Buying a car: new vs second-hand

BRAND NEW VEHICLE DEPRECIATES MASSIVELY

If you’ve decided to buy a car you’ve probably asked yourself: do I buy new or used? Here are some important factors to consider when buying a car.

First, don’t compare apples with oranges. A vehicle with 200 000km on the clock simply won’t be in the same condition as one straight off the showroom floor. But, a one year-old car – that’s still new, and could be more reliable than one straight from the dealership. Any problems with a new car are usually experienced in the first few months; if you’re buying a used car with 30 000km on the clock, these will probably already have been sorted out. Consider, then, what you’re getting for the premium paid for a brand new vehicle if reliability isn’t a factor.

A new car depreciates massively as soon as it leaves the showroom floor, and there’s a big difference in price between a brand-new car and one that has only a few thousand kilometres on the clock. For example, a new car worth R200 000 could cost you R160 000 – a 20% depreciation, just a year later.

Of course, a car will continue to depreciate after that, but in increasingly smaller increments.

To encourage people to buy vehicles with lower emission ratings, government charges a carbon tax on the purchase of new vehicles. This is calculated on a vehicle’s CO2 output, so the bigger the engine, the more you pay.

For a small vehicle – like a Polo GP 1.2 TSI Comfortline with a CO2 emission of 117 g/km – there would be no tax at all, but for a gas guzzling workhorse like a Toyota Landcruiser 76 SW 4.5D 4x4 (303 g/km) you’d have to pay R13 725. These taxes apply only to new cars.

The only real reason you could have for buying a new car is that it would allow you to spec your car just the way you want it. Some would say that the warranty is also a good reason, but this is usually not true. If you bought a yearold car with a five-year warranty, the vehicle would still be covered for four years when you bought it, and by this point the vehicle will have already seen its greatest drop in value.

For these reasons we believe that cars between one and two years old are the best buys. They’re typically still under warranty, they represent good value and, because they are later models, they’re fuel efficient.

You can get a good deal with an older vehicle, but you have to be a little more careful in choosing your purchase.

Shirley Smith is Old Mutual Finance’s COO

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