New or pre-loved car? Weighing up the pros and cons

It is always exciting to buy a car but how do you decide whether to buy a new or used car? You will pay less for an older pre-owned car, but it is difficult to say no to a shiny new vehicle.

The decision you make has a lot to do with the level of peace of mind you want, the vehicle you want to buy and the budget you want to stick to, Ernest North, co-founder of Naked, a digital insurance platform, says.

Advantages of buying a new car

Your car will have the latest technologies, which may include advanced safety technology, connectivity and comfort features such as automatic emergency braking, lane-keeping assistance and adaptive cruise control. This may help reduce insurance premiums as these features help prevent accidents and theft.

A new car will usually include a manufacturer’s warranty that covers repairs and replacement due to inherent defects, but these come with a time or mileage cap. This will give you peace of mind during the early years of ownership.

New cars often have a service plan that will cover basic maintenance for a few years. The cost savings may amount to thousands per year.

Your car is shiny and new with no wear and tear. Therefore, there is less chance of having to wait for roadside assistance.

You can configure the car, choosing the exterior colour, interior materials, advanced sound system and performance components that you want.

Many dealers are running great deals to move units. You can often get incentives like lower admin fees or an upgraded model for less.

New cars are designed for lower carbon emissions and run more efficiently on less fuel.

Disadvantages of buying a new car

A new car starts losing value as soon as you get behind the wheel. A new car may lose about 20-30% of its value in the first year and around 50% or more over three years. That loss looks even worse if you get financing and pay interest on a depreciating asset.

New vehicles are much pricier than similar used cars. Insurance premiums may be higher too. The extra lifespan of a new car might not justify the premium you will pay over getting a model that is a year or two older.

Dealers will often not haggle over prices because incentives from manufacturers are fixed.

The advantages of buying a used car

You can get more car for your budget. That means you can get a higher-end model or a car with more features than you could afford if buying a new one.

With a used car, there is a lot of information out there about the model’s reliability, pain points and performance over time in professional and consumer reviews.

Models that are new to the market might have unknown quirks and issues.

A pre-owned vehicle retains its value better than a brand new car. It has gone through that first year or two of steep depreciation.

Insurance premiums may be a little lower on used cars, but it might not be as much as you expect. Most insurance claims are for repairs and the cost of parts, labour and repairs can still be pricey for used cars.

Disadvantages of buying an older used car

Older cars may need more repairs. You can mitigate this by buying a used car with lower mileage.

It might not be under warranty anymore, which means you will pay for major repairs if something goes wrong.

You will need to fork out when the service plan runs out.

There is always a bit of uncertainty about the car’s past. Get the car inspected by an expert to check there are no major faults.

You will not be able to customise the car to your taste.