New vs used, are you really clued up?
It always amazes me when someone says that they would never buy a new car. It is closely followed by, “Do you know how much money you lose the minute it drives off the showroom floor?” These people are generally not professional car-buyers or even in the motoring world. Why are people so against buying a new car? Depreciation off the showroom floor can and should not be your only reason for not buying a new car.
There are, in fact, pros to both new and used cars. It comes down to what your needs are at the end of the day. Kriben Reddy, TransUnion head of auto information solutions, has made it so easy for you to make the decision as to whether you should buy new or used by listing these pros and cons to both:
BUYING A NEW CAR
It’s new! Think about what this implies. No previous owner means you know exactly what you’re getting. There’s no worrying about service history or hidden defects. The dealer delivers it to you wrapped in a bow on the showroom floor, and you drive it out in mint condition. Plus you have a warranty if anything goes wrong.
They’re safe and economical. Even cheaper models today have modern safety features like ABS and airbags. They also generally have new-generation engines, which deliver fuel consumption figures that owners of older models can only dream of, so you’ll often save money on your fuel bill as well.
Warranties and motor plans. The upfront pain of the premium you’re paying for a new car is eased if your new car comes with a motor plan. This means you don’t pay for any running costs except fuel and tyres for the first couple of years of your car’s life (depending on how much you drive, of course). It also helps to know that if anything goes wrong, your repairs are covered.
The thrill of it. Oh, yes. Admit it. Driving a new car has a special thrill. The new car smell. The subtle (or not so subtle) flaunting to your friends and family. Sure, it makes no sense logically. But we do it anyway. Just don’t go bankrupting yourself in the process of buying that new car.
Depreciation. You know the story: the moment you drive it off the floor, your beautiful new car drops in value by anything up to 30%. And because of all the upfront costs, like carbon tax, VAT and fees, you could end up paying a lot more than the original sticker price. Tip: make sure you have shortfall cover (or gap cover as it is often known) to cover any gap between the market value and the insured value.
They’re expensive. Make no mistake, new cars can be a challenge for even the healthiest budget. You might get unheard of technology in even the most modest mid-range cars nowadays – but all that new technology and styling comes at a cost.
Insurance. Newer cars are worth more and are a higher risk, so they’ll obviously cost more to insure. Make sure you do your homework on insurance costs before you make your purchasing decision. Work this out across the full period that you’ll be paying the car loan, as your financial institution will require comprehensive insurance until it’s paid off.
Their sticker price is more affordable. For many people, this is the single biggest benefit of buying a pre-owned vehicle. If you’re prepared to drive a slightly older model, you can pay as much as half the price of a new one. The first owner took the biggest hit in terms of depreciation, so even when you choose to sell, you should still be better off.
More car for your money. If you’re prepared to drive a pre-owned, slightly older model, you can certainly trade up. A 2012 BMW 750i for the price of a new VW Polo? Take my money already. Just check the price of services and tyres before you live out your captain of industry dreams.
Previous owners. A car may look clean from the outside, but you don’t know how it’s been driven or if it has any lingering long-term issues. A service history helps. But if it’s a high-performance car, you might need to assume it’s been driven hard. And if you’re buying privately, you usually buy voetstoots, which means you have no guarantee or recourse if something goes wrong. Tip: use the FirstCheck app, which gives you the current market value of the car, its full history and the legal status of the vehicle. This includes a link into bank and SA Police Service databases to check if a car is currently being financed, or is flagged as stolen.
More repairs. It’s a sad fact of automotive life: as cars age, things break. The higher the mileage, the greater your risk of major repairs. If you don’t have an after-market warranty for those big-ticket items like gearboxes and clutches, you could be on the hook for some unexpected bills.
NOW THAT YOU KNOW IT ALL
As you can see, there are more pros in new, but there are, of course, risks involved. The bottom line is that it’s all down to individual choice and risk tolerance. You have to know what your priorities are for your next car, and choose accordingly. If you need fuel economy and reliability, new is probably a better choice. If you want more wheels for your money, or a lower sticker price, then used is your friend.
Next time you tell someone that you would never buy new, please give them more of a reason than depreciation.