Purchasing a car is an exciting time, but if you want to buy ‘smart’, there is one important question to consider: should you buy used or brand-new?
Before answering this, take the time to read through our tips:
Buying second-hand: why and why not
While the ‘new-car smell’ is certainly enticing, used cars (usually) come with a lower price tag upfront.
That’s because by far the biggest depreciation hit happens in the first three years of ownership. If you buy ‘nearly new’, the original owner will have already borne the cost – so if you keep the car for a number of years, the rate of depreciation you’ll have to bear will be significantly lower.
Having said that, don’t forget that ‘cheaper’ doesn’t necessarily mean ‘best value’. While your next car should fit comfortably into your budget, it’s also important not to let price alone dictate your choice. There could be more than meets the eye under the hood...
Used cars can provide a great alternative – as long as you pick a good car. It’s easy to focus your attention on how a car looks, but are you sure it is reliable?
First of all, you may want to check the car’s condition (or have it checked by an expert). Key things to assess include:
- the overall condition – are there any visible dents or scratches?
- the car’s mileage – consider an average of 15,000 km per year; if the reading on the odometer is significantly lower or higher than this, ask for details
- the car’s history – has it been involved in any accidents? What repairs have been done and when?
- a few more things to tick off the list: engine, lights, tyre tread and inflation, radio, aircon, and windows.
Plus, don’t forget to do a test drive and take all the time you need. Making sure everything works as expected is the right way to steer clear of a ‘lemon’ – and the costly repairs that may come with it.
Buying brand-new: why and why not
There are many positives (and some significant caveats) to buying a brand-new vehicle. With no damage from previous owners and, generally speaking, very few repairs to worry about, new cars usually cost less to run than used ones.
Plus, brand-new cars usually include a warranty, with features varying from one manufacturer to another. It pays to get into the detail of what’s covered and what’s not, to make sure that you’ve got a good level of consumer protection.
Another benefit of buying a brand-new car is that it will have the latest technology in terms of comfort, performance and safety (for that make and model). Can you wait another few years to get those?
Depreciation is one of the hidden costs of car ownership. And when it comes to buying a brand-new vehicle, the depreciation rate can be steep. A new car can lose up to 30 percent of its value in the first three years, and 50 per cent within five years. After that, depreciation usually slows down.
Of course, there are exceptions to this rule. Some makes and models tend to hold the most value after five years; that’s why it’s important to do a bit of research upfront. And remember: whatever car you choose, looking after it is a great way to reduce depreciation.
As you can see, both new and used cars come with pros and cons, so make sure you factor them all into your budget before making a decision. Ready to get the engine started? Talk to the team at AA Finance about your car loan needs today. Contact us on 0800 500 555, seven days a week between 9 am and 5 pm. We’re here to help.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.