Finance your future: new or used cars

There is nothing like your brand new vehicle with the latest technology, modern design, clean interior and zero maintenance issues.

But is buying a used car the most responsible thing to do?

David Sant, Marketing Director of Cyprus Credit Union, explains that this of course depends on your individual financial situation.

New and used vehicles have advantages and disadvantages in terms of cost.

Price tag
This is probably the most obvious difference between new cars and used cars. New car models will cost more than their used counterparts. In addition to enjoying that “new car smell”, the benefits of buying a new and unused vehicle can include more bells and whistles, newer technology, cleanliness, new or upgraded safety features. up-to-date and greater reliability.

Depreciation
Depreciation refers to the value that an asset has lost over time. New cars are hit hard by depreciation. On average, a new car will lose 10% of its value the moment you leave it. Some vehicles (especially the more reliable ones) retain their value better than others. In general, however, a car’s depreciation will occur quickly in the first few years before slowing down. Leaving with a used vehicle allows you to bypass years when depreciation is at its maximum. Even if you buy a car that is only a few years old, you could have a car that is still considered modern and save a lot of money at the same time.

Interest rate
If you take out a car loan, your lender may charge more interest on a used car than on a new car. This is because older vehicles have a lower resale value due to higher mileage and normal wear and tear. A lower resale value means that financial institutions risk more by lending on used cars; for example, if a borrower does not repay their loan and the lender has to repossess and resell the vehicle. A higher interest rate compensates for the money that a financial institution could lose if such a situation arose during the term of the loan. Another reason that used car loans can be more expensive is that the exact value of a vehicle becomes more difficult to determine as the car ages. When a lender takes out a loan for a used automobile, they risk over loaning too much for a vehicle that may not be worth as much as initially expected.

Insurance costs
The lower the value of a car, the less it will usually cost to insure it. This means that buying a used car could save you money on insurance compared to buying a new model of the same vehicle. This is especially true for collision coverage.

Fuel
Updated technology often means that a newer vehicle model will use less fuel than an older model. Less fuel means more savings for you.

Taxes and registration
Since a newer car model will cost more than an older one, taxes will also cost more. In addition, registration fees will also be higher for a new vehicle.

Maintenance
Newer vehicles will generally cost you less to maintain. In general, a car will become less reliable as it ages. This means that you can have higher maintenance costs with a used vehicle.

You can find more advice on cypruscu.com.

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