When getting a car on loan, the temptation is to go for something new. However, taking out a used car loan may save you more in the long run, depending on the car’s condition.
Depreciation.
New cars continue to depreciate, sometimes by as much as 10-20% each year. So the cost of taking on a car loan will likely be less on models that have been on the market for more than a year. Even when buying a new car, your ability to refinance your car loan will change over time as the car itself loses value.
Depreciation does slow down over time, so getting a model a few years old might be a good idea.
Special rates.
New car loans may have special zero per cent or low-interest deals that typically last for the first year. These can be good incentives to begin a car loan with lower initial repayments before they grow larger.
Warranty.
Depending on your lender and the car itself, you may have to spend extra on an extended warranty and other expenses for a used car. However, some warranties will expand to cover the extra time on the road.
Coverage.
While new cars are generally more costly to ensure, they usually come with more insurance options, including roadside assistance coverage in case of breakdowns. So if you are deciding on going for a used car, it pays to check on its current warranty and calculate how much the cost of ongoing repairs will be.
Your credit history.
Depending on your credit history, you might find it easier to secure a used car loan over a loan for a newer model. First, buying an older model could also help you increase your credit score with good repayments and eventually sell your car to finance something a bit newer.
