If you want to keep those payments as low as possible, you may be better off buying second-hand…
Turning the key on a brand-new car and driving it out of a showroom is something that many of us dream of. Between the gifts thrown at you by the dealership, the oversized ribbon on the bonnet, and the new car smell, it’s a sign that you’ve arrived.
Except more often than not, it’s a sign that you’re about to sign over a significant portion of your monthly salary to the bank for the next few years.
If you want to keep those payments as low as possible without compromising on the quality of the car you buy, you may be better off buying second-hand.
Perhaps the most well-known reason not to buy a brand-new car is the fact that it starts depreciating as soon as you drive it off the showroom floor.
While it’s a myth that it loses half its value at that moment, it is true that cars depreciate most when they’re new.
On average, cars depreciate at a rate of 15% to 20% in a year. In the first year, the depreciation will tend toward the higher end of that range but will incrementally lose less and less every year.
If you buy new, you’ll end up carrying the cost of that depreciation, something you won’t have to do if you choose to buy second-hand.
For an example of this, consider the fact that a brand new Hyundai i10 will set you back just under R180 000, while a 2017 model with just over 30 000km on the clock will set you back just over R136 000.
This depreciation factor also means that you can probably afford a nicer car with more features than if you decided to buy new.
There are, of course, exceptions to this rule with some cars increasing in value over the years – especially if they come to be regarded as classics. This is, however unlikely to happen to most of us.
New car perks
But what about all the perks that come with buying a new car? After all, many people choose to go the new car route because the purchase will come with a service plan and warranty.
Well, if you find the right deal, you can get a car that’s still within its service plan. And, if it comes down to it, you can sometimes purchase an extension of the service plan and still save money.
Alternatively, you can put away a portion of the money you’re saving every month and use that to pay for any services in the car’s future.
Similarly, warranties can be extended, or added to the cost of your second-hand car.
It is, however important to buy smart when it comes to purchasing a second-hand car. Remember, outside of a house, a car is the most expensive purchase most people will make.
While you might think you’ve found a great deal on an online classifieds site, you’re most likely better off buying from a reputable dealer.
Most dealers are also open to negotiating on price, meaning you could walk away with an even better deal than you thought you would.
Once you’ve decided on a new set of wheels, it’s worth getting it checked out by a reputable mechanic. The AA, for instance, offers full bumper-to-bumper examinations at eleven Technical Centres around the country in partnership with DEKRA, a German vehicle-monitoring organisation.
Spend your money elsewhere
Finally, even if you’ve got enough money for a brand-new car, there’s still incentive to buy second hand. The savings you get by avoiding depreciation mean you can do fun things like go on holiday or treat your significant other more frequently.
And, unless you hang around with a bunch of car snobs, chances are they’re not going to notice that whether your new set of wheels is a year or two old instead of brand new.
So go on, buy second-hand. Your wallet will thank you.