New car vs used car: Which is better to purchase?

Used car vs new car: Which is a better option?

One of the main reasons to consider a second-hand vehicle is that it costs less than a new car. In other words, the value for money proposition is relatively high, provided you manage to buy a used vehicle that is in good condition. But is it a good idea to go for such an option? To understand which is a better purchase, you need to look at the difference between the key parameters of both types of cars.

Refer to the table below for the key differences between an old car and a new car.

*Note: The differences are mentioned assuming that the new and used car is of the same make/model or the same segment.

Advantages of buying a new car

Apart from the experience and pride of owning a brand new car, purchasing a new vehicle has several other advantages that are listed below.

• Reliability: A brand new car is highly reliable as it comes with the latest technology. It is highly unlikely that your new vehicle will suffer any issues. Modern cars come with good build quality and high-quality components. Hence, buying a new car ensures no concerns related to reliability.

• Latest technology and features: Another main advantage of buying a new car is that you get to experience the newest technology and features. It includes creature comfort features, new technology, safety features, etc. 

• Low maintenance cost: A new car requires significantly less maintenance, at least for the first six months to a year or for the first 1,000 kilometers. You will also have free services, and the number of such services varies from one brand to another. Hence, the overall cost of maintenance is less.

• Low-interest rates on car loans: When buying a new car, you can avail attractive financing offers. The interest rate for a car loan for a new vehicle is lesser than a loan on an old car. Financial institutions also come up with exciting deals on new car loans during special occasions.

• Warranty coverage: You get standard warranty coverage when you purchase a brand new vehicle. The warranty package covers the major components of the car. Some brands may even provide additional coverage, such as roadside assistance free of cost when buying a new car.

Disadvantages of buying a brand new car

Here are some of the cons of buying a new vehicle.

• Expensive: Buying a brand new vehicle is a costly affair. No matter which segment it belongs to, a new car commands a higher price than an old car. An expensive price tag could be a deal-breaker if budget is the main concern. However, you get a reliable, new and low maintenance car for the price you pay.

• High car insurance premium: New cars also command a higher car insurance premium. The premium depends on the value of a vehicle, and the value of a new car is higher than a used car. Hence, you have to shell out a higher premium to insure your brand new car.

• High depreciation rate: A new car depreciates faster than a second-hand car. That’s because a brand new vehicle loses most of the value in the first few years of ownership. As soon as you drive your new car out of the dealership, it may lose its value by around 8 to 10%. However, if you wish to own a car for a very long time, depreciation should not be a concern.

Advantages of buying a second-hand car

Below are the benefits of buying a used car.

• Affordable price: A second-hand car commands a lower price tag than its newer counterpart. That’s because of the depreciation that the vehicle goes through over a period of time. Hence, you may be getting more value for your money if you manage to find a good used car.

• Low car insurance premium: Since the market value of an old car is lesser than that of a new vehicle. The car insurance premium is also on the lower side. So, insuring an old vehicle costs less than insuring a brand new car.

• Low depreciation rate: A new car loses a chunk of its value in the first few years of ownership. So, when you buy a used car, the previous owner will take the depreciation hit. If you maintain your used car properly, you may still get a good value if you wish to sell your second-hand vehicle.

Disadvantages of buying an old car

Below are some of the disadvantages of buying a used car.

• No warranty coverage: An old car may not have warranty coverage, depending on the age of the vehicle. Since a used car is prone to reliability issues, having no warranty coverage can increase the maintenance costs.

• High maintenance cost: As mentioned earlier, an old vehicle is less reliable than a new car. Moreover, you will not have the benefits of free service. Hence, the cost of service and repairs can run high. It would be best if you also accounted for the costs of replacing key components of the vehicle in the long run.

• Lacks new features and safety technology: An old car may not have all the modern features and safety equipment. Hence, you may miss out on that aspect if you decide to own a second-hand car. Also, an old car may be less safe, depending on the safety features on board.

New car vs used car depreciation

A car is a depreciating asset. Hence, it loses its value over time. In the case of a brand new vehicle, it loses most of the value in the first few years of ownership. So, if you wish to upgrade the car within a few years, you may account for the depreciation factor and buy a car that retains maximum value over time. You can also read about the cars in India with high resale value if you are planning to upgrade the vehicle within a few years.

The depreciation factor is not so significant in terms of an old car. That’s because a used vehicle has already lost its value in the initial years of ownership, and the depreciation rate is lower for an old car. So, you can manage to recover most of the value if you wish to sell your second-hand car.

New car vs used car interest rates

Car loans have made car buying much more feasible for the masses. Yes, you can easily avail of a loan and buy a car of your choice. It is one of the most sought-after modes of financing a new vehicle with attractive deals on car loans.

However, when it comes to new cars vs used cars in India, car loan interest rates take different paths. Generally, the interest rate for a loan to purchase a new car is lower than a loan to buy a used car. Financial institutions also offer flexible tenures for a new car purchase loan. In contrast, such benefits may not be available for a used car purchase loan.

Used luxury car vs new economy car

We have already covered the pros and cons of buying a new and used car in India. By now, you should be able to pick the right choice when it comes to a used luxury car and a brand new economy car.

However, if you're still confused, here's the answer. A new economy car is the best choice if you are concerned about the price and maintenance cost. The price also depends on the make and model of the new vehicle and the second-hand luxury car. So, it depends on your requirements. But at the end of the day, a new car would be a sensible choice as it will deliver superior performance and needs minimal maintenance.

Also, read: PDI Checklist for Used Cars

Frequently asked questions

Explore more:

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2. How to sell a used car in India?

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