There’s an ongoing debate in financial circles between going new and used cars when buying a vehicle. I personally don’t think there’s an argument, and would suggest that everyone (unless you are already financially free) should go second hand. I explain why through some examples here.
However, I started thinking a few days ago about the difference between buying an used car and an OOOLLLLDDDD used car. Over the past ten years, there has been some great progress in making vehicles more efficient, and there are a number of incentives from national and local government which financially rewards “cleaner” cars.
Therefore, I thought I’d take a look at the question of how important is fuel efficiency when buying a car. The best way to do this is probably through a couple of examples:
Example 1 – Seat Ibiza – Old Used Car Or Older Used Car
A quick search on Autotrader gives these two options for someone looking to buy second hand.
Firstly, a three year old used car:
- Seat Ibiza 1.2 TDI Ecomotive SE 5dr Diesel – 25,000 miles – 2012 reg – £5,250
- Mpg = 80.7
- 92 g/km = Tax = £0
- Seat Ibiza 1.2 SX 5dr Petrol – 38,300 miles – 2006 reg – £2,695
- Mpg = 47.1
- 144g/km = Tax = £145
If you ignore all other costs, and say:
- we drive 8,000 miles a year (UK average)
- diesel costs on average £1.10 per liter, equivalent of around £5.00 per gallon
Therefore, in one year, the older car would cost £145 more in tax, and £355 more in diesel costs. So, in total, it costs £500 more per year to run the older version because it is less efficient.
Let’s imagine that our cars will last up to 100,000 miles or 15 years (whichever comes first). This means that the Seat Ibiza (2006 reg) will last us another 6 years. In that time, it will cost £3,000 more in running costs from the above calculations than buying the 2012 model. The price differential is £3,000. Looks pretty close, doesn’t it?
Example 1 – Seat Ibiza – New Car Or Used Car
Let’s not forget to look at how much the car would cost from the showroom floor.
A brand new SEAT IBIZA 1.2 is currently around £12,724 (if you buy with cash). It’s important to note here that if you have to finance the car, it becomes more expensive.
Therefore, you can see that the loss of value in the first 25,000 miles and 3 years is over £7,500 (or almost 60% of the car’s original value). The loss over the next 13,000 miles and another 6 years in our example is a much lower £2,500 – another 20% of the car’s original value.
It’s tough to pick a winner between buying moderately and very old for the SEAT Ibiza. But, going with old or older is clearly beneficial when compared with buying new.
Let’s take a look at a second example: the trusted Ford Fiesta.
Example 2 – Ford Focus – Old Used Car Or Older Used Car
Again, we’ll look on Autotrader for a fairly new, but second hand Ford Focus. Let’s say a 2011 reg Ford Focus 1.6 Zetec 5dr with 24,867 miles for £6,000:
- Mpg = 47.9
- 136 g/km = Tax = £130
Or, we can find an older 2005 reg Ford Focus 1.6 5dr with 50,000 miles for £1,550:
- Mpg = 42.2
- 161 g/km = Tax = £180
So, for this Ford Focus, there is clearly a bigger difference in price, and a lower difference in fuel efficiency and emissions.
Using the same assumptions of:
- we drive 8,000 miles a year (UK average)
- petrol costs on average £1.10 per liter, equivalent of around £5.00 per gallon
Therefore, in one year, the older car would cost £50 more in tax, and £115 more in petrol costs. So, in total, it costs £165 more per year to run the older version because it is less efficient, but it was a massive £4,500 cheaper in the first place.
Example 2 – Ford Focus – New Car Or Used Car
A brand new Ford Focus 1.6 is currently around £19,845 (if you buy with cash).
So, as with the SEAT Ibiza, you can see that the loss of value in the first 25,000 miles and 4 years is almost £14,000 (or almost 70% of the car’s original value). The loss over the next 25,000 miles and another 6 years in our example is a much lower £4,500 – another 22% of the car’s original value.
It looks like the older beats the old when it comes to the Ford Focus, but not by much. However, once again, both absolutely trounce buying new!
Should I Buy A New, Used or VERY Used Car? Other Considerations
We can see from these examples that the winner between buying a newer used car and an older version is dependent on the make and model, as some cars have seen more rapid improvements in their fuel efficiency and emissions than others.
Therefore, it’s worth running the numbers for the type of car that you wish to purchase.
However, in both of our examples (and indeed for any used car) there are some other things to think about here:
- Car insurance – your insurance premiums will usually be higher for a newer car as you have a higher value asset to insure.
- MOT costs – may be cheaper on a newer car as general wear & tear on older cars will sometimes mean higher costs to pass the MOT.
- General repairs – older (and more used) cars will have higher repair bills. However, don’t overestimate this factor to try and kid yourself that buying new is better!
- Breakdown cover – you may need a higher level of breakdown cover (relay or homestart) with the older vehicle as it may be more likely to break down
- Time – if your car was to break down, or need repairs, then you may want to factor in the additional time that this takes (remember: time is money).
- Finance costs – if you decide that a newer used car may be better for you, but you can’t afford the cash to pay for it upfront, then the additional finance costs (of a loan for example) will need to be added into your figures
Should I Buy A New, Used or VERY Used Car? – A Conclusion
Sorry – I don’t think that there is one definitive answer. I’m pretty sure that buying used is financially better for everyone compared to buying new.
However, the age (and mileage) of the used car that you buy will depend on the make and model of the car, the change in efficiency and emissions over time, how much you can afford and a host of other variables (now including how dodgy the emissions tests and printed mpg may be!!!)…