Average Australian Mortgage Size in 2023
29 Nov 2023
A car is a major purchase and if you are considering buying one, you might be asking yourself, should I buy a new or a used car?
The truth is there are advantages and disadvantages for both options.
Check out our list of pros and cons to help you make your big decision.
There is no doubt that buying a new car comes with a good dose of peace of mind. A new car will be more reliable and less likely to break down or need repairs. And if anything does go wrong, your new car warranty (usually three to five years) will have you covered.
Most new cars come with a certain amount of warranty based either on total kms or for at least three to five years.
If you plan on selling the car within the warranty period, it usually passes onto the new owner which can help you sell your car faster.
One of the biggest benefits of buying a new car is the freedom of to choose exactly what you want. Everything from the make model to the choice of colour and specification level is up to you (so long as it fits your budget).
New cars also come with the latest developments in safety features and fuel efficiency, making them safer to drive and cheaper to run.
A new car will be fitted with the make and model's most up-to-date technological features, so if driving with all the latest gadgets is important to you, there is no going past a new vehicle.
You also get to customise the car to your exact liking including which accessories and extras you'd like to add.
Coming straight from the factory, there will be no history or hidden problems or previous owners having made their mark on the vehicle.
Despite popular belief, insurance on a new car might also be cheaper than on a used car thanks to those latest safety features . It's worth checking the price difference with your insurer so you can factor this into your financial costs and decision making.
For car loan lenders, it's easier to determine the value of a new car compared to a used car. As a result, there's usually stronger finance deals for new cars.
So, if you're looking to get a car loan to help in buying your next car, make sure you take into account the total cost of the monthly payments under different rates as it could affect which one ends up as the cheaper option over time.
And while it might not be a deal breaker, there's no doubt there's something about that “new car” smell that makes it hard to resist.
By now you might be thinking, why on earth wouldn't I buy a new car? Before you get too excited, check out the cons below.
Aside from the expensive upfront cost, new cars depreciate in value the moment you drive them out of the dealership with some estimates at a whopping 20 per cent. After the first few years, the value of your car could drop by half or even two thirds.
If money is tight or you're trying to save, the disadvantages of depreciation alone could be enough of a reason to buy a used car instead depending on how long you're planning to keep it.
If you like to upgrade your vehicle every few years or so, buying a used car just a few years old could save you a load of money. However, if you're planning on keeping your car for a long time, you're more likely to get value for your money purchasing a new car.
Once your warranty runs out, your new car and all its latest parts and technological features could cost more to repair than an older used car.
If you're buying a new car, you might have to wait weeks or even months until you're sitting behind the driver's seat.
If it has to be ordered from the factory and delivered from overseas, shipping times can delay the arrival of your highly anticipated purchase.
For some buyers this simply isn't an option, especially if their current vehicle has broken and they need to get back on the road quickly.
As a more affordable option, buying a used car could save you thousands and thousands of dollars. If you've done your research and found a car with low kilometres (about 15,000km to 20,000km a year is a good guide), that's had all of its services, that test-drives well and that's passed an independent vehicle inspection, you could be onto a winner.
One of the biggest downsides of buying a new car is the impact of depreciation as soon as you drive it off the lot.
When buying a used car, most of that depreciation will have already occurred. By buying used and avoiding depreciation, you could also afford to buy a recent prestige model with all the added extras and features (think leather seats, sunroof, reverse camera etc) for the same price as a new basic model.
You can also give yourself a pat on the back for helping the environment by buying a used car instead of a new car. Although new cars often use less fuel, the amount of pollution generated during the manufacturing process is only offset by the better fuel economy if the car is used for longer.
If everyone upgraded their car every couple of years, it wouldn't be doing the environment any favours.
Buying a used car comes with the risk that it might break down or need repairs, sometimes within a few months of purchase.
It's also more likely to spend more time at the workshop, so if you can't afford to be without it for a few days here and there throughout the year, buying new might be a better option.
Services are more likely to show up repairs that need to be made on used cars as the kilometers start to rise, so be prepared for the costs. Insurance could also be more expensive on your used car, so be sure to compare prices and factor these into your costs.
Another disadvantage of buying a used car is finding flaws or faults you might've missed before you purchased it.
While you can often get a vehicle history report for a used car, if one isn't available there's a risk you're buying a car with unknown defects.
Windows that don't operate correctly, seats that get stuck when you try to move them back and forth, sun visors that droop, air-conditioning vents that don't hold position, compartments that don't open or close properly, stains and scratches you missed – the list is endless when buying a used car.
Unlike new cars, where dealerships can offer a wide range of makes, models, and specifications, there are likely to be fewer options on the used car market. With limitations on supply, buyers may have to compromise on certain factors like colour or different available features.
Whether buying a new car or a second hand car, the important thing to remember is that everyone is different. What is right for someone else and suits their circumstances might not be right for you.
We all make decisions based on different grounds, so don't worry if you're making a different choice to well-meaning family members, friends or the local mechanic offering advice.
At the end of the day, the right decision is the one that is right for you.
If you’re looking to buy a car with finance, why not see if you qualify for one of our low-rate car loans online today?
Alternatively, speak with one of our car loan specialists today to find out what would suit you best.
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.