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Can You Really Afford A New Car?

Updated 18 Jul 2017 – By Loanstreet


Around 600,000 new cars are produced and sold to Malaysians every year. It remains a question if it is worth the bucks to buy a newly released model or search for a relatively older model in the second hand market. Let’s take a look at some of the differences between buying a new and a 2nd hand car.

Depreciation

This is the headline discussion point when it comes to a debate between new or second hand cars. Depreciation implies how much value your car has gone down since you purchased it, i.e. the difference between your selling and purchase price. It is safe to say most cars descend in value with main exceptions for car antiques. Their rarity inflicts a premium price in the modern era.

You have probably heard the saying “The moment your car touches the road, the moment it’s value decreases.” While this is true, we need to explore how much it will go down by. Now, each car model has different depreciation graph. It is a function of mileage, conditions, brand reputation, economical 101 and many more. Generally, you can expect to lose up to 15% of the value of your car each year on reducing balance. Let’s go take a look at Proton Saga FLX Executive Manual as an example. Assume a straight depreciation of 15% of value on reducing balance.

Can You Really Afford A New Car?

After 5 years, your Proton Saga FLX have lost around 40% of its value. Be reminded that this is just an average depreciation rate over the life of the car. New cars can actually depreciate by 30% in the first year alone but its rate slows down after that.

New car vs used car (Pros and Cons)

Can You Really Afford A New Car?

Direct/Indirect Purchase

We can opt to buy our cars through a dealer or directly to the owner. Going to a dealer typically tends to be a little pricier as they would need to mark up the prices to cover operational costs. However, with vast online websites allowing us to publish our listings, it becomes relatively easy to find a matching price.

Our Final Take

There may be factors such as warranty, latest gizmos, financing and maintenance fees that go against older cars but the most important factor to be considered is the depreciation. As shown, 5 years difference could save you 40% of the new car price. It may be more than what you could have saved from getting a new car.

Stories about malfunctions and 2nd hand car problems might be true. So if you’re looking to get a 2nd hand car, do research on the make and expected problems and also a sum of money to fix it up. If you are still keen on purchasing a 2nd hand car have a look at our Personal Loan Comparison tool to find out the best loan options available to you.

You should still be saving a substantial amount.

Good luck.

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