Deciding between a new or a used car is a tough decision for anyone looking to upgrade their ride. Either option offers many benefits that will work to your favour depending on your needs and priorities. If you’ll be purchasing a car soon and need some help to make the right decision, here are the things you need to know.
Why buy a new car?
Well, it’s new. That’s the main benefit! The fresh paint, the new car smell, and the sleek interior: all yours. Since you’re the first owner of the car, you can also trust that it will offer the best quality and performance. However, there’s more to buying a new car than these points.
New cars in Australia come with 3-7 years of warranty or up to 100,000 kilometres, depending on the maker. That means you don’t have to worry about repair costs throughout the validity of the warranty.
Warranties are also transferrable: if you decide to sell the car within the validity period, the warranty can be transferred to the next owner. This makes it quite easy for you to resell when you’re getting an upgrade.
Lower running cost
Maintenance costs are generally lower with new cars. This is because new cars are still in top condition and are less likely to breakdown, and if you keep up to date with your servicing requirements then you’re making sure your vehicle is being well-cared-for and prolonging its performance.
New cars also have a better fuel economy. Fuel economy refers to the ratio of a car’s total distance travelled to the litres of fuel used. The higher this number, the more efficient the vehicle is in utilising fuel. Unlike older vehicles, new cars are at the peak of their performance and are more fuel-efficient. This means you’ll have a lower daily fuel expense when driving a new car.
Variety of options
There are more than 50 local and international manufacturers that sell cars in Australia. Each of them sells different types of vehicles with a variety of models, equipped with various specifications and features. All of these are available to you if you choose to buy a new car. With this array of options, you’ll be able to choose the exact car that you want.
The latest automotive technology
Each year, new automotive technologies become available and many of them are rather very useful. Newer car features like Automatic Emergency Braking and Lane Departure Warning will ensure you and your passengers’ safety. Meanwhile, Parking Assist and GPS technologies will make driving so much easier for you. Most new cars are equipped with these technologies, as well as a stack of entertainment options like Bluetooth compatibility, USB ports and WiFi.
Whether you are buying a new or used car, one of the things you’ll have to think of is financing. In both cases, you can approach different lending institutions to apply for a car loan. The only difference is that it’s cheaper to finance a new car compare to a used vehicle. The interest rates for a new vehicle is lower too.
Why you shouldn’t buy a new car
The reasons to buy a new car may be overwhelming, but don’t let them hasten your decision-making process. There are also downsides to purchasing a brand-new vehicle, some of which could affect your future finances big time.
Higher upfront cost
Brand new cars are more expensive. It’s just the way it is. In exchange for the top-of-the-line features and guarantee optimum performance, you’ll have to dig deep into your savings or get a larger loan. Aside from the actual car price, you’ll also need to shell out some cash for the vehicle registration (also called stamp duty), and the Luxury Car Tax (LCT) for expensive vehicles. Not to mention, the cost of dealer extras that you may fancy purchasing.
All tangible assets lose their value over time. New cars, in particular, deplete in market value pretty quickly. In fact, 20% of the new vehicle’s value is gone by the time you drive out of the dealership! By its third year, your car will have lost 30% of its original value.
So, if you’re buying a $40,000 car, it will be valued at $28,000 after three years. That’s not great, but it’s a fact and you will feel it when you decide to sell the car. Learn more about car depreciation.
Why Buy a Used Car?
Used cars often get a bad rap. Engine failures, smelly seats, and worn paint — these are just some of the things usually attributed to used cars that are not necessarily true. Most used cars today are well-taken care of, which means they are still in good condition. If you choose to buy a used car, you’ll also get the following benefits:
If you are on a limited budget, buying a used car is your best option because it’s considerably cheaper than a new one. You don’t have to dip into your savings or sacrifice future income just to pay for it. And even if you have enough to buy a new car, a used car is still a great option because you can save money that can be allotted to running expenses instead.
By purchasing a cheaper used car, you’ll also be able to save money on depreciation. If you decide to part ways with the vehicle, you can sell it at a price that is much closer to the value you purchased it for.
For instance, you want to buy the 3-year old vehicle mentioned in our previous example, which is worth $28,000. After a year, it will lose another 15% of its value, which is equal to $4,200. On the other hand, if you buy the brand-new car worth $40,000, you’ll lose $8,000 (20%) in depreciation after just a year.
Value for money
Most cars today are more dependable than those from the previous decades due to the kind of technology we have. You can find two to three-year-old cars that are almost in the same condition as the newer models. You’ll get the same technology, features, and warranty — all for a much cheaper price.
Cheaper insurance premium
Another reason to buy a used car is the lower insurance cost. In general, a car with lower value can get a lower insurance premium, whether that be for comprehensive or third-party insurance. Although, the brand, model, age, and service history of the car can also affect the insurance premium.
Reasons to not buy a used car
Even though used cars are cheaper and have improved in quality and performance in recent years, there are still some reasons for you not to consider used cars on your next purchase.
Lack of warranty
Most used cars have no warranty, whether they’re sold from a dealership or a private seller. If you decide to buy a used car, you need to have a budget ready for emergency repairs and services.
You can find many used cars for sale in Australia, but not in the same number of options as new cars. If you have a preferred model, colour, and specifications, you may find it hard to find the exact vehicle you’re looking for. You can either expand your search to other states and territories (may cost additionally) or settle for a car that you don’t necessarily prefer.
More hard work
With a new car, you are guaranteed with top quality and performance, no question. The price is set beforehand and you’re assured that you’ll be the first owner. In short, you’ll have peace of mind. However, this is not the case if you buy a used car because you will have to do some legwork.
First, you need to research the prices of similar cars to make sure you are making a good purchase. Websites like RedBook will help you do so. Second, you need to check that the car has no outstanding debt or charges. Hence, checking the Personal Properties Securities Register (PPSR) website is also a must-do for you. Lastly, you will have to do a physical check-up of the used car to ensure that it’s in good working condition or at least arrange for an inspection by a professional.
You’ll need to do all of these, maybe more, if you opt for a used car.
Higher interest rates
Like with a new car, you can apply for financing to purchase a used vehicle. But lenders will most likely give you higher interest rates. Why? Historically, those people who applied for used car loans have bad credit scores. To mitigate the risk of not getting paid, lenders approved their loan applications, but with higher interest rates.
If you have a good credit rating, you may be able to negotiate for a better rate. Otherwise, you need to prepare for a higher interest rate when you go for a used car.
New or Used Car Financing
Armed with this information, you’ll have an easier choice when deciding whether to buy a new or used car. Once you have weighed up your options, the next thing to do to get a pre-approved loan from CarFinance.com.au so you’ll have more confidence shopping for your next car and more negotiating power.
Call us today and talk to our team for fast and easy financing of your new or used car, or apply online!