New car or used car - which is better value?

The best deals - and how to pay for them

Updated: 

A321HJ Car For Sale By Owner for sale sign on car at home sale of used car used vehicle

With the latest registration plates available from 1 March, it's often a signal for motorists to hit the forecourt in search of a new vehicle. This year could see record sales, with more than a quarter of drivers planning to replace their car in 2016.

Of course, buying a car doesn't come cheap. Of those who think they'll buy this year, they're expecting to spend an average of £11,932, according to the AA. This probably makes it the biggest purchase of the year, and most likely also the largest outlay since they last bought a car.

Different ways to pay for a car

With such a huge expense on the cards, it's important to consider the different ways to pay. A third of drivers say they'll use their savings to pay for the new car, with almost a quarter (23%) looking at some kind of financing, and one in 10 (9%) using a personal loan.

Each have their merits. As long as you have enough savings left over for emergency costs and other expenses, cash is often the best way to pay. You'll own the car outright, meaning you'll be able to sell it if you have financial problems later on.

But if you don't have enough cash, a loan or financing deal can help you spread the cost over a number of years. Of course, the dangers include struggling with repayments if your situation changes, and you'll end up paying more overall.

New or used car?

The AA research also revealed that 70% of those looking to buy this year will be after a used car rather than brand new. If you're considering whether to buy used or new, it's not just the upfront cost you should consider.

The same model, one new and one a few years old, will generally have the same insurance and fuel costs, but the other running costs can vary drastically. Servicing and maintenance will be a lot cheaper for the brand new vehicle, but the biggest difference is down to depreciation.

Depreciation is the difference between the car's value when you buy it, and what it's worth when you sell it. In the first year – essentially as soon as you drive off the forecourt – a new vehicle will lose 15 to 35% of it's value, adding up to half or more over three years.

Other factors to consider when buying a car

Though depreciation is the biggest factor in getting value for money, there are other things to consider, especially some key running costs. Here are the some of the main ones:

  • Reliability
  • Safety
  • Fuel
  • Tax
  • Insurance
  • Servicing
  • Maintenance

This article is provided by the Money Advice Service.


The cheapest cars to insure

The cheapest cars to insure


Woman Can't Fit Giant Painting in Small Car