Should You Buy a Brand New or a Pre-owned Vehicle
So here you are eyeing a vehicle that you’ve always wanted, or maybe you’ve been wanting to own one for quite sometime now, and you’re a bit confused as to how to go about it. You check out one showroom after the other, then you are now to make a decision, and you are thinking of getting a brand new one or getting used or a pre-owned one.
This is a very interesting topic that many can relate to. I myself have acquired several vehicles already both used and brand new, and there will always be the discussion of which one is the better purchase. Before I give you tips on to help you decide whether to purchase a brand new or a pre-owned vehicle, we’ll have to look at the different areas which can help you decide.
There are already so many makes and models of vehicles available in the Philippines as of this writing, and they are all offering great deals, promos and discounts. They are so good in marketing that they use the hottest celebrities to endorse their brand and many can’t help but join the bandwagon.
But it is not only the cost of acquiring a vehicle that we’re considering. Aside from considering the cost involved, buying a vehicle is no joke because it is said to be the second most expensive item that a man would purchase next to a home. So purchasing a vehicle touches also on our emotional side and our ego. Although this is on a case to case basis. This is why we need to make sure we plan correctly and make the right decision.
There are different advantages and disadvantages of purchasing either a new or a used vehicle:
Before purchasing a vehicle, make sure to ask yourself the following questions:
- What is your purpose of purchasing a vehicle? There are different vehicles for different purposes. If you will use it mostly for city driving such as going from home to your work and vice versa, then a simple sedan or compact car will work for your need. These kinds of vehicles cost less than the more sophisticated and higher end vehicles. Of course, this depends on how many will be using the vehicle on a daily basis. If more will be using the vehicle, then the All around utility vehicles or family vans will do the job also. If your purpose for acquiring a vehicle will be for frequent road trips or for use in business where you’ll need space to haul stuff, then you might have to consider bigger vehicles like sport-utility vehicles, family vans, or pick-up trucks. All these kinds of vehicles vary in price. So you will really need to match your purpose with the right vehicle. You don’t to buy a van when you’re the only person who’ll be riding it, or you don’t really need to buy a pick up truck when you don’t want the bumpy ride and when you won’t really use its flatbed for hauling stuff. You’ll want to get the vehicle that’s just right for you.
- Fuel Expenses. It may be true that diesel costs less than petrol fuel. But you will need to make sure that you need to keep your vehicle well-maintained, otherwise you’ll end up spending more on maintenance. Petrol vehicles are easier to maintain than those that run on diesel. However the price of diesel fuel is about 20-25% cheaper than petrol fuel.
- Battery: You normally replace this every 2-3 years depending on the quality of the battery, some only last for less than 2 years.
- Tires: You normally replace your tires every 40,000 km to make sure it is running well and safe. Normally you accumulate that in 3-4 years time depending on the distance that you drive.
- Change oil: Depending on how many kilometers you drive, you normally replace this every 10,000 km or every 6 months whichever comes first. Making sure that you change your vehicle’s oil regularly keeps your vehicle in good shape, making it last longer. Even if you don’t normally drive 10,000 km in 6 months time, the day to day to traffic wears out the vehicle, so you’ll really have to consider this.
- Depreciation: A brand new vehicle depreciates fast especially on the first 3 years especially when it keeps on accumulating kilometers into the odometer, but the depreciation somehow stabilizes towards the 5th year depending on the condition of the vehicle. Most vehicles now are well made that they already last longer as compared to the older generations. Depreciation also depends on the make and model of the vehicle because these are related to the cost of maintaining the vehicle and the reliability of the vehicle. There are vehicle brands that are known to have expensive spare parts, or parts take a long time to order leaving you not able to use your car for some time, or some vehicle parts tend to wear out easily for example suspension, brake pads, while makes you have to replace them more often. Because of these issues, their price tend to depreciate a lot faster as compared to the more reliable brands. Of course, the more reliable brands tend to have higher resale value.
- Parking: Make sure to consider this when purchasing a vehicle. Parking may seem cheap on a day to day or hourly basis, but when you accumulate the amount your paying for in your parking on a yearly basis, it can even be as much as 2 months worth of your monthly amortization. For example, when you go to the office and you’ll have to rent a parking space on a monthly basis for about P2,200 per month, that’s already about P26,400 in one year. Not to mention if you still have to rent a parking space in your condominium building.
- Monthly amortization or financing: Buying a brand new vehicle via installment has an add-on interest rate and the amount depends on the number of years you’ll pay for the car. Of course, the interest charged to you is more expensive when the term of your loan is longer. However, you have a lesser monthly amortization. You may get a loan from banks or directly from the financing company of the dealer. The bank rates are cheaper as compared to the financing company of the dealer. There are pre-owned vehicles that can be bought via financing when you buy them from a used car showroom. Make sure to consider your cash flow when buying a vehicle. Try to put a higher down payment as much as possible and make sure that you can pay for the amortization within the agreed period.
- Insurance: You must consider this for unforeseen collisions and car emergencies. You may even want to include the insurance rider called acts of god or acts of nature to make sure you’re covered for floods or instances when trees fall on vehicles which you don’t always have a control on. Make sure to find a great insurance company to cover your vehicle, and ask for a good participation fee. A good participation fee would be P2,000 to P3,000 depending on the vehicle. Vehicle companies will offer you motor car insurance from their in-house provider, however this tends to be more expensive, sometimes even double as compared to the rates from other insurance companies. At times they even use this as their leverage on you especially when the vehicle that you want is on an indent order basis. You can get the vehicle from them only if you get the insurance from them. There are insurance companies who even insure vehicles that are more than 8 years old. However, during claims, the depreciation already sets in and you get a lesser claim.
Here’s my verdict:
When you want to consider buying pre-owned vehicles consider the following:
- Make you sure to check the condition of the vehicle. Request to test drive the vehicle to check for possible problems. Bring a trusted mechanic with you to check important details such as tires, engine, paint among others. He can assess whether the vehicle is in good condition or will require some repairs. Calculate the necessary repairs to make a good assessment of the amount that you’ll have to shell out and compare it to the cost of acquiring a brand new vehicle.
- Ask about the history of the vehicle. Ask the reason why it is being sold. Normally owners of brand new vehicles sell their vehicles after the third year because they either want to upgrade to a newer one and because after the vehicle may lose more value after that. So if you encounter a less than 3 year old vehicle which may seem to be a good buy, make sure to interview the owner well, check records of being involved in accidents, being submerged in flood and other possible reasons. Not everyone may tell you the real reason, but a trusted mechanic may help you assess the vehicle’s condition.
- Make sure to buy it in cash and not via financing or installment. Because buying in cash may even give you enough room to negotiate the price of the vehicle. Should you wish to pay in installment, pay a higher downpayment so you’ll just have to pay a lesser balance.
Aside from the fact that brand new vehicles are more durable and reliable, most companies offer warranty for the first 3 years which can be to your advantage because this can be to your advantage. They may be more expensive than used vehicles but buying a brand new vehicle may save you from headaches in the upkeep of the vehicle. You may get to save on the selling price of used vehicles, but you might be caught off guard when it comes to the parts that you’ll need to replace like buying new tires, battery, radiator, suspension, etc, and you may end up spending as much as the amount of a brand new vehicle.
So when buying a brand new vehicle, consider the following:
- Negotiate for the price when you’re buying it in cash. Some dealers give a discount for cash payments.
- Should you pay in installment, make sure to shop around for rates. Ask your friendly bank officer for a good rate. Do your best to put in a higher downpayment, and as much as possible go for a maximum of 36 months, so that should you wish to sell the vehicle after the 3rd year it is already fully paid with the bank and you can easily facilitate the transfer of ownership. Of course the terms will depend on your cash flow and ability to pay the amortization.
- Negotiate the insurance premiums. Talk to insurance providers and insurance brokers and ask for a quote from them first. Then tell the dealer that you’ll be the one to provide for the insurance. If they offer insurance, ask if they can match the rate that the insurance company provided. If yes, you may also go for the offer of the car company.
So before purchasing a vehicle, make sure to cover all the bases and consider the tips above. If you’re inexperienced when it comes to the mechanical aspects of a vehicle, then a brand new vehicle may be your best option. But if you are able to check the pre-owned vehicle and everything works well and you can pay for it in cash, then a used vehicle may be great for you.