So you’ve decided to buy a car. How exciting. Whether it’s an upsize, downsize, update or your very first car purchase, you need to decide whether you’ll go for a new car or a used car. Is one ultimately better than the other, or is it ‘different strokes for different folks’?
The answer is: it depends. As with everything car-related, it comes down to what best suits your wants and needs.
The perks of going ‘new’
The upsides of buying a car new are exactly what you’d expect. There is a certainty about what you’re getting. No-one else has ever owned it, so there can be no untold horrors lurking in its past.
You will receive the benefits of a full warranty and it’s likely you’ll enjoy free post-purchase servicing. You can be sure that your car is operating at the bleeding edge of technological efficiency. There is the deep satisfaction one gets when one drives a shiny, new vehicle off the showroom floor (with that one-of-a-kind new car smell).
What are the problems?
There is really only one major issue in buying a new car and it’s depreciation. The value hit that a new car takes between the dealership driveway and your garage is substantial. In the first three years, your car will lose about 40% of its original value. Of course the longer you keep it, the less all of this matters, but for many people, depreciation is a significant enough factor to deter buying new.
Car buying’s dirty little secret
Once you fully understand how car depreciation sucks money out of your wallet, you’ll learn how to save boatloads of cash over your lifetime. You often hear that a car loses 20% of its value as soon as you buy it. Yes, in just one minute, a $30,000 car will lose $6,000 as you gleefully drive off. By the end of the first year, mileage and wear and tear could bring that to 30%, or $9,000. Why don’t you feel this big hit? Because it takes effect much later when you sell or trade-in your car.
Take a look at two similar cars, one new and one used.
New-car depreciation: You buy the car for $30,000 and sell it three years later for $15,000. The car has cost you $15,000 in depreciation.
Used-car depreciation: Now let’s say you buy the same car, but it’s 3 years old when you buy it. You could buy the car for $15,000. Three years later you could sell it for $10,000. So the used car depreciation cost you only $5,000.
Now, if you’re paying attention, you would quickly say, “But driving a brand new car is much better!” You’re absolutely right. So, if driving a new car is worth an extra $10,000 to you, go for it.
So should I choose to buy ‘used’?
There are plenty of convincing reasons to go ‘used’. For anyone who can look past the material joy of a brand new car, you can get almost everything a new car offers at a fraction of the cost by buying pre-owned.
Consider a car that is 12-months old. It’s already lost up to 30% of its original price but may still have up to 2-3 years left on its new car warranty (with many manufacturers now offering up to 5-years). Its features and technologies are still considered new and modern.
If looked after, its interiors are still fresh, and there should be no issues with reliability, given its youthful age. There is a lot of value there. And in terms of savvy shopping, a 12-18-month-old car is considered the used car ‘sweet spot’.
Forget the old used-car stigmas
It used to be common for people to put down used cars by saying that it was just a way to buy someone else’s problems. That’s not true anymore. Here are two updates on old knocks against used cars of recent vintage.
Reliability: Cars have never been more dependable than they are today. It’s not uncommon for some cars to deliver more than 100,000 miles before needing major repairs.
Maintenance: All cars require regular maintenance such as oil changes, tire rotation, brake jobs. But you can drive today’s cars much farther in between these scheduled maintenance visits. Even tires and brake pads last much longer than before.
What should I be aware of?
Even when you can look over the stigmas, it doesn’t mean that you can trust any sellers.
The biggest downside of buying used is that you cannot be guaranteed of its history. You can piece together a pretty good idea through service logs, condition and running a vehicle history check, but you will never know each and every quick of the car before your time.
The further you stray from the 12–18-month sweet spot, the more prominent this concern can become. But, generally speaking, if you do your research and educate yourself on what to look out for, you’ll know a bargain when you see one. Just trust your ‘gut-feeling’ or that of a friend in-the-know.
If you are looking for a professional pre-purchase car inspector in Melbourne, do not hesitate to contact German Precision today!
sources: carsguide, nerdwallet