Why you should buy a Used Car ( Part 1 )

Why Opting for a USED Car Makes More Sense Than Going for a New One

Navigating the intricate world of car buying is not merely a science; it's an art that can be masterfully crafted with a touch of scientific consideration. This perspective is born out of decades of keen observation and a considerable amount of trial and error experiments. Whether it's a new car or a pre-owned one, the functional requirements largely remain consistent within a given segment. The primary distinctions lie in the age of the car and the initial buying price. The artistry comes into play due to the vast array of options available today, reflecting a person's lifestyle and attitude, making the choice of the right car a deeply personal one.

Just a decade ago, the car-buying landscape was marked by limited segments, making compromises inevitable, especially for those on a budget. However, the contemporary automobile industry has undergone a transformative evolution, tailoring models to suit individual lifestyles, trends, and social circles. This evolution has empowered buyers to find a vehicle that aligns seamlessly with their preferences.

In the past, fresh graduates entering the workforce faced limited choices dictated by financial constraints and the reluctance of banks to finance young professionals. The first car often became a compromise between functionality and style, driven by affordability and societal acceptance. Furthermore, the limited number of segments meant that even if a young buyer liked a new car, it would take years before it entered the secondary market at an accessible price.

As the years progressed and the workforce gained financial stability, the decision between a new or used car with more features became a pivotal juncture. This decision, particularly for those seeking a means of conveyance and nothing more, often led to the perception that buying a new car and changing it every few years was a more sensible approach than maintaining an older vehicle.

For car enthusiasts, sentiments varied, depending on the number of cars in their garage. Some were replaced every few years, while others were intended for keeps or considered for sale periodically. Regardless of the number of cars owned, buying and selling remained a consistent element in the automotive journey.

The average car buyer, primarily concerned with reliable transportation from point A to point B, found the hassle of maintenance post-warranty to be a significant motivator for opting for a new car every few years. Bank loans factored into the equation, with monthly allocations for transportation costs making the inclusion of a new car loan feasible.

The challenges that cars encounter after the warranty period, such as maintenance issues, vary based on factors like overall reliability, part availability, and cost. Opting for a new car every three years alleviates these concerns, as new cars typically come with a minimum three-year warranty, or a certain mileage limit – whichever comes first – and an optional service contract.

Motor enthusiasts with a deeper connection to their vehicles, like myself, view cars as more than mere conveyances. A car becomes a personal statement, influencing self-perception while navigating the roads. For those with this mindset, the horizon for considering a car purchase extends to at least a 10-year plan. The decision to buy a new car is only entertained if the intention is to keep and use it for a decade. Despite the allure of hassle-free maintenance and the dealer's incentives to trade in for a new car every few years, the 10-year vision remains paramount in the decision-making process.

In the intricate dance of car buying, the artistry and science converge to create a personalized and thoughtful journey, where choices are driven by individual preferences, financial considerations, and a unique relationship with the vehicle.

Embracing a 10-Year Perspective in Car Ownership: A Wise Investment

In the realm of car purchasing, adopting a 10-year plan isn't just a practical choice; it's a mindset shift towards a more sustainable and economically sound approach. Unlike the short-term focus associated with a 3-year ownership attitude, a decade-long commitment reshapes your outlook on car ownership, transforming it into a thoughtful, long-term relationship.

Similar to any enduring relationship, a prolonged focus can prove beneficial in the automotive realm as well. This doesn't imply that you're obligated to keep a car for precisely 10 years, but the pre-purchase mindset significantly influences the overall economy, even if you decide to sell the car after, say, 6 years. The evaluation process initiated by a 10-year horizon prompts considerations of reliability, urging you to select a vehicle that aligns with your long-term financial well-being.

This principle extends to the realm of used cars as well – even in the pre-owned market, I approach acquisitions with a 10-year perspective. To illustrate the impact of this approach, envision dividing a piece of paper into two sections: '3 years' and '10 years.' In a brief exercise, jot down as many car choices as you can for each timeframe. You'll likely notice your brain gravitating towards more economically viable long-term choices for the '10 years' category. Maintaining this attitude, even if you practically use the car for a shorter duration, often results in a more financially prudent long-term decision.

Depreciation, a crucial aspect of car ownership, underscores the advantages of a 10-year plan. Unlike real estate, automobiles typically depreciate over time. In the first year of ownership, new cars experience the highest depreciation, ranging from 20 to 30%. Exotic cars often exhibit even higher depreciation rates. From the second year onward, the depreciation hovers around 10% to 15% annually, stabilizing after approximately 10 years.

Choosing a 10-year ownership term minimizes the impact of depreciation on the overall cost of car ownership. If one were to buy a new car every 3 years, enduring 25% depreciation each time, over a decade, they would suffer this depreciation three times. Conversely, selecting a car with reasonable resale value and focusing on a 10-year horizon not only reduces overall depreciation but also results in smaller insurance premiums and lower maintenance costs over the long term.

Moreover, considering the typical auto loan duration of five years, a 10-year plan positions you to be loan-free for the latter half of your ownership period. This translates to five years of car ownership without monthly loan payments, with only maintenance and insurance costs to bear. As the years progress, insurance costs tend to decrease, and smart buying decisions can minimize maintenance expenses, offering a more cost-effective ownership experience.

The relationship between price and reliability often sparks debates among car enthusiasts. While some argue that a higher-priced car should inherently be more reliable, the reality is more nuanced. Price alone doesn't equate to reliability; other factors, such as brand image and perceived value, play crucial roles. Comparing a high-end car requiring a costly component replacement to a lower-priced car with superior reliability doesn't offer a fair assessment.

In essence, price isn't directly proportional to reliability. The intangible aspects of value and brand image influence the perception of reliability. Exotic cars, crafted with luxurious materials, may command higher prices but face harsh treatment in the secondary market due to the value attributed to their opulence. However, this doesn't diminish the engineering and design excellence that goes into their production.

In conclusion, adopting a 10-year perspective in car ownership proves to be a thoughtful and economically advantageous approach. It reshapes decision-making parameters, minimizes the impact of depreciation, and encourages a nuanced evaluation of the relationship between price and reliability. This holistic perspective positions car ownership as a long-term investment, emphasizing both financial prudence and the enjoyment of a reliable and well-maintained vehicle.

Maintenance Costs:

The assumption that maintenance costs soar exponentially after five years of ownership is often championed by those advocating for a new car purchase every 3 to 5 years. While there is some merit to this argument, it's not a universal truth. Individuals exist who have maintained their cars for over 25 years with reasonable costs, contrasting with others who faced significant maintenance expenses after the initial 5 years and chose to trade in for a new vehicle.

In assessing these scenarios, the key variable is reliability, particularly the vehicle's 'history of reliability.' Over the past few decades, certain cars have established themselves as more reliable in the long run. Researching the historical performance of various brands in the industry becomes crucial when considering a 10-year ownership horizon. This approach encourages a thoughtful decision-making process rather than succumbing to impulsive purchases.

Insurance:

Insurance coverage represents a substantial recurring cost in car ownership, with the first-year premiums for new cars being particularly high. These costs are influenced by factors such as the car's value, extras, and accident risk. Opting for a full comprehensive insurance with dealer maintenance during the initial 5 years leads to higher premiums. After this period, insurance companies often discontinue dealer maintenance, resulting in reduced premiums.

Comprehensive coverage is generally available for up to 10 years, after which third-party insurance becomes more common. A clean driving record, a 'no claim' history, and factors like age and driving experience contribute to lower premiums. While these considerations align with general trends, insurance laws and policies are region-specific and may vary.

For used cars, insurance premiums hinge on the car's value, with under or overvaluing not making financial sense. An age of 10 years is considered a milestone for car insurance, as after this period, the value of the car often decreases significantly.

Spare Parts:

Concerns about spare parts availability typically don't arise for new cars within the first 10 years, especially if covered by maintenance and service contracts. The ease of driving out of the showroom with coverage for the initial 5 years is a significant factor driving new car purchases.

However, individuals who prefer retaining their cars beyond 5 years may choose to research and identify reliable garages for maintenance. There are no fixed rules post the initial 5 years, and the decision depends on individual preferences and the availability of reputable garages for the specific car brand in the vicinity.

Popular car models with a history of reliability, like the Toyota Land Cruiser, often have no issues with spare parts availability even after decades. For those intending to use a car for 10 years or more, a reliable brand and parts availability are key considerations. Spare parts become a more significant concern for much older used cars (around 15 to 20 years), requiring thorough checks of local and online parts agencies before making a purchase decision. Utilizing a comprehensive checklist is advisable in any case.

Tires:

Thoroughly inspecting the tire condition is paramount when considering the purchase of a used car. Much like insurance costs, tire expenses are recurring, and in today's market, quality tires come with a considerable price tag, regardless of their place of manufacture. Opting for reputable tire brands is particularly crucial in regions where weather conditions can vary drastically, ensuring safety on the road.

Investing in high-quality tires is a sound decision as they play a pivotal role in several aspects of car ownership, including safety, road noise, fuel efficiency, comfort, handling, and braking. Given the significant impact of tire condition on these factors, it is advisable not to compromise on quality when it comes to purchasing tires. Emphasizing the importance of this, I would recommend regular replacement, especially in hot climates, every two years, irrespective of the kilometers covered. The damaging effects of heat on tires should be factored into the overall cost when evaluating a used car.

Restoration:

Often overlooked but of utmost importance is the aspect of restoration when assessing a potential car purchase. While it demands some time and effort, restoring a used car to showroom condition is a feasible task with the right commitment and attention. The cost benefits post-restoration often outweigh those associated with owning a new car. This is a crucial consideration for prospective buyers, and the effort invested in restoration can yield substantial returns in terms of both aesthetics and functionality.

Conclusion:

While discussing the divergent approaches to new and used car buying, it becomes evident that, all things considered, opting for the right used car presents numerous advantages over purchasing a new one.

• Lower Depreciation: The depreciation curve is more favorable for used cars, resulting in lower depreciation going forward.

• Lower Initial Costs: Used cars generally come with a more budget-friendly initial price tag.

• Lower Insurance Costs: Insurance premiums are often reduced for used cars, especially as they age.

• Manageable Maintenance Costs: Carefully considering the brand and condition of the used car can lead to more manageable maintenance costs.

• Availability of Spare Parts: Spare parts are readily available in the secondary market at competitive prices if you know where to look.

• Resale Value: Resale value becomes less critical than in the case of new cars, as most of the depreciation occurs in the first two years. Beyond year five, the resale value remains relatively stable for popular brands.

• Discounted Premium Brands: Premium brands depreciate faster, making a two or three-year-old purchase an attractive option, often with the added advantage of the car still being under warranty.

In light of these factors, the used car market emerges as a practical and financially savvy choice for discerning buyers, offering a range of benefits that extend beyond the initial purchase.