We all want to save money when it comes to the family. A little bit saved here and there could mean a bigger house, big holiday – or a bigger car. But striving for the larger house for the bubs may mean sacrifices in buying bigger things too – like your car. You may have outgrown a perfectly good car; but do you really need to buy a new one fresh off the dealer floor?
Most of us need to finance a car, even if we sell the old one or trade it in. But does it make the best financial sense?
Is buying a cheaper family car better for your finances?
Newer could be cheaper (and safer!)
When you buy used, the purchase price is lower than new. That seems obvious – but as we know, cars can be a money pit. If you need to finance a used car, lenders and brokers will feel a bit iffy. Older cars hold less value and are prone to wearing out or being written off.
Car loan expert and Savvy CEO Bill Tsouvalas says buying new has a lot of added benefits when it comes to finance.
“If you fear your bank or lender will say no to a used car, they’re more likely to say yes if you tell them you’re in the market for something completely new. New cars mean they have state-of-the-art safety features, fuel economy and other bells and whistles to keep the kids entertained and most of all, safe. Lenders don’t like older cars and you’ll cop higher interest rates compared with buying new.”
You’ll also be covered by a warranty and cooling off period – plus you get that new car smell!
Buying new also means less stress
If you’re buying used, you’ll have to do a lot of homework. Used cars may have patchy service histories and could be in worse condition than meets the eye. You’ll need to check logbooks, if you’re buying a write-off or a stolen car (which can happen – it’s why we have the PPSR), transfer rego, and pay stamp duty.
Dealers take all the stress out of this process – but be sure to negotiate well so you aren’t paying for extras that do nothing, such as ‘dealer delivery’.
Is certified used a happy medium?
When you drive new cars off the lot, they can lose 15-20% of their value instantly. One way to avoid this depreciation while getting all the checks and safety you need is buying certified used. These cars are no more than three years old, have been refurbished and checked, and come with an extended warranty. They are dearer than buying used but you are getting a lot more protection – and that you can’t put a price on.
This blog post is sponsored by Savvy
Bill Tsouvalas is CEO and Managing Director of Savvy. Savvy was named one of BRW’s fastest growing companies in 2015. Bill has dedicated himself to educating Australians on finance and economics, commissioning a Financial Literacy Survey in January 2020. He regularly writes on personal finance, business finance, and economics for a variety of blogs and websites. He is also patron of Kids Under Cover, a charity helping end youth homelessness.