The journey of buying a car can be as thrilling as it is daunting, especially for first-time buyers or those contemplating a change in their car. With a bunch of options available out there, it helps to understand the benefits and drawbacks of buying new vs. used – especially if you’re trying to stick to a budget. We’ve written this piece to help you decide what’s best for you.
Why you’ll love a new car
Driving a new car means having the latest technology and top-notch safety features
New cars come equipped with the most advanced technology, including enhanced safety features like automatic emergency braking, lane-keeping assistance, and adaptive cruise control. This often translates into lower insurance premiums as these features can help prevent accidents and theft. They also have the latest in infotainment and connectivity tech, sometimes making you feel like you’re driving in 2045 and not 2024.
Peace of mind with the security of a manufacturer's warranty and superior reliability
New cars usually come with a manufacturer’s warranty. It will give you peace of mind, as it covers repairs or replacements for any defects or issues without extra costs. Be sure to double-check the fine print as warranties don’t last forever but have a time or mileage cap. There's also an inherent reliability in a car that hasn't been used before as there’s less wear and tear. So you won’t have to worry about any kinks that’ll leave you stranded on the side of the road.
A built-in service and maintenance plan
The cool thing about new cars is that they often come with a “free” service and maintenance plan. Maintenance plans cover routine maintenance like replacing windscreen wipers, brake pads, and so on. However, these plans are limited, so it's important to check what they cover. A service plan covers the regular services your car has to have each year or at certain mileages (whichever comes first). These are important to keep the car running efficiently and reliably. Regular maintenance and services can help big time when it comes to the resale value of your car.
The ability to customise your car to meet your exact needs
These days most manufacturers have developed sophisticated online configurators that allow you to build your dream car virtually. Who doesn’t like getting exactly what they want? This means choosing the exterior colour, interior materials, and additional features like sunroofs, advanced sound systems, or specific performance components.
They often come with attractive deals and incentives
Some dealerships run deals on cars when they have to make room on the floor for the latest models. These deals could include lower admin fees, free insurance for a certain period or an upgraded model for less. So, keep an eye out.
Greater environmental friendliness
With many new environmental laws and regulations popping up around the world, car manufacturers have no choice but to make more environmentally friendly cars. So a lot of new cars are being made with smaller engines that run more efficiently on less fuel. If that appeals to your green side then you might want to go for new.
The flip side of buying new
Its value begins to decrease immediately after purchase
A new car can lose about 20-30% of its value in the first year and around 50% or more over three years. This rapid depreciation is a significant financial consideration for new car buyers. Especially if you are buying the car through a finance house. Why? Because you have to pay back interest on your loan. That’s at least 11% more than the retail value of the car so you actually end up losing a fair amount of money.
Expect to pay more than you would for a similar second-hand car
The initial purchase price of a new car is typically much higher than that of a similar used car. Additionally, insurance premiums tend to be higher for new cars because of their higher valuation and repair costs.
Less chance of haggling on new car prices
There’s often less room for negotiation with new cars because prices are more transparent, incentives from manufacturers are fixed, and the market is competitive. Dealerships often provide clear pricing upfront, and manufacturer incentives are applied uniformly, meaning less room for haggling.
What going the previously loved route looks like: The upside
More car for less money
Used cars often offer better value for money. You might be able to afford a higher-end model or a car with more features than you would if buying new. This might also include a warranty that’s still remaining on the car or even a service plan.
The availability of lots of information about the brand and model
With a used car, there’s typically more information and reviews available about the model's reliability, pain points and performance over time, based on reviews and reliability ratings. You can easily find this information with a quick online search.
It retains its value better than a brand new car
A used car has already undergone its major depreciation phase, meaning it retains its value better over time.
Insurance is a little bit more affordable on used cars
Typically, insuring a used car is less costly, a factor that appeals to cost-conscious buyers. But just keep in mind that sometimes there isn’t a huge difference in premium between a used and new car. Reason being is that most insurance claims are for repairs and not replacement and the cost of parts, labour and repairs can still be pricey for used cars.
The downside of buying a used car
Higher risk of general maintenance issues
As a car ages, it might need more frequent repairs, which can add to the total cost of ownership. These costs can be unpredictable and vary widely depending on the car’s condition and history. If the car you are looking at has a lot of mileage on it and its previous owners didn’t care for maintenance, the car might be more prone to breaking down.
Facing a limited warranty and possibly higher costs for repairs
Used cars often come with limited or no warranty, which can leave you with a huge hole in your wallet if something bad happens. Warranties cover manufacturer faults like the hydraulic system failing on your brakes, for example. Faults like this can cost a huge amount of money that you will need to budget for.
Little or no service plan
Used cars usually come with no service plan, which means you’ll have to budget accordingly for them. Try to find out from the dealer and by asking around about how much a service is likely to cost. And don’t forget to ask about the major services.
Not knowing the full story of the car's past
Even with a car history report, there’s always some uncertainty regarding a used car's past and any hidden problems that might not have been documented. It’s always a gamble so it's best to do your homework and ask the right questions. Keep an eye out for pre-certified models. These cars have been through rigorous checks that the dealerships have to do.
There’s likely to be limited choices around cars and features that you want
When buying used, you might have to compromise on certain features, colour, or even the make and model based on what’s available in the market.
Essentially, when you’re deciding between an older, less expensive model and a newer, more expensive one, you need to look at a bunch of factors and not just at the price tag or how pretty it is. Buying a car could have a big impact on your financial health and as much as it’s an admin intensive exercise, it’s worth weighing up the pros and cons.