How to Make the Right Decision between a New Car and Second-Hand Vehicle

We all know that feeling. Bringing home a brand new, spick and span car that you've just picked up at the dealership. It's your pride and joy, with all the perks that come with a modern car. Naturally, you'll be content with your decision, but not everyone reaches the buying stage with as much ease. In this case, it's worth tallying the pros and cons when it comes to buying a new car and second-hand vehicle.

Depreciation or security?

New cars depreciate in value as soon as they leave the dealership. When buying for private use, you may not be able to claim depreciation as a tax deduction.

Many people ignore this substantial cost because it is a 'notional' cost, whereby there is no cash impact after the initial purchase. Nonetheless, you shouldn't overlook this cost, because a 40% haircut in value over the first three years is enough to dictate the flexibility of your ownership of said car.

Meanwhile, a new car offers security for a new owner. First of all, you are not buying someone else's mechanical problems.

Secondly, if you encounter any manufacturing faults, these will generally be fixed quickly at no cost under warranty, particularly with manufacturers' these days offering extended warranties of seven or even ten years.

Tying into this is a third point. Most of us need to take out a loan to pick up a 'new' set of wheels, even if it is second-hand. Typically, the interest rate on a new car is likey to be less than that of a used car, albeit this takes into account the higher purchase price that leads to higher interest costs over the loan.

The first owner of any car absorbs the steepest depreciation costs, so a second-hand owner benefits from a lower purchase price, a slower rate of depreciation, and lower insurance costs.

However, for all these savings, there are significant risks attached to buying a used car. These cannot and should not be overlooked. Not only is there a higher risk of incurring costs for unwarrantied repairs - and that owner's manual is not easily verifiable - but maintenance costs are likely to be higher due to the car's age. Do you really want to run the gauntlet with the risk of a major mechanical failure a;ways looming?


Pricing or features?

New cars, particularly those made in the last few years, are susbtantially safer than older cars, and often have desirable features that a second-hand vehicle might not be equipped with. This extends to the likes of autonomous emergency braking, reverse camera, rear-cross traffic alerts, blind-spot monitoring and much, MUCH more!

Some buyers achieve major savings while still enjoying most of the benefits of a new car by opting for a near-new demonstration model. In this case, you can find a car that is practically new but sold at a steep discount.

Alternatively, a 'certified pre-owned' vehicle can also bridge the gap between new and used. Pre-loved cars sold under this program are subject to rigorous inspection, and are usually covered by a manufacturer warranty.

At the end of the day, most buyers will come to a decision based on affordability. But the reality is, there are risks abound. You would almost be better served looking for a more affordable new car, than a discounted second hand that could be hiding all sorts of problems. If you do opt for a used car, however, be sure to have it thoroughly checked out by a mechanic before you agree to purchase it, and don't be afraid to walk away from the deal if things don't stack up.

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