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Motoring
Should I buy a new or used car, and is a new car worth the extra cost?
There's a lot to compare when deciding whether to buy a new or used car. Use this guide to help decide whether buying new is cost effective for you.
One of the first and biggest decisions you’ll make when buying a car is whether to opt for a new or used vehicle. You might start by reading car reviews, and looking at the best small and compact SUVs or the cheapest electric cars in Australia, along with finding out about the best car safety features and real-world running costs.
You might have your heart set on a particular make or model, but realise a second-hand vehicle is your only option. Both new and secondhand cars have their pros and cons, and deciding which is the best option for you often comes down to individual circumstances, personal preferences, how you intend to use the car and how long you'll keep it before upgrading. If cost is your main consideration, buy the safest car you can afford and check the ANCAP safety-ratings for the cars within your budget.
When purchasing your next vehicle, consider comparing the following factors to help decide whether it’s better to buy a new or used car.
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What to consider when choosing between a new or used car
Upfront cost
Cost has traditionally been one of the major differences when comparing new and used vehicles, with large up-front savings often available by opting for a secondhand car over new.
These savings dropped significantly from mid-2020 to 2023 due to supply issues for new vehicles driving a demand for used. While demand for used cars remains high, increased new car supplies has returned some of the cost savings to the secondhand market.
According to the most recent Automotive Insights Report (AIR), the used car market in Victoria and NSW experienced a 13.2 per cent price drop in 2023 for vehicles between two and four years old. As of December 2023, the national weighted average for used car prices had a retained value of 67 per cent.
Be mindful of the age of the used car you’re looking at as well. Although it may seem counterintuitive, older models of reliable cars can be more competitive to purchase secondhand as their relative affordability generates high demand, resulting in fewer savings passed onto the buyer. Used cars purchased privately as opposed to through a used car dealership are often cheaper.
Finance options can also differ between new and used vehicles. Financiers often set limits on the age that a vehicle can be at the end of a loan period, so bear this in mind if you’re not planning to wholly finance your car yourself. You may be deciding between a novated lease or a car loan, and need to know the difference.
More: The best used cars to buy under $30K
Getting a vehicle inspection of a used car will help you make an informed decision about your purchase
Running costs and depreciation
Beyond the initial financial outlay, however, are the costs of running the new or used car once you drive it away.
These include fuel, servicing, potential repairs, registration, loan repayments and insurance.
The newer the vehicle, the cheaper these running costs tend to be. If you’re planning to buy a used car, choosing a more recent model, or one with fewer kilometres, is one way to help alleviate the vehicle’s overall running costs.
RACV’s Annual Car Running Costs Survey highlights some of the cheapest to operate vehicles on the market.
Also consider depreciation when choosing between new and used. New cars lose value fast, starting as soon as you drive them away from the dealership, while used cars may depreciate at a slower rate. This means you’re less likely to lose as much value on the vehicle if you resell a used car after a few years, opposed to new. If you envision using your car for as long as possible, depreciation matters less.
More: How to downsize to a small car that's cheaper to run
Reliability, condition and aftersales support
Even the best maintained used car can’t surpass the condition of a new vehicle straight out of the dealership, and there’s certainly no replicating a new car smell.
New cars are also covered under warranty and may come with roadside assistance and fixed-price servicing. The downside of this is that you may be restricted to servicing solely through the dealership.
That said, there are plenty of well maintained, pristine used vehicles on the market. You can make a confident used car purchase by taking steps such as requesting a Roadworthy Certificate (RWC) from the seller, as well as purchasing vehicle inspections and history reports.
Used cars under 160,000 kilometres and less than ten years old are also covered by a statutory warranty when bought through a licensed motor car trader (used car dealership). These warranties are fairly limited (they last either three months or 5,000 kilometres, whichever occurs first) but can provide some peace of mind to prospective buyers.
More: Are there lemon car laws in Australia?
Opting for a used EV may be a more affordable way of entering the electric car market
Choice of brand or model
Buying a new car means you can buy exactly the vehicle you want, down to the paint job and seat covers, in addition to the latest safety technology. You may have to pay a premium for these features however, and customising can mean waiting longer for that specific vehicle to ship, if its not currently in stock locally.
Purchasing a used vehicle doesn’t necessarily mean less choice, but it may mean you need to scour the market for longer to find a car that suits your wants and needs. It may require you to compromise on some features, but it may also allow you access to features that you never would have opted to pay for in a new vehicle. You’ll likely be able to drive your purchase home sooner than if buying new as well.
Brand new electric car sales in Australia have increased sharply in recent years, with Tesla, BYD and MG becoming market leaders. That also means there are more EVs on the used car market, with the MG4, GWM Ora, BYD Atto 3 and the Tesla Model 3 among the best used electric cars and SUVs to buy.
The information provided is general advice only. Before making any decisions, please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit racv.com.au. As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product(s) issued by Insurance Manufacturers of Australia Pty Ltd ABN 93 004 208 084 AFS Licence No. 227678.
