It is difficult to buy a car. There are many models available to choose from. You also have the option of buying a new or used car. The car’s value will decrease over time, so it is not a good investment. You need to consider its cost-effectiveness. How much mileage would it take to drive the car? Is it worth buying a car if you only commute short distances every day? You might also want to think about whether a second-hand vehicle is more cost-effective. Older cars have lower maintenance costs and a shorter lifespan. This blog will discuss which option is better: buying a new or used car. We’ll discuss the pros and cons of each. We will also discuss which one is more cost-effective.
Let’s first look at the benefits and drawbacks of purchasing a new vehicle over an older one.
These are 3 benefits of buying a new vehicle
Number 1: A new car has a lower maintenance cost than a used one
A new car requires no maintenance for the first six months to one year, or the first 1,000 kilometers. After that, you may need servicing. You might also need servicing after the initial few services. This could be one or two services. The number of services that are free varies from company-to-company. If your car is older than 8-10 years, you will need to change the oil at least 3-4 times per year to keep it moving. There might also be additional costs such as changing the battery or cleaning out the air filters. If the car you purchased is in poor condition, such expenses can be very costly.
#Number 2: New cars have more advanced technologies and features.
Even the most current technology can be outdated within six months or one year. When you purchase a new car, it is important that the technology and features are current in terms of equipment, and accessories. You can also upgrade certain features if you buy an older car. However, this would add cost. If you’re a tech enthusiast, buying a new car is a smart move.
#3: The interest rate on a car loan for an older car is higher
It is easy to get a car loan, no matter how old or new. However, the interest rate on a loan for an older car is higher than that for a loan to buy a new one. Bank offers loans for old and new cars, too. The interest rate on a loan to a new vehicle is 9.25% and the 14.5% for an older car.
Let’s now look at the 2 downsides to buying a new vehicle over an older one
#Number 1: There is no need to pay the registration fee or road taxes
You will need to pay registration fees, road taxes and RTO fees when you buy a car new. You don’t have to worry about these expenses if you buy a used car. They are already paid for by the original owner.
#Number 2, Depreciation rate of a new car is higher than that of an old car
A new car’s depreciation rate is approximately 20% per annum. The maximum amount of depreciation occurs in the first three years. Even if you take the most care of your car, it will lose at least 40% in value within three years. The depreciation rate for an older car cannot be accurately counted. It depends on the damage and maintenance that would be done while it was being sold. However, the rate of depreciation is much lower than for a newer car. If you purchase an older car and keep it in good condition, you can sell it within a year for about the same price.
Buying New Car or Used Car: Which is more affordable?
After we’ve discussed the pros and cons to buying an older car over a new one, let us crunch some numbers so that you can determine which car is more affordable.
Let’s look at an example to better understand the concept.
Someone who is, 25, has decided to purchase a car. He has saved Rs 15,000 for the down payment. He also plans to borrow the remaining amount. He is still deciding whether to buy a pre-owned or new model. He needs to decide which model is more affordable. Let’s first look at the costs of buying, running and maintaining a car
Cost of purchasing a new car
He plans to purchase the latest car model at Rs 6 lakh. As the down payment, he has already saved Rs 1 lakh. He would take out a 5-year car loan to cover the remainder of the amount. The EMI for the Rs 5 Lakh car loan at 9.25% over 5 years would be Rs 10,000/month. He would have to pay Rs 50,000 upfront for registration and any other taxes.
Cost to run a new car
Let’s say that he currently has to pay Rs 80/L fuel. In the next five years, the cost per liter would rise by Rs 1. Given that a hatchback averages 12 km/L, the fuel cost per kilometer would be Rs 7. Let’s say he travels 500 km per week. If that is the case, then his weekly commute would cost Rs 3,500. That’s Rs 2.1 lakh over 5 years.
Maintenance costs for a new car
There are also two additional costs: insurance and maintenance. Let’s say that the maintenance cost for the first year is zero. It will rise to Rs 6,000 the second year. It increases by 10% each year from there. The maintenance cost for the next five years would be Rs 35,000 In the meantime; the insurance cost would be Rs 18,000. Then it would go up by 5% each year. A total cost of Rs 15,000 in five years. Let’s say he could sell the car for 50 percent of its purchase price after five years. Rs 3 lakh its inflation-adjusted price after five years would be Rs. 2.3 lakh.
Let’s now calculate the total cost to buy, run, and maintain a new vehicle.
According to the calculations, the cost of purchasing, running and maintaining a car for five years would be Rs 8.6 million Let’s now compare the expenses if he purchases an older car.
Price of an Old Car
He will pay Rs 4 lakh for a car (3-year-old) in good condition. He has saved Rs 1 lakh and would be paying that amount for the down payment. He would then apply for a car loan of Rs 3 lakh. At a 14.5% rate, he would need to pay Rs 7,000 monthly as EMI. He does not need to pay any registration fees or taxes for a second-hand vehicle.
How much does it cost to run an old car?
Even in the best conditions, an average mileage for a 3-year-old car will be lower than that of a new one. Let’s assume that a used car would get an average mileage of 8 km/L. If the petrol price is currently Rs 80/L and it rises by Rs 1 every 5 years, then the average fuel consumption for the car will be Rs 11/Km. If he travels 500km per week, the average commute cost would be Rs 5,500/week. In 5 years, Rs 3.3 lakh
Maintenance costs for an old car
An older car costs more to maintain than a new one. Let’s assume that for the first year, he would need to pay Rs 10,000 in maintenance costs. Each year, the cost would rise by 10%. In five years, the total maintenance cost would be Rs 56,000. The initial insurance cost of Rs 18,000 would be the first year. It would then increase by 5% each year. A total cost of Rs 15,000 in five years.
After 5 Years
Let’s say that five years later, the car can be sold at one-fourth the price it was paid, or. The inflation-adjusted price would be Rs 1 lakh. Let’s now calculate the cost of purchasing, running and maintaining an older car for five years. The total cost of running and buying a car for five years would amount to Rs 11.5 lakh. As you can see, buying a new vehicle is more economical than buying an older car.
Why is it a good idea to buy an old car?
When you are just learning to drive, it makes sense to purchase an older car. You might get into an accident (minor or major), while you are learning to drive. Because the depreciation rate of a new car is greater than that of an older car, these damages can have a direct impact on the car’s resale price. If your car is involved in an accident and suffers minor/major damage, it can be more painful to look at than if you were to buy a second-hand vehicle.
Bottom Line:
A new car is not only cost-effective but also offers many benefits. A new car from tesla dealer in Newport Beach can bring joy, and you can choose the color, seat covers, and other details that suit your tastes. There is no need to visit the garage multiple times for servicing.
Company name:- California Beemers Teslers
address 1425 Baker Street Costa Mesa, CA 92626
