New car finance vs used cars

  • Are you better off getting a finance deal or buying used?
  • Pros and cons for both explored
  • Important points to remember included

Buying a new car is exciting, whether you’re scanning the classifieds looking for a used bargain or heading to your local dealership for the latest finance scheme on a brand new set of wheels.

Deciding on whether to put your hard-earned cash into a new or used car can be a difficult decision, as there are pros and cons for both choices.

Don’t forget to check out our Cars for Sale section for the latest deals on new and used cars. When you come to selling your current vehicle, make sure you get a free car valuation with us to ensure you get the right price.

Buying used

One of the big draws of buying a used car are the lower levels of depreciation when you compare with new cars. In some cases a car can lose up to two thirds of its original value in the first three years, so used models will hold onto their remaining value much better.

You could also argue that you have more choice on a smaller budget when it comes to buying used too, depending on how much you have to spend of course and how old you want the car to be.

There’s often more room to haggle on a used car as profit margins tend to be a little higher and buying privately could be cheaper still. It’s a risk, though, and you’ve got little comeback if you find anything wrong with the car. Make sure you check it over thoroughly before you buy, especially looking for rust and bodywork damage. If you're not confident doing this yourself, there are plenty of companies and individuals out there who offer engineers' reports to validate whether a used car is a sound buy. 

A history check on a used car is vital as it’ll tell you if it has outstanding finance or if it’s been stolen or written off. You can get a history check with us here.

If you've not managed to save enough to pay for your used car up front, some manufacturers offer competitive used car finance so it’s worth shopping around, plus there’s the traditional bank loan route if APR rates aren't competitive enough.

The pros

  • Likely to depreciate slower
  • Usually cheaper to buy
  • More choice depending on budget

The cons

  • Unlikely to get a car in the exact spec you want
  • More likely to go wrong and warranties may not be transferable
  • You don’t know how the car has been treated during previous ownership

New car finance

A finance agreement is by far the more popular way to buy a new car, witha variety of finance methods available. The most popular is called Personal Contract Purchase (PCP) - in a nutshell you pay monthly premiums and at the end of the term can either pay a 'balloon payment' to buy the car outright or hand the keys back.

How much you pay each month is determined by how much the car costs and how much it’ll be worth at the end of the term. You can lower your premiums by putting down a larger deposit, however there are also some PCP deals that offer you the chance to pay nothing at all initially.

There are lots of advantages to buying a new car, including gaining access to the latest tech and connectivity kit, lower running costs and competitive warranties. Some PCP deals include servicing packages, insurance and maintenance thrown into your monthly premium too, making it easier to plan your finances.

You can expect very little to go wrong with a new car and if the worst was to happen, you’re likely to be covered by the manufacturer’s warranty.

If you’ve had your eye on a premium car for some time now and you don’t have the capital to buy it used, finance could be a way to get the car that you want.

There are downsides, though. One of the main issues with buying new is the rate of depreciation. As soon as you drive the car off the forecourt it's losing money. Finance companies will also place restrictions on how many miles you drive, plus how, where and when you maintain the car. It’s also important to remember that you won’t own the car until the end of the term if you choose to pay the balloon payment although your name is on the registration document. It's unlikely you'll be able to add any modifications, either.  

If you’re considering buying a new car on finance, make sure you visit our finance section for a quote - we work with over 20 lenders to give our customers access to more than 100 different lending options.

For more on the different car finance methods available, check out our advice section here.

The pros

  • Warranties and servicing usually included
  • Easier to plan your monthly finances
  • Less likely to breakdown
  • Access to the latest tech
  • Sometimes no deposit required
  • Many bundles are available that include insurance, maintenance and even fuel

The cons

  • Mileage restrictions
  • You don’t own the car unless you play the balloon payment at the end
  • Balloon payments at the end could be large

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