NEW VERSUS USED: ADVANTAGES AND DISADVANTAGES

BUYING NEW

The advantages:

• You have peace of mind, because new cars come with a full warranty, guaranteeing you against certain faults for a certain period;

• You know the history of the car and its condition; and

• Banks tend to offer better interest rates for new cars, because new cars have lower risk. The disadvantages: • It is estimated that, once a new car leaves the showroom, it typically loses 15% of its value, and about 10% of its value each year thereafter.

• Dealerships and finance institutions require you to have full insurance cover on the vehicle until it’s paid off, and the premiums are likely to be high on a new vehicle.

BUYING SECOND-HAND

The advantages:

• Someone else has paid the depreciation for you.

• You can buy the best car for the price you can afford. It is not unusual to find a late-model used car at less than half the cost of a new one.

• Some deals on recent-model used cars offer the remaining balance of the factory warranty, and the opportunity to purchase an extended warranty. The disadvantages: • One of the biggest disadvantages of buying a used car, particularly an older model, is that it may not be reliable, or it may need a lot of repairs.

• You’re likely to pay a higher interest rate on a used car.