Budgeting

The allure of a new car is too much for many of us to resist, yet your cash will go further with a good second-hand vehicle. We weigh up the pros and cons of buying a vehicle fresh off the lot.

For buying a new car

Reassurance

You know what you’re getting when you’re buying new. Sure, there may be a chance of a mechanical glitch soon after purchase, but buying new from the dealer protects you if you purchase a “lemon” – a vehicle with some serious, unheralded problems. Also, new car warranties now extend out to five years – just about the average holding period for car owners. Used car dealers, on the other hand, offer more like three months.

Satisfaction

When you buy new, you get the car you want. Saving thousands of dollars may not seem like such a great deal if it means you have to wake up every morning to a mustard-coloured monstrosity in the garage.

High-tech

There are some important features in the latest cars: new generations of frugal petrol engines, reverse-parking cameras or iPod connectivity and Bluetooth. Electronic stability control and side curtain air bags are becoming the norm even in cheaper cars. “The vehicle will be hard to sell in the future if it doesn’t have those sorts of things,” says NRMA’s senior policy adviser, Jack Haley.

Good value

Which brings us to the next fact: you get more for less these days. Indeed, light cars are cheaper now than they were 15 or 20 years ago. Drive editor Toby Hagon pointed out in The Sydney Morning Herald that a current model Toyota Yaris costs $15,690. Its 1996 equivalent – the three-door Toyota Starlet – cost $16,990 new, and came without the stability control and Bluetooth connectivity of Toyota’s modern small car.

Make a deal

If you’re smart about it, you can get a great deal just before the launch of an updated model. If the soon-to-be-outdated version ticks all your boxes, or the new one doesn’t seem to offer much extra, then wait for the run-off sales and you can save thousands without having to take a gamble on a second-hand car. In fact, there’s generally more wiggle room with new car dealers, who get sent vehicles from the car companies and can find themselves overstocked and desperate to sell. A used-car dealer can be more discerning with inventory.

Against buying a new car

It’s a lot of money for a nice smell

Want to know what the thousands of extra dollars you shell out for a new car buys you? Three words: new car smell. It’s nice, but it’s not that nice, and it doesn’t last anyway. NRMA’s Jack Haley reckons that a new car loses about half of its value in the first three years on the road. And you can bet that a good chunk of that depreciation happens the moment you roll out of the dealership.

Bigger model

You can trade up to a bigger and better model if you buy used. This may be particularly useful if you have a growing family and need to add some more room to accommodate your expanding brood but find all you can afford new is a Honda Jazz. Alternatively, shopping for older models may expand your universe of potential purchases to include luxury vehicles that still look classy even years after their birth date. Be careful though to factor in higher service and insurance costs associated with high-end vehicles.

Perfect timing

A canny buyer should purchase a vehicle that is three or so years old. At that vintage, the rate of decline in price has slowed, yet you can still look forward to years of reliable driving. The cherry on top is the potential for a couple more years of manufacturer’s warranty.

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Buying from a franchise dealer greatly reduces the chance of getting a second-hand dud. Dealerships need to maintain their reputation, so they are choosy about which vehicles they stock. They also offer a short warranty on most of their inventory. Franchise dealers also represent the brands they sell, and they know that car companies will not be impressed if anyone is damaging their brand by selling dodgy automobiles.

Inspection

Your chances of buying a lemon from a private seller can be dealt with by making any offer conditional on the vehicle passing an inspection to make sure there are no nasties lurking under the hood. These checks can cost a bit of money to get done, but could also end up saving you thousands of dollars.

Si view: Being a smart investor means using your brain rather than your heart. And, as we suggest above, a three-year-old car with low mileage and a couple of years warranty could be the right trade-off between the performance of a new model and the price of a used one.

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