The choices faces when buying a “new” (to you) car are astounding- a huge variety of makes, models, options and colours. But before you even begin to narrow down what you’re looking for, it’s important to decide whether you want to buy a brand new car, an “almost new” car (>5 years old), or a “used” car (5+ years old). Each group has its benefits and drawbacks, and what works best for you will obviously depend on factors such as how long you plan to keep the car, what features you’re looking for, your mechanical handiness, and of course, your budget.
In this three-part series, I’ll be looking at the pros and cons of each of these categories of vehicles.
Part II: The “Almost New” Car
The “Almost New” car is a vehicle that was recently somebody else’s new car. For my purposes, I’m defining this group as being cars under 5 years old. Obviously, there will be a great deal of variance during this period, as a car 6 months old will have different issues from one 4 years old. But the driving force behind the buyers of these cars are the same- let somebody else take the initial depreciation hit, and drive a new-ish vehicle for thousands less.
Pros
- It’s the Same as a New Vehicle, but Different - With slightly used cars, you get many of the same benefits of a new car- modern looks and features, decent safety features and relatively new creature comforts. In many cases, you will also get the remainder of the car’s warranty.
- Big Savings over New - The biggest appeal of this group of cars is the lower price point. The initial buyer took the biggest depreciation hit, but you get to enjoy the same vehicle for quite a bit less money. Cars under 5 years old are rarely cheap, but they cost quite a bit less than their brand new counterparts.
- More Car for Less Money? - An additional benefit for some buyers is the ability to get more car by buying slightly used. For the cost of a brand new Honda Civic, you can get a 2 year old Accord, or a 4 year old BMW 3-series.
Cons
- Reduced Financing Options - When buying used, you will generally be ineligible for the great financing deals offered by most manufacturers. Increased interest rates can quickly eat into your savings. Additionally, unless you take over somebody else’s lease (for example, through Leasebusters), leasing is not an option on a used vehicle.
- Continued Depreciation - While the new buyer takes the biggest depreciation hit, you will continue to experience sharp depreciation during the early years of a vehicle’s life, especially as you reach the end of the warranty period and as the current model is replaced by newer, sharper models and your car no longer looks “almost new”. Many people like to buy “almost new” under the false pretense that they’re avoiding the depreciation of a new car- they’re not. The percentage depreciation rate in years 2, 3, and 4 are only marginally lower than in year 1.
- Reduced Selection - When you buy used, your selection is limited by what’s on the market at that time. The impact of this will vary based on whether you’re in a large market or a small one- in St. John’s, your selection is limited, but in Toronto, you have a much better chance of finding something that suits your wants. Even so, it can be difficult to find both nice examples of popular models and any example of less-popular cars.
- Reduced Warranty Coverage - An almost new car will usually come with some residual manufacturer’s warranty, but the period remaining will depend on age and mileage. When this coverage expires, you’re on your own, and newer vehicles generally have increased maintenance and repair costs due to more complex vehicle systems and a limited availability of used parts. A newer car should prove more reliable than an older one and hopefully you won’t encounter any major problems, but that will be little comfort when you get a huge bill for a fried ECU on your 6 months-out-of-warranty car.
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