Are second-hand vehicles worth your money?
The perennial question that plagues potential car buyers needs an answer and here is our take on where to put your money
“Do I buy new, or do I get a used car?”, this is the age-old question that has shaped driving destinies all over the globe. If you are a trust fund baby or are a victim of financial misfortune, the choice may be a little more obvious and this may not apply to you. But for the overwhelming rest, this is serious problem that often keeps buyers up at night and needs effective guidance. So, let’s get right to it!
It is all about the money!
It is quite simple really, new cars cost more than used vehicles, thanks to a market force called depreciation. For some people, this criterion is enough to make a decision. But wait, there is more to this story!
While it may seem logical that secondhand vehicles should enjoy lower interest rates when being financed, this isn’t true at all. Some manufacturers and banks may even go far enough to give you a zero per cent interest on a loan for new vehicles. As for used vehicles, it is marginally tougher to get a loan approved and the interest rates are higher on an average. But the silver lining is that since the principal amount i.e., the cost of vehicle is smaller, the EMI actually works out to be in your favour.
Also, with new car sales, the price is generally fixed (at least in this part of the world), and bargaining isn’t accommodated. But a holiday season or a shopping festival may help drop MSRPs temporarily. With secondhand vehicles though, ads on popular websites come with the tag “NEGOTIABLE” and sometimes in capital letters too. This means that there is some room to play, whether it is to match the deal in your head or suit your fetish for beating the seller on his expected residuals. You may even get someone doing a distress sale, which further gives you an opportunity to lower the asking price.
And let’s not forget insurance rates, which in the case of used cars is smaller simply because of a smaller principal amount, again.
The consensus is that a new vehicle loses about 15-20 per cent off its sticker price as soon as you drive it out of the lot. Some specific German vehicles take a bigger hit. And French, Italian and American vehicles are even worse. One can do their bit to retain the residual value like keeping the service history updated, keeping it clean, getting a saleable colour, but secondhand vehicles, especially those from Japanese marques and those older than five years, they tend to hold their value better over time than new vehicles.
New car feel and the colour compromise
There is nothing like the shine of a new car. And getting it scratched in the parking lot or a road accident is like driving a stake through the heart for most owners. But with secondhand vehicles, it does hurt when someone dents your panels by opening the neighboring car’s door too quickly, but not as much. The smell of new interiors is also why people like brand new vehicles, as opposed to a used vehicle which is often riddled with dirt and grime or is accompanied by the fear of dirt and grime.
With new vehicles you can pick almost any shade out of the brochure, unless they are reserved for specific models or they are a colour so unique the dealer is reluctant to bring them for the fear of not being able to sell. This allows you to match your motor vehicle with your personality. In case of used vehicle though, you’re at the mercy of the market and by that, I mean sellers who are probably selling black, white or silver vehicles since they are the most purchased vehicles. Do keep in mind that some of these colours also do a splendid job of hiding scratches, so pay a little attention when you go scouting.
Tech and safety features
New vehicles are usually accompanied by a current range of technological conveniences, gizmos and gimmicks as well, such as a larger screen or screens with better resolution or an auto stop/start feature, etc. And considering we are part of a tech-driven generation, regardless of age, most people want the latest and greatest to brag about if not to take advantage of. For such folks, new cars make sense. While slightly older vehicles may have some of the boxes ticked, but they may not support the full extent of capabilities. For example, some may have Bluetooth technology that supports phone calls, but not music streaming. That being said, you can source aftermarket bits and update your vehicles with things like portable navigation system, parking sensors or even a rear camera and monitor.
Much like technology, the new car has more compliant safety technology matching today’s regulations like crash ratings, more air bags, updated versions of things like ABS and more intelligent or smart features like lane keep warning and assist, forward collision warning and assist, etc.
Given that there is a run-in period which has been minimised or even eliminated by most manufacturers, the performance and efficiency will only climb as the kilometres go up, at least for the foreseeable future. In case of used vehicles, these figures are expected drop especially for cars with a mileage north of 100,000 kms. Also, with older vehicles, you will never know how the vehicle was treated, whether the driver drove with a lead foot or whether he completed oil changes on time, which also gets these numbers you further away from manufacturer figures.
Warranty and modifications
The big benefit of buying new is getting a comprehensive warranty that covers your vehicle bumper to bumper, besides the battery and wear-and-tear parts. And they are usually valid for three to five years; the latter is especially applicable for some Korean and Chinese brands. This kind of peace of mind is priceless for some buyers. While if you are lucky, you may find something suitable with warranty from a private seller; and while certified preowned showrooms provide warranty, they do not usually last long (usually one year) and the coverage is not as comprehensive.
Strapping on a turbo and changing the suspension bits almost certainly voids the warranty on a new car. Enthusiasts who like to tweak or get their ride tweaked, you may want to avoid this situation. The same goes for the average buyer as warranty is seen as a safety net, a sort of the insurance against bad build quality or missed quality check on the production lines… even if the vehicle has a bulletproof reputation like a Toyota or a Honda. With a secondhand vehicle, you have the opportunity to modify your vehicle to suit your performance and aesthetic eye. Can’t hurt a warranty that does not exist!
To each his own is what we have to say! Everyone lives a unique financial life and their requirements may be different. If you have the dough and prefer a relatively hassle-free vehicle, go for a new one. But to most, the sweet spot may be one that is a couple of years old, with few thousand clicks on the odometer that will negate the new car price tag while keeping the safety of a valid warranty.