Should You Buy a New or Used Car in SA?
Choosing to buy a car is a major financial decision. So what’s the best approach, financially speaking? Should you opt for a brand spanking new motor vehicle, or go for a good second-hand car?
Here we consider the pros and cons of buying new versus old, to help you make a decision.
Once you own a car (new or pre-owned), you can also use it to secure a short-term, asset-based loan with Pawn My Car.
Buying a new car: pros and cons
Of course, it’s nice to have a brand new car. There’s the shine, the smell and, of course, you get to choose the colour! But is new the most sensible option? We consider the pros and cons.
Advantages of buying a new car include:
- low maintenance costs, at least initially, thanks to a built-in maintenance plan and/or manufacturer’s warranty
- freedom to choose the upholstery material, the exterior and interior colours of the vehicle, and the accessories you want built-in; for example, you might fancy a sunroof, funky wheel rims or a high-tech navigation and sound system
- advanced safety features such as brake assist, traction control, roll-over protection systems and lane departure warnings
- lower fuel costs and emissions – newer engines are more fuel efficient and environmentally friendly
- lower interest rates than for a second-hand car, because the vehicle’s resale value is much higher and vehicle depreciation hasn’t set in.
New cars are expensive. Very expensive. In fact, there’s a significant cost disparity between new and second-hand cars.
Take the Hyundai Accent 1.6L as an example. A brand new model will set you back R279 900, while a four-year old car, with one owner and in good condition, costs in the region of R130 000.
Buy new and you’ll be liable for additional taxes, such as VAT at 14% and a carbon emissions tax of between 2.5% and 3%. Your insurance premiums will also be much higher on a new car.
Finally, a new car is not an appreciating asset. It loses value from the moment you drive it out of the dealership.
Buying a second-hand car: pros and cons
The price tag will be lower, but is buying a second-hand car significantly cheaper in the long run than buying a brand new car? The answer is, it depends.
Opt for a second-hand car and the most obvious benefit is less financial outlay. Vehicle depreciation is the main driver of lower prices. It’s pegged at approximately 50% or more over the first three years.
It costs less to insure an older car, and an older vehicle you buy from a private seller doesn’t attract additional taxes, such as carbon tax and VAT.
Thousands of car dealerships, both online and off, sell pre-owned cars of all makes and models, spanning multiple decades. So you’ll have a much wider choice of vehicle in your budget category than if you were buying new.
If you buy a second-hand car that’s only a few years old, a warranty or service plan may still be in place.
Opt for a pre-owned car, and you don’t really know what you’re getting. The vehicle you end up with could be a great buy or a complete lemon. Before you part with the cash, ensure the vehicle has a full service history and has recently passed a roadworthy test.
Older cars don’t have advanced safety features or other desirable high-tech gadgets and gizmos, and you might have to spend more than you expect to get the accessories you want.
Also, used cars are often out of warranty. So you’ll either have to purchase a used car warranty or cover maintenance costs from your own pocket. That means the overall savings you get from resisting the temptation of a new car could be less than you’d hoped.
With Pawn My Car, you can use a car that’s in your name to secure a loan quickly and easily, with no delays.