Used car versus new car – a debate

Dude, you know what I own an ANHC. What is it that you own? A Maruti Alto. Obviously the listener would give more weightage to the former person. By the way, ANHC is the acronym for all new Honda City. But wait a minute, did the first person tell the second one that the Honda City is actually a resale item which he brought from a used car dealership? No and there is no need as well. When a person meets you for the first time, he never asks you if you have brought this car new or on a resale. For a first time buyer, the debate is always there. Should I go for a new car or an old one. The latter because I am not so well versed in driving and if it’s a new car, then if I ding it, then I would be in deep shit over the maintenance factor. Here is yours truly shedding some light onto this deeply debated issue.

Registration price is a much higher price than say maybe the usual down payment one pays for a new car. If one is to buy a used car then keep this factor in mind that the first owner has already paid for it. He or she has already borne the cost of it and that is one burden less off your head or may be your pocket. Depreciation also pays a big role in determining the cost of a purchase. If you purchase a new car, the moment you step out of the show room and decide that you would rather go for another car, the show room would direct you to its used car arm. Because a new car depreciates upto 10 percent, the moment you take it out of the show room. Never mind that it hasn’t even crossed the 10 kms mark. If you are of those types who would rather go in for a car every year, then beware of the 20 percent depreciation which steps into play. This is one cost which is even bigger than say, the fuel cost or even maintenance of the car itself. Buying a used car means that you have fortified yourselves from the hands of depreciation, albeit not fully.

If your budget is not so generous at Rs 3.5 lakhs, then chances are that you can go for only the brand new small cars like the Tata Nano, Hyundai Santro, Spark or some Marutis like the Alto, 800 or the Omni-Eeco twins. However at the same price, you can also try out a used sedan or saloon. Some ultra reliable but phased out ones like a 2008 Maruti Esteem or Maruti Baleno would be available for this price. Older ones like the Opel Astra or Corsa would also be yours for the taking for far less price but then the reliability thing gets thrown out of the window. More safer and bigger bets would be 5 or 6 years old Honda Citys and Chevrolet Optras. If you are in love with reliable German cars, then look no further than a second hand Skoda Octavia. Agreeably, the maintenance and running costs would be higher than that of the new hatchback that you could have brought however do keep one thing in mind. Not only does a sedan present a better image of your status in the society, it is more safer as well and would carry a dozen features more than the puny new hatchback can ever think of offering at this price. Always add Rs 30-40 k to the cost of the old vehicle that you are buying. There may be some unseen costs coming out. However if you go for a pre-certified car then the chances of having a repair done to the car due to the way it has been maintained earlier lessens down. A certified used car outlet like Assurance Honda or Maruti TrueValue ensure that they first check the car that they are buying and then refurbish it accordingly. Moreover, they even offer a warranty on the car for a period of either 6 months or even a year. The cars sold from these outlets however costs more than what you would get at non certified ones but then ultimately you have the peace of mind that you are getting a used car with a certificate.

A new car which you might be eyeing would have a higher purchase cost and hence chances are that you may require finance for it. New car finance interest goes at a phenomenal rate of 14 percent for used cars whereas for the new ones it is relatively cheaper at 10 percent. However do bear in mind that a new one costs about Rs 1-2 lakhs more than what you would pay for a used one. Eventually you would end up paying less money on a used car than what you would on a new one. For example, if one intends to purchase a new Maruti Swift VXI which costs approximately Rs 5 lakhs and decides to go for 80 percent finance option for a 5 year term. Then he would be paying Rs 8,633 as the EMI. A 2 year old Swift would cost about Rs 1-1.5 lakhs less than what a new one would cost and finance on this would mean eighty percent of Rs 4 lakhs which comes to Rs 3.2 lakhs. If suppose you have to pay 14 percent interest for the used car, then it comes to paying an EMI of Rs 7,353 for 5 years and this comes to Rs 4.41 lakhs in total for a used Swift and at the same time Rs 5.3 lakhs for a new one. This means that you are saving approximately Rs 80k on this purchase. This gap widens if the car one is intending to buy is more expensive. If the car is more pricier, then a higher rate of interest would definitely do you in. Imagine paying Rs 14 lakhs for a new Skoda Laura and at the same time getting a 3 year old used model for Rs 9.5 lakhs.

Another plus point while going for used is that you have a freedom of choice. Not that it is any restricted while buying a new one but then some cars come with forced features like sunroof or parking sensors, which you feel are totally unnecessary but are forced to pay for. In buying a used car, there is no such restriction. Moreover a used car may come with more add-on goodies which the owner must have put for his own convenience but you aren’t made to pay for it extra. For a new car, all you can do is haggle with the dealer as to what freebies he can thrown in with the purchase whereas for an old or used one, you can bargain on the price of the car plus get additional freebies. One more big advantage of going for a used car is that the insurance amount wouldn’t be too much as compared with a brand new car. Infact a 3 year old car with a no claim bonus tag on it would have a 40 percent lower premium attached to it than a new car.  You can also evade one time road tax payment on a second hand car.

So in the end, it boils down to your priorities. Do you want a brand new gleaming car and shoulder the burden of EMIs or loans for the rest of your lives or rather give it all in and go for a certified used car which more or less would be as gleaming as a new one? The choice is yours.

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