New car vs used car: Which is a more beneficial option and when for car buyers?

Buying a car is one of the biggest and most important financial decisions most people make after buying a house. A car is not just about the looks or the flashy exterior. It's a major spending decision with long-term financial implications.

While buying a new car is the way to go for most people, as most middle and lower middle class individuals dream of owning a car one day, why not purchase your own, right? However, surprisingly, many people who can easily afford cars choose to buy used ones at times. Let’s take a look at why, and whether a new car would be the right choice for you or a pre-owned one.

Depreciation

People who choose to buy a used car, even when they can afford a new one, often take depreciation into consideration. New cars lose value quickly, most losing nearly 20% to 30% in the first year itself. Over five years, many cars lose over 50% of their original price. When one buys a pre-owned car, the original owner has already covered the steep depreciation seen in the early couple of years.

Upfront cost and charges

Buying new cars also comes with many additional charges like delivery, registration, showroom price, road tax, handling fees, and much more. These charges add up quickly and make a new car a much more expensive decision. However, if you go for a second-hand car, you can avoid these charges and save more in the long run.

Modern cars

Modern cars are reliable and durable, making 2-5-year-old cars perfectly functional. This makes old cars a better value for money. Many cars that are over a year old are mechanically sound, wouldn’t require high maintenance costs, and may be covered by warranty. If you have done a proper inspection of the car and checked the maintenance records before buying it, you can get yourself a quality vehicle at a reasonable price.

Insurance

As insurance premiums are based on a car’s value, you can get cheaper insurance on used cars. This means you’ll save more every year by paying lower insurance premiums as compared to a new car.

When should you buy a new car?

If you want the latest technology and safety features in your vehicle, buying a new car would be a suitable option. Additionally, new cars come with a full manufacturer warranty and no maintenance history that you’d need to worry about, making it a decent choice.

You can also personalise a new car however you want, and the running costs on a new car would also be lower. In terms of financing, you will get more options with better interest rates for a new car as compared to an old one.

So, if you’re low on budget and want to get a car with low depreciation along with more value for your money, buying a used car is a smart choice. On the other hand, if you want the latest features with personalised options and fewer worries about maintenance in the future, a new car won’t be a bad decision at all. It all depends on your needs and budget, but remember to evaluate all these factors before making any decision.