Dear Lifehacker, I’ve been saving up to buy my first car for a while and I’ve just hit $10K, which is more than enough to buy something second-hand. However, I’m not sure if I should keep saving to buy a new car instead. I need something new enough to be able to connect to my phone, and something which won’t cost too much in repairs in the next few years -- so is it worthwhile to keep saving to buy new instead of second-hand?
Thanks, Jessica Meadows
Hi Jessica! Choosing between a used car and a brand new one is a tricky proposition, because there are so many different elements and considerations to balance against each other. At your budget, though, it's far more reasonable for you to consider a second-hand car -- but a good one. You can buy terrible old used cars, or you can buy used cars that have barely even been broken in. It's easy to think of all second-hand cars as junkers and new cars as perfect, but the far more rational middle-ground to take is to get a used car that's been well taken care of. Someone else has taken that initial hit of depreciation, but you're still buying a car that is modern and current.
If This is the first car that you've purchased at all -- if it's one that you're going to learn to drive on, or if it's your first few years of driving -- then I think there's a big argument for not buying a pristine brand new car. You're going to bump into a few things, you're going to crunch the gears a bit if you're learning to drive manual (and you should, by the way). It's inevitable. The more you spend, too, the larger that first pang of pain will be when you accidentally park into the car in front of you; you can lessen this by buying something with a couple of dents and scrapes pre-applied.
If you're thinking of saving more to buy a brand new car, too, you'll be buying at the lower end of the market -- which means you'll be making sacrifices. Not in reliability or build quality, because even cheaper cars are pretty damn well put together these days, but in the features and extras that the car comes with. If I was buying a brand new car in 2016, I'd want it to have the features that have become popular in 2016 -- Android Auto and Apple CarPlay, LED headlights, active stop/start, adaptive cruise control, and so on. You won't be able to get these at the low end of the brand new car market, so a used car is a more rational choice.
The main appeal of buying a new car is buying one with a warranty, and having the advantage of capped-price servicing for the life of that warranty period. You can get the lion's share of this, though, by buying a still-reasonably-new used car from a brand that offers a long, comprehensive warranty while the car you're buying is still in its warranty period. In Australia, Kia has had a 7-year warranty for a few years, and brands like Hyundai and Mitsubishi offer strong competing 5-year terms too. Choice has a great explainer on warranties here.
We've got a healthy used car market in Australia, both for well-used cars and ones that are only a couple of years old. A good compromise for you might be buying a car that's being sold off a novated lease -- a (usually) three-year lease popular with business owners and employees, where a brand new car is run and maintained by its purchaser and then sold privately at the end of that three-year ownership period. Novated lease cars are usually maintained and serviced as part of their contracts, and when the lease period ends the new owner should have the option to extend the factory warranty to cover any potential future faults.
A car that's three years old is (probably) going to have Bluetooth and an auxiliary jack for your phone, it'll probably just be coming out of warranty if it's a European model or still within warranty if it's Korean or Australian, and the lessor will almost certainly have kept it serviced and running properly due to the terms of the lease. I bought my car straight off a novated lease, had the option to extend the factory warranty, and had the peace of mind that everything was running correctly and the sale itself was above board.
My advice to you would be to check the prices of mid-2014 Hyundai Accents and Toyota Corollas and Honda Jazzes and Ford Fiestas. They're all perfectly reasonable small, fuel-effcient, well-regarded city cars that should have decent included features -- and should be around the right age to be coming off novated leases with the option to extend the warranty still available if you want it. As always, do as much research as you can and ask plenty of questions before you agree to buy anything. And get all of it in writing!
And there's another point. If you want a car that won't cost you much in repairs over the next few years, but you want something new, think about learning to take care of basic maintenance on your own. In my opinion, there's no excuse for paying someone else to change your brake pads or rotate your tyres or swap out your wiper blades or change your oil/fuel/air filters -- buy the parts yourself, learn how to do it, and save yourself hundreds of dollars. The only exception to this is if your (brand) new car is still in warranty and you want that stamp in the log book to help your resale value later.