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New vs used car – which is right for you?

Should you buy a new or used car? Make the right decision and drive away without regret.

It’s the age-old question that every car buyer needs to decide on: New car vs used car? Both have pros and cons, including some that you might not be aware of until it’s too late.

Generally, buying new carries all the advantages except price. As such, the question is whether the extra cost is worth the extra benefits?

This guide runs through each option in detail so you can decide what’s best for you, and drive away in your new, or used, car confident that you’ve made the right decision.

Buying a new vs used car – pros and cons

PriceCheaperMore expensive
Car optionsLimited to what’s availableWide and varied
Required knowledgeNeed to know what to look for in a used carNeed to know how to avoid expensive sales tactics
Financing optionsFewer optionsMore options
Information availableTypically general information onlyManufacturer stickers, fuel consumption label and more
WarrantyVaries depending on the specific carManufacturer and dealer warranty

6 things consider when deciding between new and used

1. Price

The price difference between a new car and a used car depends on how old the used car is, what kind of model it is and its condition. The best way to work out how much you’re saving by buying second hand is to look at how much the same vehicle costs when new.

It’s generally a safe assumption that a used car should cost at least 20% less than a new model assuming it’s still in almost “as new” condition. This 20% depreciation occurs as soon as a new car is driven off the lot, and in the coming years it will depreciate even more.

With the average cost of a new car around $30,000, you can generally save at least $6,000 simply by buying used, even when taking advantage of various new car cost-saving measures.

This is the most prominent advantage of buying a used car, but you need to consider whether it’s worth the downsides.

2. Vehicle options when deciding on new cars vs used cars

When you buy any car, your options are naturally limited to whatever’s being sold. However, with used cars, there are generally considerably fewer options. For example, you might find the right model in the wrong colour and need to factor the cost of a new paint job into the price.

You might not even be able to find the type of vehicle you’re looking for. You could travel a long way to check one out only to find that it’s an overpriced rust bucket.

Conversely, you might get lucky and find a used car that’s exactly what you are looking for with all the extras you want at no extra cost.

Overall, getting a new car gives you a lot more consistency. Once you do your research and check prices, you have the assurance that you’ll be able to find what you’re looking for. If you’re time-poor, this can be a distinct advantage.

3. Required knowledge

If you don’t know how to check a used car thoroughly, you’re at risk of buying a lemon. Fortunately, you can find checklists of what to look for to make it easier. However, there’s really no substitute for genuine experience, so if you’re unfamiliar with cars it might be safer to buy new.

The safety of new cars goes beyond protecting your wallet, as new cars also have the advantage of clear ANCAP safety ratings, which are only relevant for new cars. When assessing the driver safety of a used car, you’ll instead need to rely on Used Car Safety Ratings (USCRs) and a general check of current safety features.

If you’re not a car person it can be nerve-racking to go hunting for either new or used, but the risk is generally much lower when buying new. If you’re worried you might get suckered in with expensive sales tactics from a dealer, get a pre-approved car loan so know exactly how much you have to spend.

4. Car finance for new cars vs used cars

There is considerable overlap between used car loans and new car loans, and lenders will often let you purchase either kind of vehicle with the same car loan. However, the terms you can access are often determined on a case-by-case basis which can lead to differences.

You may be able to access lower rates for new car loans, but you’ll still be paying more overall in terms of principal and interest.

The terms of a car loan are individual to each purchase and each borrower. As such, it can go either way and doesn’t clearly favour either new cars or used cars.

5. Information available

New cars come with a range of verifications from both the manufacturer and the dealer. An example is the fuel economy label in the window that proves its fuel consumption, letting you make a more educated decision. You might not find it on used cars, and if you do there’s no guarantee that it will be accurate anymore.

ANCAP safety ratings are also a reliable verification of how safe the new car is, tested under laboratory conditions. A used car might also be fraught with “invisible” problems you won’t notice until later down the track, like one airbag that won’t work.

When buying used, you should always do a car history check before handing over your money through the PPRS website. This highlights any outstanding financing that may be hanging over the car. The car’s service history can also tell you whether it’s previously suffered any significant damage but only if it’s been repaired by a Motor Vehicle Registered workshop.

However, even a full car history check isn’t a substitute for the reliability you can get from a new car, it’s simply a way of getting a bit closer.

6. Warranty

Don’t underestimate the importance of this factor and the extent of its benefits. It can make an immense difference between used and new, and should also be considered when deciding between two used cars.

When new, a car comes with a warranty that guarantees reliability and satisfactory performance. What kind of warranty you get depends on the manufacturer but, in general, if you buy from Toyota, Ford or Holden you can expect a three year or 100,000 km standard warranty, with points of difference between each.

If a used car meets the criteria, then it’s also protected by a warranty for however long it has left. If you’re tossing up between two used cars, it might be worth deciding in the favour of one if it still has a reasonable amount of the warranty remaining.

If the original owner purchased an extended warranty option, then this too might remain with the used car even after it changes hands, but you should check the actual warranty documentation to make sure.

However, with new cars, you’re entitled to the standard warranty right from the beginning, so it’s predictable and guaranteed.

Bottom line

Used cars are considerably cheaper, but you’re not getting benefits, such as choice, convenience or peace of mind as you do with a new car. The question is whether those new car benefits are worth the extra cost for you?

Compare car financing options

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Establishment Fee
Simplify Secured Car Loan
6.25% - 12.50%
12 - 60 months
$100 - $500
Eligibility: Must be 18+, a New Zealand resident or permanent citizen and have an income of at least $500 per month.
See how much you could borrow without affecting your credit score.
MTF Finance Secured Car Loan
8.70% - 20.70%
3 to 60 months
Eligibility: Must be 18+, be an NZ citizen, resident or have a work visa, and have a regular source of income.
Secured car loans from $2,000.
FROM 6.99%
The Co-operative Bank Unsecured Personal Loan
6.99% - 19.99%
6 months to 5 years
Eligibility: Be 18+, an NZ citizen/permanent resident, or have a valid work visa.
Floating-rate, unsecured personal loans from $3,000.
Lending Crowd Secured Car Loan
5.03% - 15.44%
3 or 5 years
$200 - $500 depending on the amount borrowed
Eligibility: Be a NZ resident/citizen and have a good credit score.
Borrow $5,050 to $200,000 for your chosen vehicle. 100% online with no paperwork or early repayment fees.
CarFinance2U Car Loan
8.95% - 23.95%
1 - 5 years
Eligibility: Be at least 21 years old, have a valid NZ driver's licence and be an NZ citizen or permanent resident.
With a CarFinance2U secured or unsecured car loan you could get pre-approval for your next car in 30 minutes.
Nectar Unsecured Car Loan
8.95% - 29.95%
6 months - 4 years
Eligibility: Must be 18+, an NZ citizen or permanent resident, have an income of $400 per week or more (after tax) and a stable credit history.
Unsecured car loans from $1,000 with payouts made within one day of approval. Applications entirely online.

Compare up to 4 providers

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