does a used car potentially cost more to keep operating, it can spend more time in the workshop due to existing wear and tear. While there may only be an occasional day or two for servicing, it can easily stretch to a week for major repairs. As technology has improved though, cars have certainly become more reliable. Most well-made vehicles don’t need significant work done until they’re well past the 100,000-kilometres mark. On the other hand, many new cars, particularly brands wanting to capture market share, come with factory warranty for extended amount of time or distance driven.

Verdict: Buying new is better if you don’t want spend as much on maintenance. However, you shouldn’t run into too many additional problems by going with a one-year or two-year old vehicle with a clean history.

How long is the warranty?

A new car hasn’t been in any accidents, has no wear or tear and comes with a pristine history that only includes being driven off the dealer’s lot. It also comes with a manufacturer’s warranty that covers against mechanical issues not subject to normal wear and tears.

If you buy a well looked after late model vehicle, you may still inherit some portion of the new-car warranty, providing protection for a few months or even a couple of years. Ex-lease vehicles, for instance, are usually only two- to four-years-old. And since they began life as lease vehicles with kilometre restrictions and maintenance requirements, these cars tend to hold up well and still have reasonable warranty life.

Some dealers and manufacturers, typically luxury brands also offer certified used-vehicle programs that provide added warranty protection. Certified used cars have been extensively tested to manufacturers standards and have passed a checklist of requirements that are the basis for certification.

Verdict: Buy new if you want a complete warranty, or certified used if you want to save money on luxury car brands and are content with having a shorter warranty period.

Suggestion: Buy almost-new

When you buy a new car, you’re steering clear of most maintenance problems (assuming you don’t get a lemon), you’re getting the latest tech, and you can get the most out of your factory warranty period.

However, if you’re not pressed to get the latest series in the model of your choice, buying a year- or two-year-old car can save you thousands of dollars on purchase price and insurance. Another option for someone preferring to buy near new is dealer demonstrator vehicles, most are used for short distance test drives by potential buyers only and tend to be the latest series of the model.

These types of cars likely haven’t been through much and will have a fewer than several thousand kilometres on them. At the end of the day, you likely won’t be at much of a disadvantage in comparison to those with a vehicle fresh-from-the-factory when the cost saving is factored in.

Happy Hunting 😊