Buying a new or used car, which is right for you?

When you’ve decided it’s time to buy a new, or new-to-you car, there are so many options available. There are over 50 car brands available for sale in Australia with 612,155 passenger vehicles and SUVs sold between January and October 2019. One of the biggest decisions to make is whether you’re going to buy new or used. The trick is to decide what options you want, what’s important to you and how much you’re willing to pay. There are advantages and disadvantages to buying both new and used cars, so how do you know where to start?

The first step is to determine your necessities and nice-to-haves. These are the things you can’t live without – seven seats for a large family, towing capacity or payload for moving heavy items or warranty for peace of mind. There are also the extra features such as a reversing camera, built-in sat nav and connectivity options such as Android Auto or Apple CarPlay. Knowing what you want and need will help you narrow down your search to the right makes and models.

The next step is to determine how much you can afford to spend. Understanding your budget will play a big part in your search because used cars for your chosen make and model will be cheaper than their brand new counterparts. You should also factor in costs such as insurance, stamp duty and any dealer or lender fees and interest rate if you’re financing the purchase.

What to look for when buying a new car

Price will be the first thing you notice when you start looking at new cars and how they compare to older models. There can be differences in the thousands of dollars between the current year model and the previous year’s.

However, what you get with that new car price tag could be worth it to you. New cars in Australia are required to come with a warranty – the length and condition of which can vary between manufacturers. New cars are also more likely to come with the latest safety features and in-car technology.

One of the reasons there is such a discrepancy between the price of a new and used car is depreciation. Motor vehicles are some of the fastest depreciating assets you can buy, meaning that you’re losing money from the moment you drive out of the showroom. New models lose most of their value in the first few years, and the decline in value levels out after about three to five years.

There are no hard and fast rules on depreciation rates, but unless you’re driving a classic or rare model, there is little chance you will make money on your car when it comes time to sell it. That being said, buying a car from a reputable brand and keeping it in good condition can help maintain the resale value.

If you’re trying to decide between a few new car options, here are some things to consider:

• Length and conditions of the manufacturer’s warranty
• If capped price servicing is available
• Trade-in or resale value when it’s time to upgrade
• Total finance cost, not just the sticker price
• Length of time it will take to pay it off

What to look for when buying a used car

If you’re basing your decision to buy solely on the cost to purchase, a used car will likely be your first choice. A late model used car stands a good chance of being cheaper than the brand new version, and depending on how the model has changed, it may come with many of the same features. According to finder, you may be able to save at least $6,000 by buying a used car in ‘as new’ condition.

Make sure you do your research. Look into everything from the recommended price using a guide such as redbook.com.au, to reading reviews and working out the ongoing running costs such as regular maintenance and repairs. Safety features should also be a consideration because older cars may not have the same technology as more modern cars.

You’ll also need to decide if you want to buy a used car from a dealership or through a private sale. Depending on which state or territory you live in, and the dealership’s policy, the used car may come with a warranty or dealer guarantee. While you might be able to negotiate a better price with a private sale, you’ll be missing out on the peace of mind that can come with buying through a dealer.

If you’re thinking of going the used car route, here are a few things to consider:

• Is there a warranty available, either through the dealer or from the manufacturer
• Service and accident history
• Safety and comfort features compared to the current year model
• Amount of kilometres
• Are you getting the best price
• Making the right decision

What you decide to buy will ultimately come down to your needs, personal preferences and circumstances. While these are different for everyone, one common thread is that paying cash will usually be the cheapest option because you won’t have to worry about interest or fees associated with taking out a loan.

If you can’t pay cash for your car, finding the right finance is important. Like you’ve done with choosing the right make and model, take your time choosing the right lender and loan. Compare interest rates and fees, loan types, early repayment penalties and refinancing options to make sure you’re getting the best deal.