Should You Buy A New Car Or A Second-Hand Car?
Cars are such a big part of our lives here in South Africa. Most of us either aspire to have one, or if we have one we aspire to have a better one. Which car brand do you think is the most desired? I would have guessed BMW, but I would have been wrong. Check out this list of The Most Searched for Car Brands in South Africa to find the answer.
A friend of mine recently asked my advice about buying a car and seeing as it’s been a while since I’ve written on the topic of personal finance, I thought I would share my opinion here too.
Many people see buying a new car off the showroom floor as an achievement. For some it’s even a life goal. And there is no denying that the feeling of driving a brand-new car with zero kilometres on the odometer is pretty great. The smell of a brand-new car is intoxicating (quite literally as there are a ton of chemicals used to put together the interior), and the knowledge that nobody else has driven the car before is quite comforting.
But that is a very expensive feeling and it wears off pretty quickly. Depending on the car brand and model, when you drive it off the showroom floor, it devalues by 20%. In other words, if you drove it home and then tried to sell it you would get 20% less than you paid.
Let’s put that into numbers to drive the point home (excuse the pun). If you bought a brand new car for R200,000 and drove it home, you would struggle to sell it for more than R160,000. In other words, that new car feeling would cost you R40,000. As I said, that’s an expensive feeling.
Many people want the peace of mind of having a service plan, so that they don’t have to worry about expensive repairs and servicing costs. That makes sense, and newer cars are generally more reliable, so there is some argument for buying a car new. But I always suggest a compromise. Don’t buy the car brand new; buy one that is 1 or 2 years old. That way you’re still getting the better part of a service plan, plus you’re saving that 20% or more of the value dropping when it’s brand new.
It’s a win-win situation, minimal risk and cheaper price. You’d be silly to buy brand new. Buying a recent model car will reduce the risk of engine issues, but it doesn’t matter what car you buy, you still have accident risk. Never drive a car that isn’t insured, it’s just not worth it. Having an accident without car insurance can ruin your life. I also believe you should keep your tyres and brakes in good condition.
I’ve always purchased second-hand cars, and it’s worked well for me. I recommend you do the same.
Thanks to Hippo.co.za for covering my time to write this article