One of the biggest financial decisions you must make is buying a used car or a new one. Both options have pros and cons that you must weigh carefully before choosing. In this comprehensive guide, we will discuss all the key factors you need to consider when deciding to buy a new car versus a used car.
Pros of Buying a Used Car
Lower Purchase Price
Buying a used car is significantly cheaper than buying a new car. More recently, AutoTrader data underscores new price growth again, but at a much slower pace. In May 2023, the average retail price of a used car in the UK increased by 2.8% (which still notably marks the 38th consecutive month of year-over-year growth).
Lower Insurance Costs
Insuring a used car costs considerably less than insuring a brand-new car. Insurance companies calculate premiums based on the vehicle’s value, so you save money by opting for an older model.
Lower Registration and Tax Fees
Registration fees and sales tax are directly linked to a car’s purchase price. Choosing to buy used means you pay lower registration and tax rates.
Faster Depreciation Has Already Happened
New cars depreciate the most in the first 12-24 months. With a used car, the worst of depreciation is already over, so your car’s resale value will depreciate slower compared to a brand-new vehicle.
A more comprehensive Selection of Brands and Models
The used car market provides a more comprehensive array of makes, models, customisations, colours, etc., versus limited options at dealerships selling new cars. This lets you find a vehicle that perfectly matches your tastes and preferences.
Cons of Buying a Used Car
Risk of Buying a Used Car
Without a warranty, used cars are more likely to develop mechanical problems or turn out to be lemons. Thorough inspection and test drives can mitigate, but not eliminate, this risk.
Shorter Life Span Left
The engine, transmission, electronics, etc., components of a used car have aged, so you get fewer years of functioning from your vehicle before facing replacement/rebuild costs.
No Modern Features/Technology
Used cars older than five years often lack modern tech features like parking sensors, lane departure warning systems, WiFi hotspots, etc., found in new models.
Problems from Previous Owners
Sometimes, used cars face abuse from previous owners, which can cause issues like failed components, smokey engines, worn interiors, etc. This can mean unanticipated repair costs.
Higher Interest Rates on Loans
Used car loans typically have higher interest rates than new car loans. Also, lenders approve smaller loan amounts for used cars, which impacts loan affordability.
Pros of Buying a New Car
Latest Features and Technology
New cars offer the latest performance, entertainment, safety, and efficiency innovations. These include blind spot monitoring, remote start, touchscreens, and lane-keep assist.
Reliability and Peace of Mind
New cars come with a manufacturer’s warranty. This warranty protects you from paying repair costs for mechanical defects or component failures during the coverage period.
Greater Customisation Choice
Ordering a brand new car gives you more flexibility in selecting the exact specs, colours, interiors and customisations you want rather than settling for ‘whatever is available’ with used vehicles.
Lower Maintenance Costs
The engine, battery, and components are all new in a brand-new car, so you can enjoy a few years of smooth running before parts need replacement.
Better Fuel Economy
Thanks to technological advances, the fuel efficiency for new cars has improved tremendously. Newer models deliver better fuel economy.
Higher Resale Value
New cars depreciate slowly during the first few years. So when you decide to sell your car after a few years, brand-new models have comparatively higher resale values.
Cons of Buying a New Car
Steep Depreciation
New cars experience significant depreciation—a sharp decline in value over the first few years. In the first years of ownership, it is widespread for new vehicles to rapidly lose value at a steep rate as they transition from being “new” to being “used” cars.
Higher Car Insurance
Insuring a new car fresh off the dealership lot is more expensive as premiums are based on the car’s original MSRP value rather than the current depreciated value.
Pay More Upfront
The apparent disadvantage is paying the total sticker price for a brand-new car rather than getting a hefty discount by buying a used one. This difference could be £10k or more.
Extra fees
Buying from a dealership means paying admin fees, documentation fees and other miscellaneous costs on top of the car’s sticker price. All this adds up.
Conclusion
Choosing between a new or used car depends on your specific circumstances – budget, mileage needs, expected ownership tenure, etc. Carefully analyse both options while keeping your priorities in mind. This guide clarified the pros and cons of buying new versus used cars in the UK.
