New cars vs used cars
Should you buy a new or used car? Make the right decision and drive away without regret.
It’s the age-old question that every single car buyer needs to decide on: buy new or get a used car? Both have pros and cons, including some that you might not be aware of until it’s too late.
Generally, buying new carries all the advantages except price. As such, the question is whether the extra cost is worth the extra benefits.
This guide runs through each option in detail so you can decide what’s best for you, and drive away confident that you’ve made the right decision.
Pros and Cons of new cars and used cars
| Used | New | |
|---|---|---|
Price | Cheaper | More expensive |
Car options | Limited to what’s available | Wide and varied |
Required knowledge | Need to know what to look for in a used car | Need to know how to avoid expensive sales tactics |
Financing options | Fewer options | More options |
Information available | Typically general information only | Manufacturer stickers, documentation and more |
Warranty | Varies depending on the specific car | Manufacturer and dealer warranty |
Factors to consider when deciding between new and used
Price Vehicle options Required knowledge Financing options Information available Warranty
Price
The price difference between a new car and a used car depends on how old the used car is, what kind of model it is and the condition of the second-hand car. The best way to work out how much you’re saving by buying second hand is to look at how much the same vehicle costs when new.
However, it’s generally a very safe assumption that a used car should cost at least 20% less than a new model assuming it’s still in almost “as new” condition. This 20% depreciation occurs as soon as a new car is driven off the lot, and in the coming years it will depreciate more.
With the average cost of a new car being about $30,000, you can generally save at least $6,000 simply by buying used, even when taking advantage of various new car cost-saving measures.
This is the most prominent advantage of buying a used car, but you need to consider whether it’s worth the downsides.
Vehicle options when deciding on a new or used car
When you buy any car, your options are naturally limited to whatever’s being sold. However, with used cars, there are generally considerably fewer options. For example, you might find the right model in the wrong colour and might want to factor the cost of a new paint job into the price
You might not even be able to find the type of vehicle you’re looking for, or might spend a lot of time travelling a long way to check one out only to find that it’s an overpriced rust bucket.
Conversely, you might get lucky and find a used car that’s exactly what you are looking for with all the extras you wanted at no extra cost.
Overall, getting a new car gives you a lot more consistency. Once you do your research and check prices, you have the assurance that you’ll be able to find what you’re looking for. If you’re time-poor, this can be a distinct advantage.
Required knowledge
If you don’t know how to check a used car thoroughly, you’re at risk of buying a lemon. Fortunately, you can find checklists of what to look for to make it easier. However, there’s really no substitute for genuine experience, so if you’re unfamiliar with cars it might be safer to buy new.
The safety of new cars goes beyond protecting your wallet, as new cars also have the advantage of clear ANCAP safety ratings, which are only relevant for new cars. When assessing the driver safety of a used car, you’ll instead need to rely on USCRs and a general check of current safety features.
If you’re not a car person it can be nerve-racking to buy both used and new, but the risk is generally much lower when buying new.
Financing options for new or used cars
There is considerable overlap between used car loans and new car loans, and the same financiers will often let you purchase either kind of vehicle with the same car loan. However, the terms you can access are often determined on a case-by-case basis which can lead to differences.
You are often able to access lower rates for new car loans, but you’ll still be paying more overall, which generally means paying back more overall.
The terms of a car loan are individual to each purchase and each borrower. As such it can go either way and doesn’t clearly favour either new cars or used cars.
Information available
New cars come with a range of verifications from both the manufacturer and the dealer. An example is the yellow sticker on the windscreen that proves its fuel consumption, letting you make a more educated decision. You might not find it on used cars, and if you do there’s no guarantee that it will be accurate anymore.
ANCAP safety ratings are similarly reliable verification of how safe the new car is, tested under laboratory conditions. A used car might also be fraught with “invisible” problems you won’t notice until later down the track, like one airbag that won’t work.
When buying used, you should always do a car history check before handing over the money. This highlights any outstanding financing that may be hanging over the car and its service history, including whether it’s previously suffered significant damage that may not have been effectively repaired so much as covered up.
However, even a full car history check isn’t a substitute for the reliability you can get from a new car, it’s simply a way of getting a bit closer.
Warranty
Don’t underestimate the importance of this factor and the extent of its benefits. It can make an immense difference between used and new, and should also be considered when deciding between two used cars.
When new, a car comes with a warranty that guarantees reliability and satisfactory performance for a total of 20,000km driven since manufacture, or 12 months after initial purchase, minus 1 month for every 2,000km driven, whichever expires first.
If a used car meets the criteria, then it’s also protected by a warranty for however long it has left. If you’re tossing up between two used cars, it might be worth deciding in the favour of one if it still has a reasonable amount of the warranty remaining.
If the original owner purchased an extended warranty option, then this too might remain with the used car even after it changes hands, but you should check the actual warranty documentation to make sure.
However, with new cars, you’re entitled to the full warranty right from the beginning, so it’s predictable and guaranteed.
Used cars are considerably cheaper, but you’re not getting as much as you do with a new car. The question is whether those new car benefits are worth the extra cost for you.
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