Guide to buying a new car

It is always exciting to buy a car, but how do you decide whether to buy a new, pre-loved or used car?

You will pay less for an older pre-owned car, but it is difficult to say no to a new car.

What is key thing is that your decision has a lot to do with your peace of mind, the vehicle you want and the budget, says Ernest North, co-founder of Naked, a digital insurance platform.

Advantages of a new car:

Your car will ship with the latest technologies. This may help reduce your insurance premiums as these features can help prevent accidents and theft;

A new car will include a manufacturer’s warranty that covers repairs and replacement due to inherent defects; and

New cars often have a service and maintenance plan.

Disadvantages of a new car:

A new car may lose about 20%30% of its value in the first year and around 50% or more over three years; and

New vehicles are much pricier than similar used cars. Insurance premiums may be higher too.

Advantages of a used car:

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

With a used car, there is a lot of information out there about the model’s reliability;

A pre-owned vehicle retains its value better than a brand-new car; and

Insurance premiums may be a little lower on used cars.

Disadvantages of an older used car:

Older cars may need more frequent repairs and incur higher service costs due to wear and tear;

Your car might not be under warranty anymore;

You’ll need to pay for the services when the service plan runs out;

There’s always uncertainty about the car’s past. The previous owner may have ditched it due to a hidden problem, so get the car inspected by an expert; and

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

Deciding between new and used

North says buying a car is a multifaceted decision where you must strike the right balance between your lifestyle needs, budget and your tastes.

“It’s a major financial decision that could affect your financial health for years. It’s worth thinking about why you want to replace or buy a car, what you’ll use it for, how much you’ve saved, how much you earn and what your ideal car will look like. Draw up a list of the pros and cons of buying new versus used to make the right choice for your needs,” he adds.