Choosing between a used and a new car
Mark Bristow
- 4 min read
Buying a new car often comes with advantages, like a warranty, access to more modern features, and often easier loan options. But it’s also typically a more expensive option compared to purchasing a used car.
If you’re deciding between buying a used or new car, looking at the pros and cons of each can help you with your decision.
Disclaimer
This article is over two years old, last updated on January 18, 2023. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent car loans articles.
New car pros
- Choice: When you’re in the market for a new car, you may be able to choose your preferred car make, model and colour. You may also be able to customise the vehicle by adding or removing features, benefits and extras as required. Even if your preferred vehicle isn’t currently in stock, you may be able to place an order so that you can start driving upon delivery.
- Warranty: A new car should be free from defects or mechanical issues, as it hasn’t had a chance to experience wear and tear. Most new cars are also sold with a warranty, ensuring that any faults or problems you encounter with your new purchase can be repaired or replaced if necessary.
- Lower car loan rates: Interest rates on loans for new cars are often lower than those for used cars. This is because lenders are usually more confident that a new car will retain its value for longer than a used car, which can help to secure the loan in case of a payment default. Plus, newer cars are less likely to be written off after breaking down.
New car cons
- Pricing: New cars generally cost more than used cars, and depreciate in value rapidly over the first few years. Even if you can get a lower rate on your car loan, you’ll still be paying off a vehicle with a higher price tag.
- Delivery delays: Depending on the level of demand for new cars, you may have to wait for your new vehicle to arrive. During the pandemic, at the height of supply chain disruptions, delays on new car orders were so long that they were driving up demand (and prices) for used cars.
- Loan limits: Some secured car loans are only available for purchasing particular makes and models of new cars, so the lender can be confident that the vehicle will retain enough value for long enough to secure the loan. If you’re buying a new vehicle that falls outside a lender’s standard criteria, you may find it harder to get a car loan approved.
Used car pros
- Pricing: Used cars are generally cheaper than new cars, due to their age, depreciation and general wear and tear. Generally, the older a car is and the more kilometres travelled, the lower its price may be. There are exceptions, such as when you’re talking about prestige or classic cars.
- No delays: If you find a used car for sale in the make, model and colour you prefer, with the features and benefits you want, in most cases you should be able to drive it away without having to wait. And if you can’t get what you want straight away, it’s possible that exploring the second-hand market a little further, you may stumble across something closer to your preferences.
- Dependable: Provided a used car has been well maintained, it may be as reliable as a new car, especially if it’s a popular model with plenty of access to servicing and spare parts.
Used car cons
- Limited options: Buying a used car means being at the whims of the used car market. If there aren’t any of your preferred vehicles available for purchase in your area, you may need to reconsider your options or look further afield.
- Requires some experience: Unless you’re familiar with cars, it may not be easy to spot signs that a used car hasn’t been well-maintained, which could mean being affected by mechanical issues later on. While newer used cars may still be under warranty, it’s more likely that repairs for broken down used cars will come out of your own pocket.
- Higher loan rates: Used car loans may have higher interest rates than new car loans, as lenders may consider used cars to be riskier. As well as their lower value making it harder to secure a loan, used cars are more likely to break down or be written off due to their age and wear and tear.
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This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.
Mark Bristow
Personal Finance Editor
Mark Bristow is RateCity's Senior Finance Content Producer, and an experienced analyst, researcher, and producer. While primarily focused on Australian mortgage and home loan expertise, he has experience across energy, home and travel insurances. Mark has been a journalist and writer in the financial space for over ten years, previously researching and writing commercial real estate at CoreLogic. In the years since, Mark has worked for the Winning Group, Expedia, and has seen articles published at Lifehacker and Business Insider. Mark has also completed RG 146 (Tier 1), making him compliant to provide general advice for general insurance products like car, home, travel and health insurance, as well as giving him knowledge of investment options such as shares, derivatives, futures, managed investments, currencies and commodities.
