Should you buy a new or second-hand car?

Buying a brand new car is a dream situation for many. It’s clean, it’s shiny and it has that great new car smell.

But if you’d rather buy more economically, and avoid paying the premium for being a car’s first owner, then you might want to consider going second-hand or even ‘nearly new’.

Depending on how you plan to pay for your car, you’ll be doing your initial cost comparisons using the large, one-off price or the monthly repayment amounts (if you pay on car finance).

However, there are lots of other costs that come into play when buying and running a car and they shouldn’t be overlooked. These include the car tax, a car’s fuel consumption, MOT costs and car insurance. In particular, the car tax and fuel consumption are often cheaper on new cars (which run more efficiently) compared to older cars.

Making careful decisions about these (and other) factors could save you a small fortune over the years that you plan to have a car - and you may even find a new car or higher spec used car is more affordable than you first thought.

If you’re planning on borrowing the money to buy a car, make sure you understand the different car finance options. It's worth carrying out an eligibility check before you apply for finance. Firstly, this will give you a realistic idea of what you can borrow before you set your heart on something you can’t afford. And secondly, it means you can avoid unnecessary credit checks which will protect your credit score.

Pros:

• You can get the exact specification of car that you want
• Generally speaking, new cars are safer and more fuel efficient thanks to the latest technology that’s rapidly entering the market.
• You’ll be covered under a manufacturer’s warranty (usually lasting 3 – 5 years)
• New cars are more reliable because there’s no previous wear and tear
• Lower running costs than older cars: so it’s likely to have a better fuel economy, fewer (if any) maintenance costs, no MOT to pay (for 3 years) and the car tax is likely to be lower too.
• You might be offered a better car finance deal that used car buyers won’t be offered

Cons:

• New cars are expensive (obviously). You pay a premium for being the car’s first owner.
• Most new cars lose up to 60% of their value in first 3 years, so if you choose to sell the car on, it’s unlikely you’ll be able to make back much of the money you’ve paid for it.
• If you go for a tech-reliant car you may find computer faults occur which can’t be fixed at the side of the road.

Pros:

• It will be much cheaper than buying a brand new car
• Because it’s cheaper, it helps your chances of affording a higher spec of car
• It doesn’t lose as much value as a new car, so if you choose to sell it on you’re more likely to get a good chunk of your money back

Cons:

• You don’t know the car’s history. You may want to pay for a history check which will allow you to verify the car’s details and check for things such as previous insurance write-offs.
• If you buy privately, it may be difficult to go back to the seller if something goes wrong with the car.

Nearly new cars are cars which are no more than 12 months old. Generally speaking, these tend be former dealership demo cars, company cars, hire cars, or may have been ‘pre-registered’ by the dealership themselves (in which case they may have never been driven).

Pros:

• The price will be lower than a brand new car
• Because you haven’t paid a premium for being the first owner, you won’t lose as much money in depreciation
• It’s likely to be in good condition
• It’ll still be covered by the manufacturer’s warranty, even if it’s for a shorter period than if you bought it brand new.

Cons:

• You will have to buy ‘off the rack’ – so you can’t demand the exact specifications you want
• If it has been driven before, you won’t know it’s history
• Because you’re technically the second owner, you won’t be able to sell it on for as much money as you would have if it were new – even if you were the first person to drive it.

There’s no right answer to this question. Some buyers prefer a new vehicle and are happy to pay for that privilege; others feel uncomfortable with a debt or monthly leasing cost and want to buy a car they can drive away immediately without worrying about depreciation.

If you’re not sure which option is best for you then it is worth prioritising what you want and doing the sums. The new vehicle may not be as out-of-reach as it first seems, or a second-hand car might enable you to buy a higher-spec model.