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Buying New vs Used Cars: Which One’s Worth Your Buck?

The majority of Malaysians, especially those in the urban areas, own cars. Many say they are forced to own cars because of the unreliability of the public transport system or the inaccessibility of this system. Cars don’t come cheap in Malaysia, especially imported cars since there are several taxes you have to pay for.

You may be wondering whether you should buy a used or a new car. Of course, this really depends on your individual situation. Here are some of the important questions you should ask yourself before buying a car:

  1. What is my budget overall for a car?
  2. Can I afford to pay at least a 10% down payment for the car I want?
  3. Can I afford to take a hire purchase loan (in addition to all my current loans)?
  4. Can I afford the annual insurance and road tax?
  5. How long do I want to keep the car?
  6. What do I want most in a car? What do I need the car for?

These questions are very important so that you don’t end up making big mistakes. For example, if you’re looking for a car to transport your large family, then you’ll have to consider a large car like an SUV, MPV and the like.

If you like modifying cars, then you probably won’t want to buy a brand new one for fear of damaging or spoiling it as you may add and replace parts. Let’s compare both new and used cars briefly:

Price

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Used Cars are generally cost less than new cars. This is because used cars depreciate fast and can reach half the original price in just 5 years. Here’s a comparison table of the costs of some new and used cars. We’ll try to examine those that share the same brand and make

Brand New Price (RM) Used (from Mudah.my) Price (RM)
Honda City 1.5 S 2017 RM75,930 Honda City 1.5 2010 RM44,800
Mazda 3 Sedan 2017 RM110,225 Mazda 2  1.5 2012 RM28,700
Perodua MyVi 2017 RM41,262 Perodua MyVi  2010 RM15,500

Prices quoted above are correct at the time of writing

Maintenance Costs

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For any car that’s over 5 years old, you can expect that the maintenance costs will go up. The average lifespan of a car was about 11.4 years in 2014 so naturally cars older than this age will start giving technical problems which means you’ll have to fork out more for repairs.

Additionally, most Malaysian car vendors only provide 5 to 7 years of free service warranties. For example, BMW provides a limitless mileage manufacturer’s warranty for 5 years and Proton offers the same 5 years free service on all models. This means that you’ll have to take on any problems yourself after this time.

Loan

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If a used car is less than RM10,000, usually you won’t need to take a hire purchase loan for it. Most people just save up and pay for the car in cash. Taking a loan for a used car means that you have to pay an interest of 3.6 – 4.6% per annum. This interest rate is higher than the interest rates you pay for a new car, which can drop to as low as 2.5% per annum (interest rates quoted are accurate at the point of writing). You’ll also have to ask yourself whether you can afford to take a hire purchase loan as the monthly repayments (when added with your other loan repayments) should not exceed one third of your income.

Road Tax and Insurance

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In addition to the loan you may want to take, you also have to consider whether you can afford the insurance and road tax. Insurance is higher for new cars and less for used cars since their values are higher also.

Here’s a comparison table for annual insurance premiums according to their age and make. Calculations are based on standard comprehensive coverage plans without any extra policies, and done at Takaful Malaysia’s estimation website (with age of driver: 30 years old and location: Peninsula, no NCD discounts):

Type of Car Insurance Premium Type of Car Insurance Premium
Honda City 1.5 S 2017 RM2,787 Honda City 1.5 2010 RM 968
Mazda 3 Sedan 2017 RM3,345 Mazda 2  1.5 2012 RM1,160
Perodua MyVi 2017 RM 1,458 Perodua MyVi  2010 RM851

Prices quoted above are correct at the time of writing

So should I get a new car or used one?

Both new and used cars have pros and cons. New cars often got a bad rep because they depreciate very fast and don’t represent a good investment, unlike houses or other property. However, new cars function well and can last longer than used cars.

On the other hand, used cars are much more affordable and offer you an option not to get a loan. It’s also suitable for those that like to modify your cars.

In conclusion, choosing a new or used car really depends on your personal financial condition and what you want from your car.  If you are a civil servant and need any financial help in getting yourself a car or to repair your car, please reach out to us here at Direct Lending.

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