Paying for the privilege of a new car
It costs $20,000 more on average to buy new
Australia’s obsession with a new set of wheels may be setting us back financially, according to a survey of 1,000 car owners released by ME Bank this week.
While a small majority of respondents purchased their car new, they are shelling out a lot more for the privilege, with average purchase prices at $34,000, compared to $14,000 for their used-car compatriots.
Matthew Read, a money expert for ME Bank, says this behaviour could be harming our financial wellbeing. “Owning a new car is a nice luxury, but could $20,000 be used for another savings goal like a house deposit or even simply covering the rising cost of expenses?” he asked.
Read believes the status value and a misconception about the true cost of a new car are the main reasons behind our preference for buying new.
“Status is one of the key reasons we’re obsessed with new cars: 51% of new car buyers said ‘the car they drive says something about them so they prefer to purchase new cars… A new car loses significant resale value as soon as you drive out the door, a pattern that continues over the first few years of its life, making it one of the biggest costs of owning a new car.”
While 33% borrowed money to buy their car, this rose to 41% for those buying new. One-quarter of all car buyers also said their car’s running costs were higher than expected and 65% of respondents were unable to recognise depreciation as the largest cost associated with owning a new car. Furthermore, 61% of respondents agreed that "used cars will cost you more in the long run."
These beliefs were especially pronounced among the younger generations, with 64% agreeing that their choice of car said something about them. Despite over two-thirds of generation Z buying second-hand, 47% admitted they would be embarrassed driving a used car and 59% needed a car loan to finance their purchase.
Read says the best bet is to opt for a newer used car in order to save on both upfront and long-term costs.
“You can buy a two or three-year-old car for much less and it won’t necessarily cost more to run, especially if a preventative approach has been taken to maintenance… It might not seem as glamorous as a new car, but there are thousands of well-maintained and serviced used cars available. If you do your research and negotiate well, buying a pre-loved vehicle could save you a lot of money.”