There’s no doubt that buying a new car is pretty exciting – brand new cars have all the latest technology, don’t come with any dings or scratches, and of course, there’s that new car smell you just can’t duplicate.
But these aren’t the only pros of buying new.
New cars typically have fewer maintenance problems, and you won’t have to replace brakes, tyres etc for probably a few years. If you are unfortunate enough to have a defect, chances are it will be covered under warranty.
So with all those benefits, why wouldn’t we all be snapping up a brand new car?
1. New cars depreciate faster
News flash – new cars depreciate faster than used cars!
The average new car can depreciate as much as 19% in its first year. But what does that really mean? Well, if you buy a brand new car without making a sizeable cash deposit, or if your monthly loan payment isn’t high enough to compensate for depreciation, you could end up owing more than the vehicle is worth.
And if you’re the type of person who trades in vehicles every three years, negative equity will increase the cost of your next vehicle. If what you get from a trade-in is less than what you owe, the difference doesn’t just disappear, it will be added onto your next car loan – so the amount owing keeps increasing!
On the other hand, if instead of buying a brand new car you buy a car that’s one or two years old, you’ll be able to get the car at a price that’s more comparable to its resale value – and someone else can wear the biggest drop in value.
2. You get more ‘bang for your buck’ with a (slightly) used car
So we know that cars depreciate rapidly within the first year – and that can mean that buying ‘used’ is an opportunity to get more for less.
A one year old car is likely to have low mileage, have barely a scratch and still be under warranty, but it could be 20% cheaper (or more) than the new model. That creates the opportunity to buy the upgraded version – think leather seats, or a 7-seater model, and still come under budget.
3. Spend less and avoid debt
By spending less on a car, you’re less likely to have to borrow money. Not only will you be able to negotiate a better price by paying cash, but you will also avoid one of the biggest costs associated with car ownership – interest.
The moral of the story – aim to buy a ‘newish’ car, without the ‘brand new’ price tag.
But only you can determine the value of a new car versus a used one.