Money saving tip: Say no to new car! Why you should buy a used one instead

With the availability of more options, easy finance and increase in spending capacity of people, the sales of four wheeler have taken a huge jump in the last decade. But, due to rise in new car prices, surged taxes, increase in fuel rates, higher depreciation, less resale value etc, buyers are shifting towards a second hand or used car options.

Money saving tip: Say no to new car! Why you should buy a used one instead
A used car has a less depreciating value as compared to a new one. New car will depreciate at a rapid pace right after purchase, but the used one will depreciate slowly at a stable rate. Reuters
By Hardik Bansal
Updated: Wed, Jan 09, 2019
02:54 pm
New Delhi, ZeeBiz WebDesk
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A Car has become an essential commodity. With the availability of more options, easy finance and increase in spending capacity of people, the sales of four wheeler have taken a huge jump in the last decade. But, due to rise in new car prices, surged taxes, increase in fuel rates, higher depreciation, less resale value etc, buyers are shifting towards a second hand or used car options. And, guess what! It is not a bad move. Pankaj Mathpal, MD, Optima Money Manager told Zee Business Online that even these used cars come with warranty and help save decent money. "There are lot of certified used car dealers in the market now a days, which are selling great cars with warranty. A person can get a great value at cheaper rates by going for a used car option," Mathpal said.

Here are some benefits of buying a used car:

1. Available at low prices:

The used car will always come at lower prices as compared to a new one. The new car depreciates at a higher rate, which makes the used one available at cheaper prices. The buyer can also look for different options comparing prices, condition and features.

For example: If a person is looking to buy an all new Maruti Suzuki Swift at a price of Rs 6,00,000 for any given model. The same car with same features can be bought second hand for a price of Rs 3,50,000 to 4,25,000 for a 2 to 3 year old version.   

"If a person can afford to pay more down-payment for a new car purchase, he or she should always go for a used car with the same amount, without any pressure of finance or regular interest payments," Mathpal said.

2. Less depreciation rate and high resale value:

A used car has a less depreciating value as compared to a new one. New car will depreciate at a rapid pace right after purchase, but the used one will depreciate slowly at a stable rate. However, depreciation of the car depends on the brand, model, price range, age, owners, condition, etc. 

"A person can get a high end or luxury car at a same price, if goes for a used one," Mathpal added.

For example: All new Hyundai Verna that costs Rs 10,00,000 for a given model, will depreciate at a rate of 20 to 25 per cent for the first two years. Whereas, a 2 year old used Verna that costed Rs 7,00,000 to 7,50,000 for the same model, will depreciate at a rate of 12 to 15 per cent for the next two years. 

3. Low Insurance cost: 

Uncertainty cannot be predicted and therefore it is essential to keep your car insured for the protection, safety and legal purposes. Hence, it is mandatory to get an insurance for the car you are driving. The new car will always have a high insurance premium as compared to a used one due to its higher insurance value. 

Akhil Mahajan, CEO, Insurance Pundit, spoke to Zee Business Online, "Premium of an old car naturally reduces with a depreciating value. Rs 1,750 per one lakh is the average premium cost for a new car at present, which reduces in case of a used one."

However, the insurance cost of the car may vary on the basis of segment, age, engine capacity, price, brand or insurance type etc. 

4. Tension free driving:

The new car comes with a fear and tension of driving, bruises, dents, minor damages etc. But in case of a used car, owner can enjoy driving it smoothly without any fears and tensions.  

5. No additional cost and expenses:

The moment one buys a new car, the owner maks' some additional changes in order to increase the comfort, features, pleasure etc. Accessories to enhance entertainment, safety, looks, designing come with a cost. 

People spend money on accessories like, music players, cameras, seat covers, protective bezels, consoles, lights and what not. But a used car can be bought with the pre-installed accessories from the previous owner, saving further expenses for the next owner. 

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Steps to follow while buying a second hand car:

1. Always prefer buying a used car from certified second hand car dealers, they ensures you the guarantee on spare parts, condition, engine and services. 

2. Get it checked from a local mechanic, make sure that the car is not accidental, majorly repaired, more than 2 owners, or in poor condition.

3. Make sure that the car's essential details like, driven distance, body structure, chasis or engine number are not tempered.

4. Check all the documents and essential papers like, Registration certificate (RC), insurance papers, pollution certificate, service manual, last service bill, purchase bill, warranty papers etc.

5. You can also check the vehicle details, no. of owners, owner name etc by sending an SMS with typing- VAHAN <Registration No.> to 7738299899.

6. Also check the condition of tyres and major areas like, gear liver stability, cloutch plate, sound, vibration, engine's condition, 

7. Prefer buying from a certified used car dealer but even if you buying it from any personal, make sure the latter is genuine. 

8. Carefully, fill all the details on transfer papers and get the car transferred to your name in the given time.