It can be difficult to purchase a car. There are many models to choose from. There are two options: buying a used or new car. It is not a wise investment as the car’s value will decline over time. Its cost-effectiveness is important. What would the mileage be to drive the car? If you commute only short distances each day, is it worth purchasing a car? A second-hand car might be more affordable. Older cars are more expensive to maintain and have a shorter life expectancy. This blog will explain which choice is better: buying new or used cars. We will discuss the pros and cons for each. We’ll also discuss which is more economical.
Let’s take a look at the advantages and disadvantages of buying a new vehicle instead of an older model.
These are the 3 benefits of purchasing a new vehicle
No. 1: A new car is more affordable than a used car
For the first six months to one-year, or for the first 1,000 km, a new car does not require maintenance. You may need to have your car serviced after that. After the initial services, you may need to have your equipment serviced. It could be one or more services. The number of free services offered varies from one company to the next. You will need to change your oil every 3-4 years if your car is more than 8-10years old. You might have to replace the battery or clean out the air filters. These expenses can become very expensive if the car is not in good condition.
#Number 2. New cars are equipped with more advanced technology and features.
Even the most recent technology can become obsolete within six months to one year. It is essential that you have the most current technology and accessories when purchasing a car. If you purchase an older car, you can upgrade certain features. This would increase the cost. A new car can be a smart investment for tech enthusiasts.
#3 – The interest rate for a car loan on an older vehicle is higher
No matter what age or how new your car is, it’s easy to obtain a car loan. The interest rate for a loan to purchase a new car is lower than the one for older cars. The bank also offers loans for new and old cars. A loan for a new car has an interest rate of 9.25%, while a loan for an older vehicle has a 14.5%.
Let’s look at the two downsides of buying a new vehicle instead of an older one.
#Number1: You don’t need to pay the registration or road taxes
When you purchase a new car, there will be registration fees, road taxes, and RTO fees. These expenses are not necessary if you purchase a used vehicle. These expenses are covered by the original owner.
#Number 2 The depreciation rate for a new car is higher than the one for an old car
The depreciation rate for a new car is about 20% per year. In the first three years, there is the maximum amount of depreciation. Even if you take the best care of your car it will still lose at least 40% over three years. It is impossible to accurately calculate the depreciation rate of an older car. It is dependent on how much damage and maintenance the car would sustain while it was being sold. The rate of depreciation for older cars is lower than that of newer models. You can still sell an older car within one year if you keep it in good shape and purchase it new.
Buying a New Car or a Used Car: Which one is more affordable?
Let’s look at the pros and cons of buying an older car instead of a new one.
Let’s take a look at an example to help you better understand the concept.
A 25-year-old man has made the decision to buy a car. He has already saved Rs 15,000 towards the down payment. He plans to borrow the remainder. He’s still debating whether to purchase a used or new model. He must decide which model is most affordable. Let’s start by looking at the cost of owning, operating and maintaining a vehicle.
Cost to purchase a new car
He intends to buy the most recent car model for Rs 6 lakh. He has already saved Rs 15,000 for the down payment. To cover the remaining amount, he would take out a 5-year auto loan. The EMI of the Rs 5 Lakh car loan at 9.25% for 5 years would be Rs 10,000/month. For registration and other taxes, he would need to pay Rs 50,000.
How much does it cost to buy a new car
Let’s suppose that he has to pay Rs 80/L for fuel. The cost per liter of fuel would increase by Rs 1 over the next five-years. A hatchback’s average fuel consumption of 12 km/L would mean that the fuel cost per mile would be Rs 7. Let’s suppose he drives 500 kilometers per week. His weekly commute would be Rs 3,500 if that’s the case. This is Rs 2.1 lakh spread over five years.
Maintenance costs of a new car
Insurance and maintenance are two additional costs. Let’s assume that there is no maintenance cost the first year. The second year, it will go up to Rs 6,00,000. From there, it will increase by 10% per year. For the next five years, the maintenance cost would be Rs 35,000. In the interim, the insurance cost would rise to Rs 18,000. It would then go up by 5% every year. In five years, the total cost would be Rs 15,000 Let’s suppose he could sell his car for half of the purchase price in five years. Its inflation-adjusted value after five years would be Rs. 2.3 lakh.
Now let’s calculate the total cost of buying, running, and maintaining a new vehicle.
The cost of buying, operating, and maintaining a vehicle for five years would amount to Rs 8.6 millions Let’s now see what the costs would be if the owner bought an older vehicle.
Old Car Price
For a 3-year-old car in good condition, he will pay Rs 4 Lakh. He has already saved Rs 1 lakh, and will be using that money to pay the down payment. Then he would apply for a car loan in the amount of Rs 35,000. He would then need to pay Rs 7,000 per month as EMI at a rate of 14.5%. A second-hand vehicle does not require registration fees or taxes.
What is the cost of running an old car?
Even under the best conditions, a car that is three years old will get a lower average mileage than a newer model. Let’s say that an old car gets 8km/L. The petrol price currently at Rs 80/L, and rising by Rs 1 every 5 year, means that the average car’s fuel consumption will be Rs 11. The average commute cost for a person who travels 500km per day would be Rs 5,500 per week. Over 5 years, Rs. 3.3 lakh
Maintenance costs of an old car
It is more expensive to maintain an older car than one that is new. Let’s say that he has to pay Rs 10,000 for maintenance costs the first year. The cost of maintenance would increase by 10% each year. The total maintenance cost for five years would be Rs 56,000. In the first year, Rs 18,000 would be the initial insurance cost. The cost would increase by 5% every year. In five years, the total cost would be Rs 15,000
After 5 years
Let’s suppose that the car is still available for sale five years later at one-fourth of the price it was purchased. Inflation-adjusted, the price would be Rs 15,000 Let’s now look at the costs of maintaining, buying, and running an older car for five-years. The cost of maintaining and buying a vehicle for five years would be Rs 11.5 lakh. You can see that buying a new car is cheaper than buying an older one.
Why would you want to buy an older car?
It is a good idea to buy an older car when you are learning how to drive. While you learn to drive, it is possible to get into an accident. These damages can have an impact on the car’s value as a resale vehicle. It can be more difficult to view a car that has been in an accident with minor/major damage than if it were to be purchased second-hand.
Bottom Line:
A new car not only costs less, but it also has many benefits. A new car purchased from a Tesla dealer in Newport Beach will bring you joy. You can also choose the color, seats covers and other details that best suit your needs. You don’t have to go to the garage for service multiple times.
Company name:- California Beemers Teslers
address 1425 Baker Street Costa Mesa CA 92626
