Should you buy a new or used car?
One of the most common questions we get – Do I buy a brand new or used car?
Below we’ll break down the pros and cons of buying new vs used and how we use our Total Cost of Ownership analysis to guide you in the direction that is right for you.
Why buy new?
As human beings, we crave certainty; we hate surprises, especially when it comes to big-ticket purchases like a car. What kind of unexpected costs wait for us around the corner? Buying brand new avoids the pitfalls and potential gremlins that could lie in a secondhand vehicle.
Driving off the lot with the new car smell and full factory warranty (most now at five years) will bring a smile to even the tightest of individuals.
And with almost all car manufacturers now offering capped price servicing, you know there aren’t going to be any surprises in those first few years of motoring.
Sounds great, what’s the problem?
So what’s the dark underbelly of new car purchases? Depreciation.
Being the first to drive those few metres off the showroom floor can cost you up to 20% of the vehicle’s value on day one. With another 20-30% wiping off over the next three years. It’s the highest cost of owning a car and rarely one that we consider when choosing our next vehicle.
What’s the answer?
Not all cars are created equal, and not all drivers are either. It’s why we built our Total Cost of Ownership platform; it gives drivers visibility of all the costs associated with buying and running a car. From purchase price, all the running costs and using market-leading data to see the vehicle’s future resale value.
To adequately assess buying new vs used, you need to have all the information, things like;
- What kind of discounts can you get on the car?
- How will it depreciate?
- What are the expected servicing costs and when?
And when buying used you need to consider;
- How much registration is left on the vehicle?
- Is the advertised price including or excluding stamp duty?
- How much warranty does it have?
- How much tread is left on the tyres?
- When will the brakes need replacing?
When we factor in our buying power upfront, choosing a car that holds its value well, 12 months before a service cost or registration renewal and the assurance there won’t be any large, unexpected repair costs; buying new often has an equal or lower Total Cost of Ownership compared to buying used.
When should I buy used?
That doesn’t mean we always recommend buying new. When you factor in the increased tax benefits of shorter novated lease terms, there can be significant financial benefits in buying something a year or two old and only keeping it for a short period.
Doing this allows you to access thousands of dollars in additional tax savings, avoid the initial depreciation of buying new and then selling the car and realizing a large tax-free profit on disposal before the concerns of unexpected maintenance costs.
Everyone’s situation is unique but using our Total Cost of Ownership platform will give you a clear picture to help you make an educated decision in buying your next car.
Talk to our Employee Benefits team to build your Total Cost of Ownership analysis for your next car purchase.