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New or Old – which car to buy?

A first time car buyer is often confused about the car to go for. Should it be a new car or an old car? Taking a decision to buy a car is one of the discussed questions in most urban households today. Costs of the car are a primary factor for choosing one, the demands vis-à-vis affordability of the owner is equally important. However, there are benefits and downs in buying either of these cars. Let’s have a look how buying an old or a new car affects your pocket and drive.

New Car:

Benefits – The smell of freshness wafts through every corner of the new car. You are sure that it comes with a guarantee and without any mechanical defects. The car has been certified by the car manufacturer. It comes with a warranty and you can be sure that the manufacturer is bound to rectify it. It comes fitted with the latest gadgets and electrical wiring. It also sports the latest design in town.

Drawbacks – In case of new cars, drawbacks are few but very significant. The car cost much more compare to the used car price. The car depreciates by at least 20-40 percent the moment the car ownership papers have been transferred to you. The overall costs of the car including insurance, installing anti-theft devices and jazzy car accessories will drive the costs higher up.

Used Car:

Benefits – It comes with a lower price tag. You can actually get a 2-3 year old car for half the price quoted in the showroom. The difference in prices can be utilized to fit the car with the latest jazzy music and lighting systems. You can actually make the car a luxury vehicle for the same price. The depreciation is lower on a used car than on a new car. The re-sale value of popular models remains stable even when it changes hands 2-3 times. The insurance cost is lower compare to new cars.

Drawbacks – The technical competency of the car is shady. The usage and wear out of parts may be passed on to the new owner, without his knowledge. However, the risk of surprise can be reduced if the car is checked thoroughly, before the transaction is finalised. Also, it is important to make sure that the car ownership can be traced to the first owner. Otherwise you may end up with stolen cars, which can be confiscated by police without prior notice. Also verify if there are pending loans against the car. Else loan recovery agent could come knocking on your door. This could be a risky proposition. If the maintenance cost of the used car is higher than the new vehicles, this will drive up the overall costs of the car.

There is a significant risk associated with buying used cars. However, used cars form big business in the world particularly in India, where it is the first priority. The new car loans interest rates are anywhere from 12 percent to 14 percent, but used car loans interests start from 18 percent onwards. Also, the used car loan can get coverage of 80-85 percent or even lower while the new cars attract loan coverage of up to 90 percent.

When going for car purchase, it is always best to arm yourself with knowledge about interest rates, down payments, loan amount, processing fees, loan tenures and term of repayment. However, these issues come into picture only after the need for car and utility is clear in the mind of the buyer. Owning a car is still a prestige issue and a careful study can make it a comfortable experience.

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