Over the years, popular opinion often maintained that it’s more sensible, financially, to hold onto that old clunker you’re driving for a few more years than it is to buy something new right now.
Because that sounds right. On paper.
The Hindenburg safely docking with its mooring mast also sounded right. On paper.
With cars losing somewhere between ten and twenty percent of their value in the first year, the rationale was that it made more sense to shop around for a gently used model with low kilometres. A case where the original owner absorbs the bulk of the vehicle’s depreciation and you got a mostly new car that’s still under warranty.
Not a bad plan. But not the only plan.
For argument’s sake, let’s say the car you drive at the moment is worth $8,000. It won’t be for long. Unfortunately.
In Australia, the average depreciation on a car’s value is 18% a year. That means in five years time, that $8,000 (which would be an awesome deposit on a new midsize hatch) has depreciated to around $2,965.
A new Hyundai Accent, on the other hand, sells for around $15,000 driveaway. Apply that $8,000 to the sticker price, and you’re already a good piece of the way there.
There’s also the price of petrol to consider.
Older cars are also going to drink more fuel and spit back heavier emissions than new ones. So all that money you think you’re saving by holding out could easily be spent, with interest, over the next few years on petrol. And working to meet Australian vehicle emission standards.
On average, your old car will consume 2L more petrol per 100km than something new and more fuel efficient. With the typical Australian logging around 20,000km on the road each year, and fuel sitting at roughly $1.25 a litre, that’s $500 a year more to keep your current car moving than you’d spend at the bowser on a new model.
It’s equally important to weigh the perceived savings of sticking with what you’ve got against what you might have to pay down the line for repairs and servicing. And depending on how old the car is, sourcing replacement parts can be costly and time-consuming.
In most cases, buying new today also means an extended, more comprehensive warranty and the capped-price servicing that comes with it.
Buying any car is a real financial commitment. It’s going to affect your budget. So again, where you might be saving some bucks up front holding out, capped-price servicing on a new model means you’ll always know how much your regular servicing is going to cost you.
Up front…. No surprises.
Add up the new set of tyres and brake work that your current car will surely require over the next five years and you’ll begin to see how it might actually end up costing you more in keeping up than it would to buy new.
Most modern warranties also include long-term cost-saving perks like roadside assistance should you ever break down, lose your keys, need a jumpstart or require help with changing a flat tyre.
As automotive technology advances, cars are becoming more efficient through and through. And at a rapid rate. Even cars that are only a few years old may be missing the latest safety features, gadgets and accessories.
You don’t have to look hard these days to notice living costs steadily on the rise either. Rents, mortgages, the price of food, fuel and other everyday expenses have taken flight over the last two decades.
Cars are the curious outlier to this gloomy trend.
Thanks to tax reductions, free trade agreements with countries like Thailand, Japan and Korea, advances in technology, improved production approaches and production practices, new car prices have remained shockingly consistent by comparison over the last twenty years.
Many models remain at a similar price point now to where they were in the mid-nineties. Add to that the fact that today’s vehicles boast tech, safety and entertainment features unheard of in those days, and it’s hard to argue the added value attached to a new car today.
Wage growth and falling interest rates have also helped put the average Australian in the best position to buy new since the 1970s.
There’s also the matter of insurance.
Odds are you’ll be paying close to, if not exactly, the same amount of money to insure your old car that it would cost to insure a new one. The difference is, that same policy stands to pay out significantly less because of the vehicle’s age and depreciation.
If you’re really looking to stretch those dollars as far as they can go, it can be worth your while to plan for when to buy a new car.
The end of the financial year is always an interesting time to shop for specials and savings. Competition between dealers hits a fever pitch and driveaway prices fall dramatically.
But there are other occasions throughout the year where the ball is definitely in the buyer’s court when it comes to new car shopping.
Public holidays and long weekends are when you’ll often find sales events and promotions on. And the end of the calendar year, when it’s time to clear out current model stock, is another great time to hunt down a bargain.
It’s easy to think that a new car purchase just isn’t a possibility. Initially.
But if you do your homework, shop around, choose the right time of the year to buy and really consider what you’re getting versus what you’re spending, the lasting value of buying new could end up being the more affordable option after all.