If you’re in the market for a new set of wheels, chances are you might be feeling a little inundated with options.
You’ll need to consider things like the number of doors and seats, how much storage you require, the most suitable body type, the make and model, not to mention fuel-efficiency and extras. But one of the biggest decisions you’ll have to make is whether you want to buy a new or used vehicle.
While there are pros and cons to both, the real question is which is more cost-effective: a used car or a new one? It might be easy to assume a used car is invariably the cheaper option, but that’s not always the case.
It’s important to consider your personal circumstances when making big financial decisions like this one, but there are a number of ways a new car could be more cost-effective than a used one.
Potential cost-saving advantages of buying a new car
Most new cars come with a warranty of at least three years or 100,000km, whichever comes firsts, and this will typically cover the costs incurred by any potential defects within this period. A warranty like this should give you peace of mind knowing that you won’t be footing the bill for any major manufacturing issues.
While this is entirely dependent on the make and model, new cars can often be more fuel efficient than older comparable vehicles. This could save you money on the day-to-day running costs of the vehicle.
New cars often come with capped-price servicing, providing consistency and potentially making budgeting more manageable. Some new cars may even come with limited complimentary servicing with purchase.
When you buy a vehicle that’s had no previous owners, you don’t have to worry about whether it was properly maintained like you might with a used car. If you do buy a used one, there’s a chance it might have an uncertain history which you could potentially end up paying for out of your own pocket.
Competitive financing options
If you’re planning to take out a loan to help cover it upfront cost, you might find that new vehicles typically attract more competitive financing options. Lenders generally consider new vehicles to be less of a financial risk than used ones, since they’re less likely to break down or be written off. Because of this, lenders may offer lower interest rates and more flexible features on new car loans compared to used car loans.
Common money savers when buying a used car
Of course, what is arguably the biggest cost saver when it comes to buying a used car over a new car is depreciation. Depending on the make and model, new cars typically lose a significant amount of their value within the first few years. This means that there’s a good chance you might save money on the upfront cost of the car if you buy used.
But while the upfront cost of a used car might be the more appealing option, it’s a good idea to do your research and factor in all of the potential ongoing costs for both.
If you have a limited budget but want to make the most cost-effective choice for your circumstances, a near-new car could potentially be a good middle ground. Buying a car that’s only a year or two old could mean that
- it’s still under warranty,
- its running costs are potentially more affordable than an older car, and
- it’s generally less expensive than a brand-new vehicle.
Plus, if you’re looking to use car finance, some lenders consider sets of wheels that are less than a few years old to be ‘new’, meaning you could still have access to some of the more competitive loans.